Toronto’s public grocery store pilot is a financial trainwreck in the making

Politicians cannot fix food prices by playing supermarket manager

The idea of getting government into the grocery store business seems to be gaining traction among left-wing politicians across North America. New York Mayor Zohran Mamdani, Toronto City Council, and NDP Leader Avi Lewis have all embraced the idea as a means of tackling today’s food affordability crisis.

Back in March, Toronto City Council voted overwhelmingly to pilot four municipally operated grocery stores. The vote went ahead without councillors even releasing a cost estimate or feasibility study to the public. At the same time, NDP Leader Avi Lewis claims a national network of government-run grocery stores could save consumers between 30 per cent and 40 per cent on their grocery bills.

But is that true or just wishful thinking?

According to the Montreal Economic Institute, retail grocery profit margins are between three per cent and five per cent on food items. That means, even if government-run grocery stores could eliminate that profit margin entirely, the average person would save between $11 and $18 a month on groceries. But that doesn’t even factor in the inefficiency of having governments get into the grocery store management business, which would surely mean higher costs through unionized workers, a failure to properly allocate resources, and a lack of motivation through deficient competition.

Yes, it is true that grocery prices have climbed by a stunning 22 per cent over the past four years. And something must be done to tackle this burgeoning affordability crisis. But the answer does not lie in more government. Instead, it’s time to look at government policies that are making Canadians’ grocery bills more expensive.

Consider, for example, supply management. This complicated network of quotas and regulations leads to heavily restricted supply and higher prices for Canadians on staple products like dairy, poultry and eggs. Supply management costs Canadian families hundreds of dollars per year. And the only reason these staples are more expensive than they have to be is because Canada’s political class doesn’t have the courage to pursue the right public policy and put an end to supply management, which would anger the country’s politically powerful dairy lobby.

There are also domestic barriers to interprovincial trade that make importing food from other provinces more expensive. Canada has a de facto internal tariff of nine per cent, making it more expensive for Canadians to access goods made outside of their province’s borders. Tearing down interprovincial trade barriers, much like putting an end to supply management, could make a meaningful impact if politicians truly want to lower grocery prices.

Another key issue is the industrial carbon tax. Higher costs for fertilizer and transportation raise the cost of producing and moving food from farms to grocery shelves. Those added costs get passed on at the checkout line. The federal government could help lower grocery prices by eliminating the industrial carbon tax, which would also improve Canada’s international competitiveness.

For those who say that government-run grocery stores at least deserve a shot, the reality is the concept has been tried and it’s failed. In Erie, Kansas, a municipally owned grocery store opened back in 2018. It closed its doors in 2025, facing empty shelves, safety issues and tens of millions of dollars in financial losses. A government-run grocery store didn’t work in the U.S., and it won’t work here in Canada either. Pretending that somehow the outcome would be different here is just fantasyland.

Solutions for sky-high grocery bills are at hand. But government-run grocery stores are not one of them. Rather, it’s time to tackle the real issues that are driving up grocery prices, including supply management, internal trade barriers and the industrial carbon tax, to get prices down for hard-pressed Canadian families. And these are all issues that could be fixed unilaterally by Ottawa if politicians at the federal level had the courage to act.

Dr. Jay Goldberg is a political scientist, a fellow with the Frontier Centre for Public Policy, and a columnist whose work is syndicated in the Toronto Sun and Winnipeg Sun. His policy analysis focuses on fiscal, trade, and energy issues.