America Has Plenty of Experience With Government-Run Stores, and It Isn't Pretty

In the recently concluded Democratic primary for New York City mayor, state Assemblymember Zohran Mamdani emerged victorious, beating out former Gov. Andrew Cuomo, among others, for the nomination.

One proposal that galvanized both supporters and opponents was Mamdani’s plan to open five city-owned grocery stores—one in each borough. In a campaign video, he called the stores a “public option” like in health care; he said they would not pay rent or property taxes, they would “operate without a profit motive,” and their “mission [would be] lower prices, not price gouging.” (As of January 2025, the grocery industry’s average net profit margin was under 2 percent.)

Some have come to Mamdani’s defense, saying city-owned grocery stores are not as radical as they sound—in fact, some states already have them, without becoming socialist hellscapes. Some have compared this plan to states that control liquor sales. But in each case, the comparison is unflattering to Mamdani’s proposal.

“5 city owned grocery stores is not that much,” progressive commentator Zaid Jilani wrote on X. “Kansas and Florida have cities with city-owned grocery stores.”

Jilani’s examples are underwhelming: The city council in Erie, Kansas, purchased the city’s only grocery store in 2020 rather than let it close. The city operated the Erie Market for years but at a loss: Erie’s mayor said the average customer needed to spend $50 per month for the store to stay afloat, but the actual monthly expenditure was closer to $14. Last year, Erie leased out the store to be run by a private company.

The town of Little River, Kansas, also has a city-owned grocery store, though the town only owns the building and its refrigeration system; the store itself is privately owned and operated.

Baldwin, Florida, opened a fully government-owned grocery store in 2019 after the town’s only grocer closed the previous year. The town already owned the site, having purchased the lot and funded the building’s construction a decade earlier in an attempt to woo a grocer to town.

“We’re not trying to make a profit,” Mayor Sean Lynch, a Republican, told The Washington Post when Baldwin Market opened. “We’re trying to cover our expenses, and keep the store running.”

The store closed in 2024 after being in business for less than five years. “The town-run store,” The Florida Times-Union wrote at the time, “has struggled for years…to reach the break-even point.”

Citing Lynch, researchers at Vanderbilt University found, “that the lack of ‘buying power’ harms local grocery stores as they compete for customers with Wal-Mart and other big-box grocers, who can offer much lower prices. Even with only needing to break even, Baldwin Market still feels the pressure from these grocers. While these big-box grocers must also balance profits, they can lower their costs for consumers by tapping into those larger distribution networks. Because of this bottom-line difference in product costs, some residents still choose to make the longer commute and shop at a store ten miles outside of town.”

It’s worth noting that in the above examples, governments stepped in when a small town’s only grocery store went out of business. It makes even less sense in a city like New York, with 1,000 grocery stores serving 8.5 million people—a ratio of 8,500-to-1, where grocers typically see 15,000-to-1 as a viable market.

A government-run grocery store would face similar problems, struggling to break even despite taxpayer backing, while likely not providing a meaningful advantage over the status quo.

Others have argued in defense of Mamdani’s proposal by pointing to the number of liquor control states, in which the government handles the sale and distribution of all hard alcohol within the state.

“I don’t know if public grocer is a great idea in practice, but my county runs all the liquor stores and wholesale distribution and [Mamdani's] plan is basically just a pilot program,” Benjy Sarlin, opinion editor at The Washington Post, wrote in a post on X. (Sarlin noted in a later post that while a state liquor monopoly may not be great in practice, “it’s in the realm of policy proposed by normie politicians and not just socialist politicians.”)

“Seventeen states have state run liquor stores, including Alabama, West Virginia, New Hampshire, and Montana. No one thinks these are socialist states,” Aeon editor Sam Haselby added. “People need some perspective.”

This example, too, doesn’t hold up to scrutiny. Indeed, 17 states, plus localities in four others—accounting for nearly 25 percent of the total population and a similar share of all U.S. liquor sales—are control states. Sarlin seemed to refer to Virginia, where the state government operates more than 400 liquor stores.

But only seven of the 17 control states actually own and operate their own stores; the other 10 “pull the strings from on high, selling a selection of spirits to all private vendors,” and “set[ting] minimum costs, essentially dictating prices on the consumer level,” according to Thrillist.

The result is no surprise: “Monopoly of alcohol retail outlets appears to be associated with slightly higher liquor prices,” according to a 2014 study. “Only five brands were at least 10% more expensive in license states, while 27 brands were at least 10% more expensive in control states.”

State-run liquor stores also serve a very different purpose than grocery stores, or even from liquor stores in non-control states.

“The goal of alcohol control states is to ultimately benefit public health by limiting the sale of alcohol and to pass on profits from liquor sales to state programs,” according to Bottle POS, a software company for liquor stores.

“Residents of control states consume 14% less spirits and 7% less total alcohol than residents of license states,” brags Alcohol Justice, which advocates against the alcohol industry.

Nearly four decades ago, Iowa gave up its liquor store monopoly, maintaining control over distribution but ceding sales to privately owned stores. At the time, officials were clear about what the purpose had been: “Iowa’s state-owned stores were initially established in out-of-the-way places where they were hard to find,” The New York Times wrote in 1986. “They were put there intentionally to keep people from drinking,” Rolland Gallagher, head of the Iowa Beer and Liquor Control Department, said at the time.

Granted, any model for a government-run grocery store would inherently be different from a liquor store: Unlike control states, nobody intends for a grocery store to limit the amount of groceries that people buy. And even under Mamdani’s proposal, private grocery stores would not be banned. “Mamdani isn’t proposing to expropriate the capitalist grocers and make privately owned grocery stores illegal,” Haselby added in a subsequent post.

Still, the principles remain the same: State liquor stores are more expensive than non-state-run stores—which is a feature, not a bug. A government-run grocery store with higher prices would be the worst of both worlds.

Government-run retail establishments are inherently less efficient than their private-sector counterparts. “Public options” like Mamdani advocates don’t have to make a profit and can count on taxpayer money to prop up any losses. For an industry like grocery stores, which already have razor thin profit margins, a publicly-funded competitor would be a bad deal for New Yorkers.

The post America Has Plenty of Experience With Government-Run Stores, and It Isn’t Pretty appeared first on Reason.com.

Source: https://reason.com/2025/06/27/america-has-plenty-of-experience-with-government-run-stores-and-it-isnt-pretty/