City-run grocery stores unlikely to lower prices, says think tank

OTTAWA — A free market think tank is warning Canadians not to believe the hype surrounding the suddenly fashionable idea of city-run grocery stores.

A new study from the Montreal Economic Institute finds that the track record of public grocery stores in North America “offers little encouragement” for recently announced pilot projects in New York City and Toronto.

The study points to two recent case studies in the United States’ Midwest, where one city-run grocery store was privatized in 2024 and another closed its doors in 2025 . The latter, Sun Fresh Market in Kansas City, Mo., received $29 million in taxpayer dollars over seven years, reporting safety issues, financial losses and trouble keeping its shelves stocked .

Citing food economist Sylvain Charlebois , the study reports that the failure rate of government-run grocery initiatives in North America “likely exceeds 50 per cent.”

Study author Charles Lammam said that these failures aren’t surprising, given the challenges inherent to the grocery business.

“We have to remember that not only are the profit margins relatively low, but (grocery stores) are really complicated logistical undertakings,” Lammam told National Post.

“They require coordinating thousands of perishable products at a time across temperature-sensitive supply chains, where your margins for error and delay are really low,” said Lammam.

“Are governments equipped to do this? I don’t think so.”

He said the typical Canadian retail grocery chain runs a profit of three to five per cent on food items.

Lammam says he also understands the politics driving left-leaning municipal governments to pursue these unpromising ventures, despite evidence to the contrary.

“What we’re seeing is a sort of policy adventurism where governments are launching these visible and unproven initiatives instead of fixing things they’re already responsible for,” said Lammam.

Lammam says Toronto city council fundamentally misdiagnosed its food affordability crisis when it voted 21-3 in March to approve four city-run grocery stores at an undisclosed cost to taxpayers.

“The problem in Toronto isn’t a lack of grocery stores — which could be an argument for a public option — it’s that people can’t afford groceries,” said Lammam.

New York City Mayor Zohran Mamdani and federal NDP leader Avi Lewis have both put forward public grocery initiatives similar to the one green-lit by Toronto’s council.

Lammam says the better way to lower prices at the tills would be to start with the low-hanging fruit.

“This country adds millions to the cost of food each year with unnecessary agricultural tariffs and barriers to shipping food across provincial boundaries,” said Lammam.

Lammam said that fixing supply management is one obvious way to make groceries cheaper, noting that it inflates the cost of dairy, eggs and poultry by as much as 300 per cent while exacerbating tensions with international trade partners.

He added that targeted income supports, such as the Carney government’s new Groceries and Essentials Benefit, are a more efficient tool to help Canadians deal with the high cost of food.

National Postrmohamed@postmedia.com

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