For CPG brands, New York City’s public grocery initiative raises a fundamental question: What happens when taxpayer dollars are used to lower the retail price of food? As the city prepares to launch publicly funded grocery stores operated by private retailers, manufacturers and suppliers are likely to be watching closely to see which products qualify for subsidies and how noncore categories are priced.
As grocery prices have increased more than a third since 2020 amid a turbulent geopolitical and economic climate, New York City’s public grocery initiative is one of Mayor Zohran Mamdani’s approaches to improve food affordability for New Yorkers, with the potential to create a model for other cities around the country.
The NYC Groceries Vision Plan is in collaboration with the New York City Economic Development Corporation (NYCEDC), a nonprofit organization that focuses on municipal initiatives. These publicly-funded grocery stores will sell core basket items, such as fresh produce, milk, eggs and milk at a 30% discount, with prices remaining fixed for a month before resetting. Non-core items will be priced competitively, according to the proposal.
The discount will be available to shoppers regardless of income, including those using nutrition assistance programs like SNAP and WIC, with projected savings of 15%, or roughly $90 a month and $1,000 a year, according to the Office of the Mayor.
“This administration is building a grocery store model that puts affordability first, with a 30% discount on essential foods and quality jobs for the people who run these stores. That’s what it means to make this city work for working people,” said Julie Su, deputy mayor for economic justice.
Last week, the Mamdani administration issued a request for proposals (RFP) from qualified grocers or firms to manage five municipal grocery stores expected to open by 2029 - one year before Mamdani’s term ends. New York City’s public grocery proposal is set to take effect in 2027, with locations planned for the Bronx and East Harlem.
How the subsidy model works
Publicly funded grocery is nothing new. Military commissaries have been in operation for more than 150 years, offering discounted groceries to military personnel and their families, with a current average discount of roughly 23.7%.
For New York City, the $70 million in capital funding needed to build the stores has been approved by the City Council, a nominal amount within the city’s $125 billion budget, according to Errol Schweizer, former vice president of grocery at Whole Foods and a consultant on NYCEDC’s public grocery program.
Using the commissary model as a framework, NYCEDC will work with private operators to sell a core basket of grocery items at a 30% discount.
Core basket staples will be subsidized by the city to cover operating costs. The city will reimburse operators for those subsidies based on sales volume and discount levels, a framework that already exists between retailers, suppliers and manufacturers to fund promotional pricing.
Schweizer said he expects that the majority of store sales to come from the subsidized items.
“My estimate is 70% to 80% of the volume of these stores will be core products. That’s why people are going to be coming,” he said.
What the proposal means for CPG brands
For CPG brands, the proposal appears less like a government competitor and more like a new retail format. The biggest open question is how noncore categories will be priced, since the framework allows operators to charge market rates on products outside the subsidized basket.
While Schweizer raised concerns in a recent Jacobin essay that subsidized core basket items could create pressure to raise margins elsewhere in the story, he said the risk is reduced if operators are adequately reimbursed for discounted items.
“As long as the retailer is being incentivized, the operator is being incentivized to meet the affordability goals, and they know that the city is coming through to subsidize those markdowns on the core basket items, I don’t think there’ll be as much pressure on them to price gouge on the rest of store items,” he explained.
Another unresolved question is whether the stores will adopt a values-based purchasing framework that prioritizes factors such as labor standards, environmental sustainability and animal welfare – a practice implemented by some conventional retailers.
Schweizer noted the city’s decision not to include those requirements in the current proposal, “which is one of the things that I’m most concerned about,” he said. However, the decision to forgo the framework may be so the city can focus on affordability, he added.
Yet, the planners are focused specifically on subsidizing fresh foods rather than highly processed products. A move that resembles USDA’s waivers restricting SNAP purchases on unhealthy foods.
“We’re not trying to subsidize junk foods or ultra-processed foods. We want the freshest, healthiest products,” Schweizer emphasized.
Concerns from local retailers
New York City’s independent grocers and bodega owners, however, raised concerns over losing business to publicly subsidized competitors. Schweizer said he has encouraged the city to consider extending subsidies to nearby retailers that may be affected.
“One of the things that I suggested to the city … is that they should just discount those same items to any local grocers or bodegas that see their transactions impacted by the opening,” he said. “So, you’re doing two things: You’re preserving local business and you’re expanding the affordability impact.”
The initiative, he argued, is designed to serve New Yorkers who are already struggling to access affordable food – not just simply shift sales from one retailer to another.
“There are 1.5 million New Yorkers who are food insecure. To me, there’s a line in the sand here. The priority is meeting the needs of those New Yorkers,” he said. “There’s, in my mind, a customer base that needs to be served here though these stores.”
More broadly, Schweizer views public grocery as one piece of a larger affordability puzzle.
“I don’t think that public grocery stores in and of itself is the only solution,” he said. “I think it should be one tool in the toolbox.”
