The Decibel - A food economist’s case against public grocery stores

Episode Date: May 1, 2026

Food affordability remains a priority for many Canadians. This week, Prime Minister Mark Carney’s government unveiled the spring economic update. It included some already announced measures aimed to make groceries more affordable. But some people are considering others measures to make food cheaper: public grocery stores. Federal NDP leader, Avi Lewis, has been talking about establishing a network of public grocery stores across Canada and municipalities like Toronto, Ottawa and Vancouver are also considering the concept. Mike von Massow is a food economist at the University of Guelph. He joins us today to stress-test the concept of public grocery stores and whether they could make food more affordable in Canada. Questions? Comments? Ideas? Email us at [e-mail] Hosted by Simplecast, an AdsWizz company. See pcm.adswizz.com for information about our collection and use of personal data for advertising.

Grocery prices are still high, meaning Canadians are feeling the pinch, and politicians know it. This week, Prime Minister Mark Carney's government unveiled the spring economic update. In it were some already announced measures aimed to make groceries more affordable. This includes the 25% increase for the next five years to the GST credit, as well as providing money to address food security and affordability in the north. But some other politicians are floating another idea, public grocery stores. New York City's mayor, Zeran Mamdani, made headlines when he announced his plans to implement five public grocery stores. And in Canada, federal NDP leader Avi Lewis has also been talking about

establishing a network of public grocery stores across this country. And some municipalities here, like Toronto, Ottawa, and Vancouver, are also considering the concept. Proponents of the idea say that public grocery stores could help lower food prices and give consumers another option. Today, Mike von Masso is back on the show. He's a food economist at the University of Guelph. He'll be stressed testing the idea of public grocery stores in Canada and whether he thinks they could actually work. I'm Cheryl Sutherland, and this is the Deciple from the Globe and Mail. Hi, Mike, thanks so much for coming back on the show.

Well, thanks for having me. So, Mike, I've been hearing a lot about public grocery stores as of late. Like we had a number of examples in the intro where the idea is at least being talked about. But what exactly is a public grocery store? Well, I can't speak exactly for what the politicians are calling for. The devil is always in the details. But the thought is that the government would own grocery stores, establish like the bricks and mortar or rent the bricks and mortar, establish a distribution infrastructure, hire staff,

hire purchasers, and get into the grocery business so that we would go into, instead of going into a loblaws or a sobies, we would go into a carnies and... A carnies, amazing. And be able to buy groceries. And in theory, depending on how much money the government put in, they would be cheaper than the alternatives. I don't believe, frankly, that the government could be cheaper without putting money into the system to subsidize grocery prices.

Because most of these price increases are happening due to factors beyond government control, extreme weather, warming, war in Iran, war in Ukraine, all of those problems with yields, problems with disease, that most of the other things that governments are talking about are really fiddling around the. margins. Okay. So if I'm understanding correctly, hypothetically, a public grocery store in Canada would work in a way that the government would kind of build or rent retail space and they would kind of build the distribution system underneath and kind of also subsidize overhead costs to create discounts. Is that kind of the idea? Well, yeah, you know, I think Avi Lewis and the other proponents from the NDP are saying 35 to 40 percent reductions in grocery costs. That would be subsidizing more than the overhead. That would actually be starting to subsidize the cost of goods in that circumstance so that they would be selling product for less than they're buying it for.

All right. That's a really interesting thing that we'll unpack in a minute. And I know you have a lot of criticisms of this model. But before we get into those, what are the possible benefits of public grocery stores? Like, why are people and politicians attracted to this idea? Well, I think there's a couple of things. The first is if you look at who is getting blamed for high grocery prices, it's the grocery stores. I did an evaluation earlier today and 30% of the talk on social media is blaming grocers for high grocery prices. Another 20% are blaming government. Then it gets pretty small. So it's an easy way to say, you think grocers are the problem. We're going to get into the grocery business and hold them to account. But it is, in truth, a way that we could lower

grocery prices so that it, I mean, if we built more than a few stores, that we could lower grocery prices for Canadians. But I would argue it's not the most cost effective way of doing it, that it would cost us more than the value of the subsidy to get it done. Okay, so lowering grocery prices. What about improving access, the proponents of these public grocery stores, are they thinking about improving access to a wider population? You know, notwithstanding some rural communities, I think generally we have pretty good access to groceries. Food security in Canada is not about availability of groceries. It's largely about income. That people who can't get food can't afford food. And so again, if we were to

build four grocery stores in Toronto or 40 grocery stores in Canada, we're like, Loblaws has 2,400 stores, Sobees has 1,600 stores. It's just a question of, are we going to be able to put these in places where we significantly improve access? And if we don't put them in places, you have to think that particularly the people who are food insecure are less likely to have transportation. So we need to be in those communities. So it's interesting. So you're saying that access is not the issue here. It is, of course, price.

And something that we hear a lot here in Canada is that margins are too low for a public model to make a difference for prices. So in Canada, the profit margin for grocers is between 3 to 5 percent. So that is quite low. Can you explain why the margins are so low? Well, I think margins are low for a couple of reasons. People, you know, we hear criticisms all the time. Look at the size of their profits. So strategically, grocery stores make profits by doing.

volume rather than doing high prices and high margins. And they do volume because that allows them to buy better. It allows them to compete better. Grocers use two main performance measures to see how they're going. The first one is share, which is how many people walk into the store. And the second one is basket is how much you buy when you're in there. And so we see flyers and specials. We see store set up with milk and eggs and bread at the back of the store, which are staples that are in almost everyone's basket. And often those are priced much lower to get you in the store. And then they try and get you to fill your cart with more things as you come back to the checkout. So low margins allow them to drive volume. Volume allows them to purchase cheaper. It allows them to get more people

into the store. And while we hear the argument all the time that, you know, we have high degrees of concentration, they don't compete. At four to six percent margins, they are competing tooth and nail for every customer that they can get in the door. And so I think where they wield their market power is back towards suppliers rather than forward towards consumers. So not only can you buy more volume, which allows you to buy cheaper, but in that circumstance, they get better deals. They can deal directly with the farmer. Right. So if Loblaws is buying lettuce. They're buying lettuce directly from the farmer in Southern California, bringing it in someone's truck or their own trucks to their distribution centers. And we're just achieving a

whole bunch of efficiencies here. On the idea of grocery stores needing to buy volume, can you just connect the dots about why scale is important? When we see a grocery store, that's like the tip of the iceberg. It is, there's all of this infrastructure underneath. There's distribution infrastructure, there's purchasing infrastructure. And so if you are a big company like Loblaws or Metro or Sobies or, you know, even others, you have distribution centers where product comes in from suppliers, then you load it on trucks and send it out to stores, rather than each individual supplier stopping at each individual store. What you're highlighting here is that scale is really important, and this is why the big grocery stores are still

able to kind of operate at an advantage. And this is kind of why public grocery stores might have an issue, right? Because what we're proposing in certain areas is a handful of stores, and they won't have that ability to scale the way that the big grocers do. Let's talk about what this looks like, public grocery stores in different places. Because right now, in Canada, it's still a hypothetical situation. Can you walk me through some examples of how they work in other countries? Well, so the first thing I'd say, Cheryl, is that they don't work particularly well in other countries. And so an example that gets raised a lot of times is Mexico.

And Mexico does have some public grocery stores. The Genesis was an effort to provide public servants with a place to buy groceries cheaper. They had originally almost 300 stores across Mexico. In the last 10 years, they've shrunk to less than 50. So that's not a successful model, if you will. The federal consumer protection branch does price comparisons. The dominant retailer for food in Mexico is Walmart. And the public store is about 1% cheaper than Walmart and about 10% cheaper than some of the other private.

grocers in the country. So they're not providing a cheaper alternative without significant subsidization. There's also a second sort of type of store that the federal government in Mexico does, and it is, its focus is accessibility. They go to remote rural communities that don't have access to a store at all, and they put a store in there. So that's not selling cheaper. That's just providing access. And so, again, not a good comparison. The other one we hear a lot about is the U.S. Army Commissary Program. And the commissary program is, as part of its larger food service operation, right, people who live in barracks go to the mess hall and they get fed, but people who live in on-base

or close to base housing can go to the commissary and buy groceries. And by legislation, it has to be about 23% cheaper than the regular groceries are. And they achieve that. problem is that in order to discount groceries by 23%, they subsidize in the range of 25 to 30%. So they're spending more money to get that price reduction than just the price reduction. You know, I mean, if you paid service members more, you wouldn't have to do that. And that money would go directly into the, without having that extra infrastructure. I want to know, though, Mike, has the model worked anywhere?

Like, do we have historical examples where this idea did work? Well, it depends how you define worked, right? You know, in many communist bloc countries, there are centralized grocery stores. Venezuela, there are centralized grocery stores where prices are controlled and often subsidized. But again, in those places, it's mostly about providing access to products. Now, in some of those cases, they are subsidizing those food stuffs to keep them cheaper. So, again, that works, right? That works.

My argument isn't that we couldn't do it. My argument would be that we would spend so much money doing it, more money doing it than we would reduce food prices, that it's just not a cost-effective way to go about increasing accessibility to groceries for Canadians. And I can tell you a couple reasons why. The first is that if we do universal grocery stores, we give those discounts to everybody. And I'm feeling price differences. Don't get me wrong. But I'm not making choices between getting groceries this week and paying my cell phone bill. I'm not deciding whether to pay my hydro bill or buy groceries this week. And so the argument should be, should we provide access to everyone? or should we provide help to the people who need it most?

And doing it in a grocery store context doesn't allow us to do that. We'll be right back. I want to come back to the access part of all of this. There's an argument, Mike, that publicly owned grocery stores could be beneficial if they were located where there aren't a lot of stores, like food deserts. I know you mentioned that there is access in Canada, but there are places that we are seeing food deserts.

I'm thinking about rural Canada and, of course, the north. So what would you say to that? Are there opportunities there for public grocery stores? Let's look at both of those a little bit differently. The first part was rural Canada. And the problem with that is picking winners. And so we could, but which communities are you going to pick? A better approach to that might be to provide some incentives for the mainline stores to go into some of those.

If it's an important priority, if that access is an important priority, if there are lower income communities in larger urban centers or small communities that aren't getting served, then say, we're going to leverage your purchasing power and we're going to provide you an incentive to go into those communities and provide access. What about the North? I mean, there's something that the government has. They have a program that subsidizes grocery staples. Can you talk a bit about that?

So that's the Nutrition North program. And what it does is it provides subsidies not to people, but to stores to lower the cost of selected healthy staples. And so, you know, I had a son who was working up north for part of last winter and he could buy milk and eggs and bread for the same prices he could here in southwestern Ontario. If he wanted a frozen pizza, it was going to cost him $45. So in that case, what the government is doing is, providing better pricing on healthy staples. I have a colleague here at Guelph, who has recently done a study, and virtually 100% of that money is passed on to consumers. So it's paid to grocers, but virtually 100% is passed on to consumers. So that is a way that they are effectively

lowering the prices of food in grocery stores in the north, where transportation costs are very high, without actually building their own grocery stores. So now they might argue we won't do that in a government grocery store. We'll have a narrower range of products on the shelf, which decreases the basket and makes it even harder to cover overhead. Right. So one of the things about offering a wide variety of things is it allows you to increase the basket

so that every person who comes in the store, if the basket's bigger, we're contributing more to overhead. Because there's a variable cost of buying the food, but then there's the overhead cost that is the people who work there, the rent we pay, the hydro for the refrigerators and freezers. And the more stuff we can sell, the more our margin contributes to that overhead. And so if you have a government grocery store that's more focused without those other things, it's going to be even harder to compete against those big players.

So I think those targeted approaches within stores that offer more options is a much more effective way, and we know that 100% of the money is going to reducing food costs. The other way the government has done, and I hope you'll allow me to segue here, is the GST rebates that you talked about in your introduction that have been extended for five years. I'm going to ask you how you think that's how that's a better solution. To me, that's a much better solution for a couple of reasons. A, it's targeted at lower income Canadians who are feeling the pinch more. I'm feeling it, but I'm not having to make hard decisions. I may be saving a little less for my retirement. And so to me, it's ridiculous to subsidize my groceries. It's much more effective to provide assistance

to the people who need it most. And that's what this does. Nutrition North does selective products, but it doesn't target individuals. The GST tax rebate targets individuals, but it doesn't do specific products. And so it's an existing program. We were already sending out GST rebates. so we didn't have an issue with more administration. It's just putting more money through the program. So again, 100% of the money that we're spending on that is going to the people that need it and allowing them to buy groceries

or whatever they need to buy because part of the reason groceries are gone up in price, but so is transportation, so is housing and all of these other things. That takes the pressure off a little bit more. So if the government is prioritizing making food more affordable, that is the best way to do it. So I'm just curious because if there are all these problems with the model in terms of really

having an impact on affordability, why is the idea catching on with politicians and a segment of the population? I'll just give you some polling numbers here from New York where it's being floated as an idea. This was from April 2025. Two-thirds of New Yorkers polled support the creation of municipal grocery stores in New York City, including a strong majority of Democrats, 72 percent, as well as the majority of independent. And defendants, 64% and Republicans, 54%. So people seem to be excited, at least in New York.

Why are people so excited about this idea? Because we hear about grocers. We blame grocers. We hear that they're making record profits. Nobody talks about 4 to 6% margins. And no one talks about that part of the iceberg that's under the surface of the water. And I think it just demonstrates a lack of understanding of the economics of the food system.

Mike, thank you so much for coming on and explaining all of this. I appreciate it. Well, thanks for having me. It's always fun. That was Mike von Masso, a food economist at the University of Guelph. That's it for today. I'm Cheryl Sutherland. Our intern and associate producer, Emily Conahan, produced this episode. Our producers are Madeline White, Rachel Levy McLaughlin and Mikal Stein.

Our editor is David Crosby. Adrian Chung is our senior producer, and Angela Pichenza is our executive editor. Thanks so much for listening.