Billionaire businessman John Catsimatidis has threatened to shut down or sell his grocery empire with roughly two dozen stores in New York City and move his corporate headquarters to New Jersey. And it's all because of one of Zohran Mamdani's mayoral campaign promises.
Mamdani, the Democratic state assemblyman who's the front-running candidate to lead New York City, has vowed to open city-owned grocery stores if he's elected in November. His proposal has drawn opposition from not only Catsimatidis — owner of the Gristedes and D'Agostino's chains and one of Mamdani's most vocal critics — but bodega owners, other supermarket operators and some in the business community.
Democratic New York Gov. Kathy Hochul isn't a fan of the proposal, either. Asked about government-owned-and-operated grocery stores at a business breakfast in August, she replied, "I favor free enterprise.”
But Mamdani has built his campaign on making New York affordable for residents and soaring grocery prices have been a pain point for consumers across the city and the country. On the campaign stump Mamdani, a socialist, has said city-owned grocery stores with low overhead, opened in government-owned properties will be able to sell produce and other groceries at lower prices.
"These stores will operate without a profit motive or having to pay property taxes or rent, and we'll pass on those savings to you," Mamdani said in a TikTok video. "They'll partner with small businesses and nearby farms and sell at wholesale prices. The job of city government isn't to tinker around the edges while one in four children across our city go hungry."
The question of whether government-owned grocery stores are viable has sparked debates, academic studies, media reports and editorials — both pro and con. These stores have worked in some places, such as St. Paul, Kansas, proponents point out. And they have failed, according to critics, in places like Baldwin, Florida. In August, city-owned Sun Fresh Market in Kansas City, Missouri, shut its doors.
Other cities, like Boston, are already looking at what Mamdani is planning if elected. It could prove to be a test case of whether government-run grocery stores can work in a big city. Atlanta in early September officially debuted its first municipal grocery store, Azalea Fresh Market, which could also be a model for other big cities, depending on its success. The issue has become top of mind for food access advocates because the federal government is set to reduce food-stamp benefits for low-income residents.
Pros and cons
Proponents of city-run grocery stores maintain that these essentially subsidized locations can sell food at lower prices. Without a mandate to make a profit, they say, city grocery stores can also open in so-called food deserts, where residents' options to buy healthy and reasonably priced food are limited, because traditional chains don't want to go into those neighborhoods.
Mamdani and his supporters also argue that existing grocers themselves are benefiting from a variety of subsidies from federal and state governments. These include the Supplemental Nutrition Assistance Program, or SNAP, benefits, according to Nevin Cohen, director of the Urban Food Policy Institute at City University of New York. He said 20% of people in New York City use federal SNAP dollars to buy food, "so that is a subsidy to the grocery industry overall."
Opponents of city-owned grocery stores say that the government is ill-equipped to operate that type of business, which among retail sectors has razor-thin profit margins. It's a competitive market where giant chains such as Walmart and Amazon have the clout to negotiate lower prices from their vendors and have distribution networks in place. Bodegas, as small businesses, and some independent grocery store owners claim Mamdani's plan is unfair and a threat, placing them at a competitive disadvantage and possibly putting them out of business.
Catsimatidis wrote an op-ed piece for The Wall Street Journal in June that described Mamdani's "public grocery” proposal as "delusional." Such stores have failed in communist nations like Cuba and what is now Russia, according to Catsimatidis.
Mamdani's city-run grocery stores "would collapse our food supply, kill private industry, and drag us down a path toward the bread lines of the old Soviet Union," Catsimatidis said in his piece.
Mamdani and Catsimatidis didn't respond to emails from CoStar News seeking comment.
Five stores to start
Mamdani hasn't offered many details about his city-run grocery plan yet. So far, he's said he would open five city-owned grocery stores, one in each borough of New York City, in a pilot test. He estimated that the cost would be $60 million.
"As mayor, I will create a network of city-owned grocery stores," he said on TikTok. "It's like a public option for produce. We will redirect city funds from corporate supermarkets to city-owned grocery stores whose mission is to lower prices, not price gouging."
He envisions these stores as buying and selling at wholesale prices, centralizing warehousing and distribution, and partnering with local neighborhoods on products and sourcing.
"With New York City already spending millions of dollars to subsidize private grocery store operators (which are not even required to take SNAP/WIC!), we should redirect public money to a real 'public option,'” according to Mamdani's website.
For example, New York also already has six city-subsidized public markets where private vendors can sell their wares in low-cost space.
In late June, Catsimatidis and members of United Bodegas of America, a trade group, held a news conference where they blasted Mamdani's plan. In several interviews with the media, Catsimatidis has threatened to close or sell his Gristedes grocery stores and possibly move the headquarters for his company, Red Apple Group, from Third Avenue in Manhattan to the Garden State, if Mamdani is elected mayor. Red Apple is Catsimatidis's conglomerate, which not only includes his supermarkets but also other real estate and WABC-AM, a New York talk-radio station, where he hosts a show.
Tough business
Government-owned grocery stores in the United States are usually public-private partnerships, with a for-profit grocer that has expertise actually operating such locations, according to James Cook, Americas director of retail research for the real estate firm JLL.
But the grocery business is tough for anyone to run, let alone the government, according to Cook. The profit margin on average is 3% and even less than that for most of the national chains, 2% or lower, he said. Catsimatidis said the profit margin for his grocery stores is in that range during an interview in September on Spectrum News NY1.
"Right now, we're not making 1%, 2% margin," he said. "You know why half the drugstores have left New York? You know why half the supermarkets have closed down? Because we're not making plus 2%. We're losing 2% right now. Everything is locked up."
And the lower costs for city-run grocery stores isn't a huge advantage based on industry averages, Cook said.
“The overall percentage of revenue that a grocer is going to spend on rents on average in the U.S. is around 2%," Cook said. "That's not a huge savings."
The plan for city-owned grocery stores to buy wholesale and pass along those savings to the consumer is unrealistic, according to Cook.
"The problem is that most wholesale buyers don't get great deals now, either," Cook said. "You have to be the largest chains in order to get those deals. And that's been a bone of contention for years, that small independent supermarkets can't get and sell at the low prices of the big competitors."
Where it works
All that said, there are cases where the government successfully runs retail operations. In his home state of Pennsylvania, Cook said the commonwealth — the Pennsylvania Liquor Control Board, one of the largest purchasers of beverage alcohol in the United States — owns and operates the Fine Wine & Good Spirits chain. It has about 575 liquor stores.
And the federal government, in the form of the Defense Commissary Agency, has a global chain of commissaries that serve military personnel, retirees and their families, according to Cohen. Those are basically supermarkets at military bases that are run by either government employees or subcontractors, he said.
In Atlanta, the city has partnered with Invest Atlanta and Savi Provisions to open Azalea Fresh Market at the historic Olympia Building downtown, a former Walgreens location. The goal is to offer nutritious food in a U.S. Department of Agriculture designated low-income, low-access area — a food desert — and to foster economic growth, according to city officials.
"It’s a step to bring fresh food where people live, work and study, while restoring a historic landmark," Atlanta Mayor Andre Dickens said on Instagram.
Savi Provisions — with 24 stores across Georgia and North Carolina — is described as the owner/operator of Azalea Fresh Market, with financial backing by the city of Atlanta. A second city-based grocery store is also planned.
Boston is exploring the feasibility of opening city-run stores, with officials citing Mamdani's plan. Chicago had considered debuting such stores earlier this year but opted instead to pivot toward supporting public markets selling fresh, locally grown produce.
In Kansas City, the closed Sun Fresh Market has become representative of the problems that city-owned grocery stores face. Kansas City invested roughly $18 million in that store, which was run by a nonprofit operator in a municipal-owned shopping center. But the site was plagued by crime and security issues that kept shoppers away, prompting its closing this summer.
Effect on small players
Mamdani's city-owned grocery stores are not the solution to rising food costs but rather will have "disastrous consequences" on smaller operators, according to Nicole Huyer, senior research associate at the Heritage Foundation's Thomas A. Roe Institute for Economic Policy Studies.
"They don't face the same barriers to entry as private businesses. And for small grocers, those are really massive costs. ... That already puts the government at an advantage in the market."
If private grocers lower prices to compete, in order to remain profitable they'll be forced to let go of staff, relocate or go out of business, according to Huyer.
By contrast, Cohen said city-owned stores could be viable in a huge city like New York. Some of the past cases of failed government-owned grocers have been in rural towns with small populations, much different that places like Manhattan.
"In New York City, you can put a supermarket in a public housing development that has 3,000, 4,000 residents who live directly above the store," Cohen said. "The potential market is totally different."
As to whether Mamdani's plan is fair or not, Cohen cited a laundry list of ways that New York City is already subsidizing grocery stores. He said that includes not only the city's support for the existing half dozen public markets but providing sites for farmers markets; offering zoning bonuses to developers who put supermarkets in their buildings; and giving tax credits to supermarkets that open up or expand in designated parts of the city that are considered in need of more food retailers.
Outgoing Jersey City Mayor Steven Fulop, a Democrat, this summer expressed some support for Mamdani's city-owned grocery store proposal in a post on the social media site X. The idea of public grocery stores has precedent, according to Fulop.
"This isn’t some radical new idea in the U.S.," Fulop posted. "The USDA, under both Republican and Democratic administrations, has a track record of funding publicly supported grocery stores, including co-ops and nonprofit retail models. These programs continue to offer financial, technical, and planning support to help bring healthy food access to underserved communities and prices down."
Jersey City was the first in the Garden State to pilot a “Healthy Corner Store” model, according to Fulop. The city got a grant to partner with and give some bodegas funds to get them to carry healthier foods, such as fruit and vegetables, according to Stacey Flanagan, Jersey City's director of health and human services. But ultimately, the program ended when the funding was reduced, she said.
"We gave it a real shot," Fulop said in his post. "It didn’t work as well as I had hoped, but I’m still glad we tried."