Zohran Mamdani, the new mayor of New York City, soared to victory last year on a handful of ambitious promises. Among them was a pledge to open a city-owned grocery store in every borough to address the twin problems of food deserts and rising grocery prices.
His idea hasn’t yet evolved into an actual plan. Atlanta beat him: Last summer the city opened Azalea Fresh Market in the city’s downtown neighborhood, a municipal grocery store backed by city funding.
“People need access to fresh food,” Atlanta Mayor Andre Dickens said. “Food is a critical part of a healthy community.” Backing a grocery store is personal: As a high school student employed by Kroger, he had to take the bus or drive from his low-income neighborhood to get to work.
The store is operated by Savi Provisions, a private company, and stocks the full range of products found in other grocery stores.
Azalea Fresh Market has implemented what it calls “Paul’s Promise,” 50 to 60 essential items like eggs and bread offered at “the lowest price possible,” Nair said. Through supplier deals with the help of the Independent Grocers Alliance and higher profits from things like prepared food, the store prices items closer to cost. The store also accepts SNAP and WIC benefits.
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So far the store is going well, according to Dickens and Paul Nair, CEO of Savi Provisions. Between 600 and 700 customers shop daily, with an average basket costing $13, demonstrating that people aren’t coming for big monthly trips, but shopping frequently. While Nair aims to be doing “much better,” he said it’s “on target.” Savi has a second location in the Campbelltown Road neighborhood in the works, which is currently being constructed with the city’s financial help.
In Fulton County, where Atlanta is located, nearly 14 percent of residents are food insecure. The area where Azalea Fresh Market is located is “disadvantaged, disinvested,” Dickens said. There hadn’t been a supermarket in the downtown neighborhood in two decades. “Grocers have historically avoided these neighborhoods due to low profit margins and perceived risks,” he said.
At first, Dickens tried to use the traditional approach of luring an established grocery chain to open up a location in both neighborhoods. He went to major brands and offered a potpourri of incentives: tax breaks, free land, help constructing the building. “They still didn’t want to take it,” he said. “I got frustrated and was like, ‘We’re going to do it ourselves.’”
Savi Provisions answered the city’s request for proposal. The city kicked in $8 million in tax credits, grants, and loans, buying the land and demolishing the building that had stood on it. Savi put in $1 million of its own equity, and the two partnered with the Independent Grocers Alliance to tap into its purchasing power and technical assistance.
The partnership with the IGA is meant to get around what has become a huge hurdle for small grocery stores: the power large retailers like Walmart and Kroger exert to extract pricing deals from suppliers. Through its larger footprint, the IGA can ink deals with distributors and suppliers to secure some of those lower prices for Azalea Fresh Market.
The grocery business is challenging. Fresh food spoils quickly. Stores deal with things like theft and goods that arrive damaged. The margins come out quite thin—between 1 to 3 percent for big box stores, and as much as 5 percent for smaller ones. It typically takes a new store three to four years to reach profitability.
The idea behind Atlanta’s investment is that it will support Savi in those early years so it can reach a point of self-sustainability. Dickens said the city is willing to back the store for three to five years; Nair wants to be sustainable within one or two.
