Can public grocery stores work in Canada?

Are you getting rewarded for paying your rent and mortgage? If not, you need to check out Built. Built members earn points on every housing payment, which can be redeemed for flights, lift rides, Amazon.com purchases, and more. Built also gives members access to its agentic neighborhood concierge in the Built app. It's connected to your home and over 50,000 merchant partners, so you can ask it to pay your rent, schedule a lift, and more. Just download the built app, link any credit or debit card,

that would sell food at lower prices than the private chains. Here's what the counselor behind that proposal, Anthony Peruta, told CBC about his plan. I see it run as a non-profit, so we take profit out of it. And by doing that, you know, lower food costs for people. Households could save somewhere in the neighborhood of $2,500 to $10,000 a year in annual food costs. That's a lot. And the public grocery store concept was part of the platform that got Avi Lewis elected leader of the federal NDP. Here's what he told, CBC's power and politics, about why he's convinced the idea is a winner. Canadians are suffering the grinding cost of living crisis.

and we're actually providing solutions that are as big as the crises we face. They're out-of-the-box solutions. We understand that. And people are looking for exactly that. Sound appealing? Well, not everyone is convinced. We'll hear more about that in a moment. But Errol Schweitzer is a believer.

He recently co-authored a piece for the Center for Policy Alternatives, a think tank. That piece is called How Public Grocery Stores Could Work in Canada. He's got decades of experience in the American grocery industry. and he writes the checkout grocery update, a substack newsletter. Good morning, Errol. Good morning. Thanks for having me. Thanks for being here. You've been in this business a long time. Why do you think that some people are open to the idea of public grocery stores now? Well, grocery prices have gone up quite a bit, 50% since 2016, and both the American and Canadian grocery industries are highly consolidated. Canada, even more so. You've got like three or four chains, like 75, 80% of market share.

So your grocery prices have gone up. And these chains run really thin profit margins, but at their scale generate huge profits based on their ability to pass higher prices to consumers than the cost they receive from their suppliers. So their profiteering has driven a lot of those price increases. I want to get into those profit margins in a moment. But help make the case. Why are public grocery stores a good idea? Well, they already exist. In the United States, we have the military commissary system.

Anybody who has friends or family in the military will know. that folks in the service get lower grocery prices. And the way they do it is that the defense agencies subsidize the retail margins. So not the profit margin. That's what everybody is wrong about. They subsidize the retail gross margins. That is the labor, the utilities, the administration,

the IT through defense appropriations. So their groceries are about 25% cheaper at commissaries than they are in the marketplace. And that is federally mandated. So over 8 million service members enjoy the service of public groceries already in the United States all the time. So this isn't a very, you know, sort of fringe topic. This is very mainstream in the U.S. We already do it, and we don't really talk about it because it's military service members. Well, the base costs of operating those

commissaries is paid for by the taxpayer. What would it cost in Canada to run a system of publicly funded grocery stores? Yeah, we've done some, you know, rough modeling to talk about applying the military commissary system to the Canadian context. And in Canada, it's a little different. I've done a little work in Canada. I know that you've got a lot of great stores and locations in urban areas. And then you've got the territories, which you've got a lot of logistics costs. So we've estimated that you need some of, you know, initial startup costs. You know, you've got to open the stores. You've got to wire them correctly. You've got to put coolers in. You know, you've got to make sure you got the shelving, all the stuff that a grocery store needs. And then you've got the cost of

operating them every year. And that operational costs are subsidizing the labor, just like we do in the commissary system, making sure that you're paying. And between those two costs, you're essentially about the price of one fighter jet, right? And, you know, you've contracted for buying about 88 fighter jets from the United States, you know, over the next, you know, time frame, you know, you could buy 87 and you can open 50 grocery stores for the same amount of money. You know, so publicly operating. system, we're estimating about initial costs about $350 million and then about $300 million every year to operate, which on the surface sounds like a lot of money, but it's 1% of Canadian infrastructure budget. It's less than 1% of Canada's defense budget. So, you know, it's really not a

lot of money for what you get, which what we're estimating is savings between $2,500 to $10,000 per household per year. So, you know, that's pretty significant if you apply the commissary model, which I could go into more detail about. Well, I want to go back to your point about profit margins because people have seen the grocery bills go up. They feel like they're being gouged, but we keep hearing that the profit margins for grocery stores are small, only about 1 to 3%. So is it possible for government-run stores, you know, that have all the same expenses to work and be able to sell groceries significantly cheaper than the private ones? I said they already do in the United States. We already have it.

The commissary system saves consumers $2 billion a year, and that is two-tenths of 1% of the U.S. defense budget. It's a rounding error in our defense budget. In Canada, you have large grocery chains where, yes, their grocery profit margins are 1 to 3%. But 1% of a billion dollars is $10 million. 3% is $30 million. So that's a significant amount of profit off of a very thin margin. But once again, I really want to emphasize this.

This isn't just about the profit margin. This is about subsidizing the gross margin, the overhead, the operating costs. You know, when you have a profit margin of 1%, but your gross margin is 30%, that's where the savings come in. That is what we're talking about with the commissary. They are saving the consumer the gross margin because that's paid for through public funds. And because of their scale, they've got 235 stores. They're able to negotiate low wholesale prices. and that is what they pass on to consumers.

So like I said, not a fringe idea, already exists. Eight million people use this all the time in the United States already. Now, that's the military system, but there are other jurisdictions that have attempted this. I'm thinking of Kansas. I'm thinking of Florida. What's happened to those public grocery stores that have tried a different model? They didn't apply the learnings from the military system for various reasons, and they failed. The main reasons why they failed were.

they were public-private partnerships and they were one-off stores in small areas. So what this means is that the city contracted to either a nonprofit or a for-profit grocer, that grocer then had to take on all the operating costs. And, you know, there were some city subsidies like they, you know, reduce taxes or they reduced some of the rent, but they still had to pass through the gross margins to the consumers. But because they were one-off stores, they didn't have any efficiencies of scale. And in the grocery industry, scale is kinged. You need scale in order to negotiate with wholesalers.

You need scale to work with growers and suppliers to pass on lower costs. So these basic structural issues outsourcing to a private operator, you know, loading them up with all these operating costs, and then giving them no cost efficiencies. And they failed. And they cost the public a lot of money. So the key learnings here is to not do what those small cities did. you know, that's where I get really concerned about both the New York and Canadian context in Toronto, that they are not learning from what works. And the only thing that has worked is the commissary model, not these public-private partnerships, not these partially subsidized

models where you just take away the profit motive or you just subsidize some rent or utilities. You have to subsidize the full gross margin. You need scale to negotiate low wholesale costs. If you don't do that, then don't do it. That's the rule. You said the cost would be in the hundreds of millions. It's a fair chunk of change. Do you think the political will... That's 1% of your defense budget. It's literally the cost of one fighter jet.

So what do you want, Dave? One fighter jet or 50 public grocery stores. Well, what do the politicians want? Do you think the political will is there to spend that kind of money? Well, they're all saying that they're going to lower grocery prices, but none of them ever do. You know, and that's what we're seeing in the U.S. and in Canada. So this is the first time that a Canadian politician took this seriously. So I've been writing about this for five years.

Like, to me, this is not a new idea. I know people who sell into the military commissary in the United States. I'm in the grocery industry. It's very accepted. So finally had a Canadian politician who took the idea seriously because they're saying, hey, yeah, this is how we're going to lower grocery prices. This is already a model that works over in the U.S., and we could apply it to the Canadian context for the price of one fighter jet.

So decide what's more important to you. one fighter jet or 50 publicly owned grocery stores that sell discount of up to 30% to 45% for consumers. So you got to decide what your priorities are over there. Fair enough, but there is some skepticism about the wisdom of this, even among those who run food banks. CBC Radio here in Toronto spoke with Neil Hetherington about the city's plan to open a non-profit government-run grocery store. He runs something called Daily Bread, the city's largest food bank. I want you to have a listen to what he said. Government has a role in responsibility for decent social policy. And I think they would be far more effective.

Passing laws provincially that forced inclusionary zoning, spending money working with the private sector to develop social housing. They would be far better off and much more efficient to increase rent supplements to individuals, to make sure that people on disability do not have to live in deep, deep poverty. Those are the types of things that governments are actually quite good at doing. We haven't seen them run grocery stores effectively or efficiently. And so let's do the math. So are there more efficient and effective ways to make food more accessible? I support all of his ideas. All of his ideas make sense. And you should do them. The one thing he's incorrect about, which he just may not be aware of, is the military commissary. The government should be

doing all those policies. I support all those social policies. But this is not an if and or. This is an and question. Yes, do all that stuff and then open up a policy. public grocery chain to guarantee that consumers can always access lower prices no matter what their social situation is. And frankly, they could work effectively with food banks, too. Food banks are dependent on grocery chains for donations. They're dependent on food manufacturers for donations. And this would be one other source of donations for food banks because that grocery chain would have all the same types of supply chains that, you know, private sector grocery stores have. So yeah, he's got great ideas. He's just missing one. And that's a

a public grocery model based on the commissary system. All right, Arrow, we'll leave it there. Thank you very much for your insights. My pleasure. Thanks for covering this. Errol Schweitzer writes the Checkout Grocer Update Substack Newsletter. He recently co-authored a piece for the Center for Policy Alternatives Think Tank called How Public Grocery Stores Could Work in Canada. In Beale City, Michigan, life is usually predictable.

Everyone knows everyone and nothing stay secret for long. But then two teenagers start receiving dozens of anonymous texts a day. Messages that go from unsettling to threatening. The kind of harassment that tears friendships apart puts families at odds and leaves a whole community wondering who would do this. I'm Kathleen Goldhar and this week on Crime Story, we uncover how thousands of anonymous messages tore through a tight-knit community. Find us wherever you get your podcasts. Mike von Masso is a food economist at the University of Guelph in Ontario. Good morning, Mike.

Good morning, Dave. You just heard Errol make the case for public grocery stores. What do you think? Well, I think that what he's not saying is, oh, he talks about one fighter jet to set up. But then there's one fighter jet a year to keep this going. and all of that assumes that a grocery chain with 40 stores or 50 stores can buy as effectively as Loblaws, which has 2,500 stores or Empire Group, which is Sobies, which has 1,500 stores. And so it's just not believable that they're going to be able to buy at the same

scale that these big guys are able to. If you look at here in Ontario, we have a great chain called Longos, which was a few years ago bought by Empire Group, Sobies, in order to achieve those purchase, those scale advantages. And I think that, you know, Earl talked about the North. We have Nutrition North,

which subsidizes directly the cost of certain staples, and that's effective. We have the GST rebate model, which is giving low-income Canadians money directly to lower food prices. So I'm not arguing that we shouldn't necessarily give relief to Canadians who are feeling high prices. I'm just saying that the grocery model, the public grocery model is unlikely to achieve that objective and and if we're just going to subsidize it anyway, why not give money directly

to the people that need it rather than building this inefficient infrastructure that, that, that, that there's no way we're going to be able to to lower, uh, food prices in public stores by 35 or 40 percent. I think it's a pipe dream. Well, we're told all the time that the margins in the grocery business are slim, but, you know, loblaws, for instance, net earnings for the last three months of 2025 were more than 700 million. That seems like a lot of profit. Well, it is a big number. If you look at that number as a percentage of their sales, that's about 5%.

Maybe 5.5%. So what we would have to do is they sell a lot of groceries. And so what we would have to say is we would need to subsidize the rent and the labor and the, you know, and the logistics. to a degree to lower prices and also be able to buy just as well as those large companies. There's real efficiency in these large companies. And so, yep, that's a big number. It's just not credible that the government will be able to do it as well as these big players

are going to be able to. You're talking 40 or 50 stores versus 2,500 stores. And so I think that while it's noble to try and help Canadians, this is just the wrong way to do it. Yet people will look at the models that are there in place, government run liquor stores, cannabis stores in some parts of Canada, and ask why not a public grocery store? Well, for example, the publicly run liquor distribution system

is not intended to reduce the price of alcohol. It is actually intended to increase the price of alcohol. So in that circumstance, we've given the LCBO here in Ontario, Manitoba Liquor Control, you know, all across this country, we've given them the power to generate tax, similar to cannabis, and to manage pricing and distribution. And so if we said, well, we just want to manage price and distribution, tax food, and make sure no one can sell it cheap,

than other people, then the LCBO or the liquor control board model is perfect. But in this circumstance, we've got a completely different objective for those organizations than we would for a publicly funded grocery system. And it's worth noting that in many provinces, including here in Ontario, they're now getting the liquor control boards to reduce their footprint relative to retail and are selling through big grocery chains, small local convenience stores and such. So I think, yep, if you want to make money from it, if you want to raise taxes, then the liquor control board model is perfect.

But it is a very poor comparison for public grocery stores. You say a better alternative might be handing a food subsidies, that sort of thing. But some feel it's just that's not a. enough, something needs to be done to fix the system. What would ease the pain in a more lasting manner for those who are finding it difficult to afford groceries? Well, we have to look, we're looking here for a silver bullet for a problem that is multifaceted, right?

We know that the war in Ukraine had a significant impact on wheat prices and on vegetable oil prices. We're seeing a little bit less impact in the short term from the war in Iran, but that's also. So we could get out of some of these geopolitical issues. Beef prices went through the roof. That's because we had two years of drought in the early 2020s in Western Canada and the Midwest from the U.S. And we have very low cattle herds, lowest that we've had in almost 40 years. Coffee prices have gone through the roof.

We've seen warming in countries where in the five major coffee producing regions, we've seen an average of 40 more days over 30 degrees. Coffee is very susceptible to temperature. We're seeing yield reduction. So I'm pulling on these strings all over the place, Dave, and saying these are the reason food prices are going up. So there's not an easy way to bring them down. You said, well, giving people direct payments is not enough.

Well, is 40 stores in Canada going to be enough to relieve the, to relieve the prices? pressure that maybe in Canadians are feeling. Again, I would argue not. We've seen programs like Nutrition North change, make affordable staples like milk and eggs and such in the North without building infrastructure. We're doing the GST tax credit. Could we argue, or tax rebate?

Could you argue that we could do more? Of course you could. But is building stores and trying to. run a business that is so dependent, as Errol said, on distribution, on efficiencies and scale, I think we're just going to be throwing money away without achieving the objectives that we're trying to achieve. Mike, we'll leave it there. Thanks very much.

Thanks for having me. Have a great day. You too. That's Mike von Masso. He is a food economist at the University of Guelph. You've been listening to the current podcast. My name is Matt Galloway. Thanks for listening. I'll talk to you soon. For more CBC podcasts, go to cbc.ca.ca slash podcasts.