How to Bring Down Grocery Prices
During his successful campaign to become New York City’s new mayor, Zohran Mamdani promised he would combat rising grocery prices by setting up a city-run grocery store in each of New York’s five boroughs. Critics have slammed the proposal as a socialist fantasy that would only create uncompetitive, Soviet-style stores. They point out, rightly, that other American cities and towns have tried running grocery stores in recent years and their track record is not great. Well-publicized public grocery stores in the small towns of Baldwin, Florida, and Erie, Kansas, closed within five years of the towns taking them over, citing pricing problems and competitive pressure from Dollar General and Walmart.
But if the whole concept of government-run grocery stores is untenable, someone needs to alert the Pentagon, because since 1867, the U.S. military has operated discount grocery stores called commissaries, with great success for active-duty service members, certain veterans, and their families. The Defense Commissary Agency (DeCA) runs 178 stores in the U.S. and 48 stores abroad that stock on average 12,000 items, including name brands and private-label products, on par with a conventional grocery store. Military families love them.
The commissary system provides a real, workable example of how government can address the grocery cost crisis that is bedeviling the country. Indeed, a “public option” for grocery stores, based on the proof of concept provided by the commissary model, could not only vastly improve food access; it could also inject more competition into the broader grocery market and bring down food prices for all Americans in the long term, which is what hard-pressed voters desperately need and say they want in every poll.
A “public option” for grocery stores, based on the proof of concept provided by the commissary model, could not only vastly improve food access; it could inject more competition into the broader grocery market and bring down food prices for all Americans in the long term, which is what hard-pressed voters desperately need and say they want in every poll.
Military commissaries have advantages that recent city-run grocery stores lack. The most important are economies of scale and federal negotiating power, which allow DeCA to obtain steep volume discounts and other price concessions from their suppliers, including giant manufacturers and food processors like Procter & Gamble, Tyson Foods, and PepsiCo. All suppliers must certify that they’re offering DeCA the lowest price they can, given the unique costs of supplying some of DeCA’s far-flung locations. In 2016, the agency threatened to take products off the shelves if it found that a supplier offered private retailers better terms, and even demanded suppliers pay back the difference.
This negotiating power allows DeCA to extract wholesale prices that are roughly on par with what the largest private grocery chains get. It then passes on these savings to its customers. Military families enjoy additional savings thanks to federal subsidies that help cover the system’s other costs, notably store labor. These subsidies would not likely be available in a civilian commissary system, since Congress offers them as a form of compensation for military service. But the military model still demonstrates something crucial: that a government-run purchasing network with sufficient scale and buyer power can secure ultra-low wholesale prices and pass them on to consumers without a profit markup. A civilian model with a similar purchasing network could run self-sufficient stores that do not need ongoing taxpayer support.
Such a public grocery option could take two forms that are not mutually exclusive. The government could own and operate a chain of supermarkets, just as the U.S. military does. Or the government could organize a sufficiently scaled wholesale purchasing co-op that could negotiate large discounts on behalf of participating, privately owned independent grocery stores. Smaller grocers already pool their purchasing power through buyers’ co-ops, but these lack the market power to win volume discounts commensurate with those enjoyed by Walmart and other large chains.
Either form of public option could be a crucial missing tool to fix the broken American grocery market. For one, public-option grocery stores could improve food access in rural towns and low-income urban neighborhoods—where nearly 19 million Americans, or 6 percent of the U.S. population, live—that cannot attract or maintain private stores.
A public option could also provide healthy competition in concentrated grocery markets where millions of working- and middle-class Americans live and thereby help keep “greedflation” in check. Between 2006 and 2020, food prices rose more in neighborhoods with fewer retailers and higher grocery market concentration, according to a study by the Atlanta Federal Reserve. Such price gouging would be harder to pull off if private grocers had to compete with publicly provisioned stores that have access to the same low wholesale prices.
The benefits could go much further, both demographically and geographically. Residents of major metro areas like Richmond, Virginia; Oklahoma City, Oklahoma; and Pittsburgh, Pennsylvania, now find that Walmart is continually squeezing out other retailers, thereby reducing consumer choice. The existence of a strong public-option competitor in these markets could not only improve choice; it could also force Walmart to share more of the “everyday low prices” it extracts from its suppliers with its own customers.
Currently, much of these savings flow instead to America’s richest family—the Walton heirs, who control nearly 50 percent of the company’s stock and whose combined net worth is over $450 billion. The competition provided by a strong public option in the retail food sector would similarly force other large chains with local or regional market dominance to provide better consumer value, just as the existence of the U.S. Postal Service forces market-dominating corporations like FedEx and UPS to provide better service than they otherwise would. Put simply, an efficient, public grocery option would keep profiteering in check and encourage dominant retailers to better compete on price, selection, store upkeep, and service.
A public grocery system or a public purchasing co-op for independent grocers could also curb the abusive impulses of consolidated food manufacturers by introducing a new powerful buyer into the market. Food suppliers are accustomed to essentially setting prices for hundreds of independent retailers with little bargaining power, but if all those retailers suddenly had the power of a federal purchasing network on their side, food manufacturers would be compelled to offer better terms and prices to a potentially large segment of the grocery market.
Care would need to be taken, of course, to ensure that the market clout of the new public-option system did not drive smaller, independent grocers out of business. That’s why it would make sense to prioritize placing public-owned supermarkets in areas that are currently food deserts or poorly served by local monopolies. For similar reasons, it would make sense to allow existing independent grocers to participate in the program so that they, too, could obtain competitive wholesale prices—provided, of course, that they committed to passing these publicly attained savings on to their customers.
Meanwhile, laws against predatory price discrimination that have long been on the books but generally not been regularly enforced for decades can also help ensure that food corporations focus on providing better, cheaper food, rather than on increasing pricing power through mergers and acquisitions. (See Kainoa Lowman, “Rollback Racket.”) Finally, it will be important to use traditional antitrust enforcement to ensure that food processors, meatpackers, and other players do not further consolidate or abuse their own power over their own suppliers, which could make the plight of America’s ranchers and farmers still worse.
Will any of this happen soon? Of course not. Perversely, in September, Pete Hegseth’s Department of Defense published a request for information on how to privatize the military commissary system. But that should not stop Democrats from campaigning on protecting and vastly expanding a proven model for a more equitable and affordable food system. If government-run grocery stores are a “socialist fantasy,” as Mamdani’s critics charge, then it’s one that millions of military families have been living in since the 19th century, and one they would never trade away.
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