Voters, as they have made clear over the last few years, hate inflation. And to most of the general public, it appears that ‘inflation’ does not just mean the pace of year on year prices rises but something about the level of prices. People would generally, and understandably, like things to be cheaper – especially things they have little choice but to buy such as housing, energy and food.
So, what way to make the public – and hence voters – happier than to offer them cheaper stuff? That is almost exactly what New York’s Mayor Mamdani pledged in one eye-catching plank of his platform for office: city-owned grocery stores offering basic necessities at lower prices. And now he has followed through.
… we are guaranteeing a 30% discount on the most common and most critical groceries for families across the five boroughs — including eggs, milk, chicken and fresh fruits and vegetables. In a city that’s defined by unpredictability, you deserve stability — no matter what aisle you’re in.
$70 million has been pledged to help achieve this. But do the numbers add up? Not according to the Clark Center’s Economic Experts Panel.
The panel was first asked whether ‘The profits on groceries that the city-owned grocery stores would forgo are sufficiently small that the vast majority of the 30% discount would be provided by tax-funded subsidies’?
More than 85% of respondents, weighted by confidence, agreed or strongly agreed.
This is less a question of economics and more of straightforward accounting. Even if one accepts that a not-for-profit store can operate as efficiently as one aiming to break even or more, the ‘savings’ available to consumers from eliminating profits come nowhere near 30%.
As Darrell Duffie of Stanford argued, ‘My understanding is that net profit margins at chains like Aldi and Safeway are not close to 30%. There’s also the usual argument that for-profit firms are on average more efficient than government service providers’.
..consider margins. These are often wafer-thin. American supermarkets like Kroger and Albertsons collected just 1% of their sales in operating profits last year. Even Walmart, with its 4% margin, hardly appears to be milking customers. It is a similar story in Britain and France, with margins only a little fatter in Australia and Canada. The real cream has traditionally been elsewhere in the supply chain, such as with the big food manufacturers. Over the past decade the average operating margin across General Mills, Kraft Heinz, Mondelez and PepsiCo has been 13%.
Perhaps the margins of municipally owned supermarkets can be faltered by lower rents or favourable regulation, but that would likely be offset by – presumably – higher wage costs, but it is extremely difficult to see how one arrives at a 30% cost reduction to consumers without a very high level of subsidy.
US governments have tried to open grocery stores in other parts of the United States with limited success. The small town of Baldwin, Florida, invested $150,000 in 2019 to open a market, with employees on the city payroll, to make it easier for residents to buy groceries in an area that was largely a food desert. While many people initially touted it as a success, the town closed the store in 2024 because it could not break even, the Florida Times Union reported.
In Kansas City, the local government invested almost $18m in a grocery store and shopping center that closed in 2025 because of crime increases inside and outside the store and slow sales, the local NPR affiliate reported.
What then are the alternatives?
The panel was also asked whether ‘A food assistance program along the lines of SNAP, with a potentially higher income cutoff, would provide direct support to low- and moderate-income city residents more effectively and with lower administrative costs than the proposed city-owned grocery stores’?
34% of respondents strongly agreed, again weighted by confidence, and another 50% agreed.
Among the widespread agreement, a few caveats were touched on. As Aaron Edlin of Berkeley noted, ‘One important qualification: people will feel more dignity buying groceries at low prices with their own money’. Judith Chevalier of Yale argued that ‘While I likely agree on net, I think a SNAP-like policy possibly should be accompanied by zoning relaxations or other location policies to fulfill one of the municipal supermarket goals– lowering travel costs to full-line supermarkets’.
The panel’s advice to the Mayor is clear: attempting to offer cut-price grocery stores will involve a large taxpayer subsidy that could be much better spent on directly supporting households in need.
