End food deserts with publicly owned grocery stores

When market actors such as grocers divest from a community, policymakers turn to incentives to lure them back. Now is the time to rethink this approach.

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A customer walks out of Whole Foods at Englewood Square on April 29 after the company announced that the store will be closing in the coming months.

A customer walks out of Whole Foods at Englewood Square on April 29 after the company announced that the store will be closing in the coming months.

Pat Nabong/Sun-Times

Access to affordable, convenient, healthy food and groceries, especially fruits and vegetables, is a persistent problem impacting 40 million Americans. Locally, a large number of Black Chicagoans live in areas with few grocers — the technical term being food deserts — which contributes to higher diabetes and heart disease rates, increased poverty and lower educational outcomes.

Bringing fresh food to underserved communities has been a priority for many policymakers. They have showered grocery store chains with tax subsidies, sales tax abatements, and other giveaways. Chicago is no different.

Case in point: In 2013, the city provided an Englewood shopping center development, which included Whole Foods, $11 million in tax subsidies. Then-Whole Foods CEO Walter Robb worked to find ways to ensure affordable pricing through community partnerships and lean operations. The Englewood store opened in 2016.

At the time, Whole Foods was a publicly traded company, beholden to shareholders. Local stakeholders and food access mattered little when the pressure to deliver quarterly results mattered most. By late 2016, Robb was out as CEO, and in 2017, Jeff Bezos-owned Amazon purchased the Whole Foods chain.

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Now Whole Foods has announced the closure of the Englewood store (along with a handful of other stores elsewhere).

The Whole Foods closure is emblematic of a broader problem. When market actors — such as grocers, banks, and broadband providers — divest from a community, policymakers turn to incentives to lure them back. This tactic works only occasionally.

We believe now is the time to rethink this approach with a straightforward solution: the city operates the Englewood Whole Foods as a public option.

You might be wondering what the city knows about operating a business. The answer: A lot, actually. The city owns and operates O’Hare and Midway Airports, two massive public enterprises critical to the local and global economy. Chicago’s water system is another example, supplying water to millions of people. These businesses are complex and professionally run, and there’s no reason why the city couldn’t do the same with grocery stores.

Yes, the city is cash-strapped, and there will be startup costs. But the strategy of repeatedly throwing money at big businesses for temporary band-aids costs even more. The city is awash in federal recovery funds meant for transformational investments just like this.

Moreover, there is precedent for such action.

In 2018, the closure of Baldwin, Florida’s, only grocery store sent a shockwave through the town. With the nearest alternative over 20 miles away, Baldwin became a food desert overnight. The recently elected Republican mayor made a common-sense move: he bought the store and started running it under the town’s banner.

Baldwin is not alone. In late 2020, Erie, Kansas, faced a similar dilemma. The owners of the only grocery store in town, Stub’s Market, were ready to retire. When they couldn’t find a buyer, the city itself stepped up and bought the store, now called Erie Market. Cindy Lero, Erie’s city clerk, said it is “set up and run similar to a utility, because that’s what we know how to do.” As municipal employees, the workers got expanded benefits — and the store still turned a modest profit in its first quarter.

No high profits needed

But Chicago is a world-class city, and these are small-town grocers. So how could a public owner or operator work here? If anything, Chicago has more expertise and capacity to innovate, but let’s pull back the curtain and look at the fundamental problem.

Just before Christmas in 2020, a Sav-A-Lot store in the Austin neighborhood shut down. The company offered little insight as to why. However, we know why businesses close: Their profit margin wasn’t high enough to justify the store in the eyes of corporate managers.

That’s the critical difference between a public and private enterprise. A privately owned business needs a high profit margin to satisfy owners or shareholders. A public owner does not.

A publicly owned business simply needs to cover its operations and capital costs: buy food, pay workers, and make mortgage payments. A private owner must do all that, plus it needs money left over for shareholders. And as the Englewood Whole Foods debacle illustrates, even when socially responsible CEOs attempt to do the right thing, a merger or acquisition can change a company’s strategy overnight. Conversely, a publicly owned business can be tethered to a community permanently.

But could we do it here? Sure. All over the country, public enterprises own and operate businesses: water utilities, electric utilities, broadband providers, and state liquor stores are all common examples, demonstrating that sometimes participating in the markets is more effective than paying businesses to do right by communities. Englewood deserves no less.

Ameya Pawar, a former City Council member, is a senior fellow with the Economic Security Project and special advisor to the University of Chicago Inclusive Economy Lab and the Academy Group.

Paul Williams is the founder of the Center for Public Enterprise and a fellow at the Jain Family Institute.

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