Errol Schweizer

The main thing is that food is really a lot cheaper than apparel. It’s a pennies game in food, and the margins are really low. That’s why at mass merchants, they sell hard goods — it’s a higher margin. Food is low margin.

Even at Whole Foods, the average price per unit when I was there was $3.49. It’s probably closer to $5 now with inflation. But still, pretty low even for a higher-end store. If you’re playing the price game like Walmart and Kroger, you’re talking about a really low price per unit. So grocery is very much about driving high volumes on low-priced items.

I’d say another key difference is in sourcing. A lot of food manufacturing is still done in the US. So while there is plenty of import in produce — berries, salad, a lot of fruit, some specialty products, olive oil, pasta — there’s also a lot of manufacturing and co-packing of products in the United States. The BCTGM [Bakery, Confectionery, Tobacco Workers and Grain Millers] union has fought hard against the outsourcing of things like cookies, crackers, snacks, and cereal in their locals. A lot of Oreos are made in Mexico now. But there’s still a ton of manufacturing in the US.

Errol Schweizer

Walmart is the product of the lack of enforcement of labor laws and antitrust laws. Much of what they do, they copy from somebody else. They copied their store format from Carrefour, and to a lesser extent, Kmart and Meijer, out of Michigan. They were early adopters of satellite technology and perpetual inventory. They reinvented wholesale by making it so cost-efficient. But in terms of their product and how they operate a grocery store, there’s really nothing special there. It’s just bigger and meaner and cheaper. The way they would open up stores in communities, underprice the competition until they knocked them out of business, then raise their prices, is well documented.

Because Walmart is so big, a really large customer for most of the bigger food manufacturers and co-packers, most manufacturers don’t want to mess with Walmart. So Walmart can mandate a 98-plus percent fill rate at the expense of everybody else — meaning that if a crisis hits, Walmart must be filled to 98 percent of their purchase order, and then everybody else is going to take it on the chin.

I’m really disappointed the FTC [Federal Trade Commission] dropped its case against Pepsi, because I believe in discovery we would’ve been able to see PepsiCo’s contracts with the mass merchants like Walmart, to see if their pricing there is more advantageous.

Errol Schweizer

Walmart is dominant, full stop. Nobody else comes close. If you add up Albertsons, Kroger, and Ahold Delhaize, they wouldn’t even scratch Walmart, especially when you consider Walmart plus Sam’s Club. So Walmart is by far the dominant creature in the food system.

There are only a few operators that really compete with Walmart locally. H-E-B in Texas kicks Walmart’s ass — one of the few. And it’s only in certain metro areas, like San Antonio, Austin, and parts of Houston. H-E-B competes with Walmart on price, size, store format, assortment, customer base, employee loyalty — people stay with H-E-B for their whole careers. Even though they don’t pay well, they treat people really well. People love working there, which is saying a lot for a nonunion employer. But in general, no one competes with Walmart.

Walmart has been crushing Kroger and Albertsons in recent years, especially as those companies were clowning around with that really poorly thought-out merger. Kroger and Albertsons are very dominant retailers in the majority of major metro markets across the US. But they really took their eye off the ball over the last few years, and Walmart has been eating their lunch.

I call Walmart the all-consuming void. It is the black hole at the center of our whole food system. Walmart has a gravitational pull on everything, and now they are trying to bust into more premium markets, competing upstream with Whole Foods and Trader Joe’s by launching a new private label.

Errol Schweizer

It’s just a reflection of the economy. Vast inequality, the lack of living wages, the lack of household savings. In the 1990s, there was a wave of consolidation, and as a result we’ve simply got a lot fewer grocery stores than we used to. But we’ve got a lot more Walmarts, and we’ve got a lot more dollar stores. That’s where people are buying groceries. I go into the dollar stores all the time just to see what they’re selling. Obviously, it’s not an ideal place to shop. They don’t sell a lot of fresh items, and what they do have fresh is pretty terrible. They’re competing with the deep discounters, the German discounters, Aldi and Lidl, who are also growing at an incredible clip.

On the other hand, you have Erewhon. There are only maybe fifteen or sixteen Erewhon stores. This is where you can get a $30 smoothie made from unicorn shit or something. They’ve taken over a niche from Whole Foods, which has retreated from some of that super premium market. Whole Foods is now adopting a two-tiered pricing strategy: they sell their store brand private label very competitively, usually matching price with Kroger, Albertsons, Safeway, Sprouts, Trader Joe’s. But they’re really expensive on the rest of their store items.

Trader Joe’s is a weird hybrid too. They’re technically a discounter, but they’ve also got premium gourmet specialty. They’re essentially built off of the same superstructure as Aldi or Lidl, and they’re actually owned by the cousins of the Aldi US organization. However, they compete for the same Whole Foods customers, usually with lower prices. Like Whole Foods and Sprouts (which is doing very well), they are still primarily appealing to a more educated, upper-income customer who may just be looking for deals.

Errol Schweizer

No, they don’t understand grocery. All they’ve done at Whole Foods is raise prices, lower labor expenses, and gut the culture.

Amazon has an enormous household reach, but it’s very different from Walmart. They do a lot better with higher income, suburban, more well-educated people. Walmart is much more of a true mass merchant, hitting every household, every demographic. I think what Amazon keeps trying to do is monopolize that top 10 percent. It’s this 10 percent that’s responsible for 50 percent of all consumable goods purchases. That’s who Amazon’s going for.

The Amazon Fresh stores are a mess. I don’t know what they’re doing in those stores. I’ve been to a few of them, and it’s not like they’re disrupting or breaking the rules of retail. It just looks like they don’t know what the hell they’re doing — in terms of the mishmash of private label and national brands, lack of innovation, lack of any sort of local approach to consumer trends, all the stuff that we really banked on when I was at Whole Foods in terms of what people wanted to buy, what people were eating. There are a lot of critical things I can say about Walmart, but they’re really up on trends. They have a very effective consumer insights team.

I just don’t consider Amazon a serious contender to Walmart, though I do consider them a threat to natural specialty and more premium, family-owned shops. Amazon is a threat to Wegmans, Raley’s, Hy-Vee to independent natural food stores. I think they’ll continue to grow share online, but in terms of being a true brick-and-mortar rival to Walmart, absolutely not.

Errol Schweizer

I’m pretty skeptical because e-commerce in grocery has not been the big disruptor that a lot of people thought it would be. It’s still a minority share of all grocery purchases. It spiked a bit during COVID-19, but it’s well under 10 percent.

There was a lot of hype around it, especially when Amazon bought Whole Foods, a lot of froth. I’ve worked for a number of e-commerce outfits. You can’t make a profit in online grocery. It’s so expensive to sell food online. It’s either a cost center or you’re subsidizing it through your brick-and-mortar. Instead of you, the customer, walking into a store, shopping for yourself, and checking out, now you have to hire people to do that for them. It adds another 10 to 15 percent in terms of just the labor costs.

Kroger has lost a ton of money on e-commerce. Their e-commerce has been hemorrhaging money and really lowering their overall rate of profit because it’s been growing as a share. They do a lot of e-commerce at Kroger and Vitacost. People like it, and they’re really good at it, but it’s really expensive and not profitable.

The numbers don’t bear out Kroger’s continued investment in it, yet I think there’s a compulsion that they have at the leadership level to keep growing it as a share. Having worked in that sector, the only way it would be successful is if you’re only e-commerce, if that’s all you do. You have to be selling a differentiated, distinct, high-margin product to pay for the home delivery.

Amazon does nonperishables very well. If you are in a major metro area that is geographically close to one of their distribution centers, you can get stuff within a few hours sometimes. But I haven’t seen the data to show that that is how more people are going to be buying food. Home delivery has existed since the Sears catalog. A&P was running groceries up and down the street in the 1930s. This isn’t new technology. So I’m super skeptical about it, and I’m looking forward to being proven wrong.

Errol Schweizer

Don’t they have friends in the military? I grew up in the Bronx. A lot of people I knew went into the military or ROTC or National Guard. The military commissary system, if it were a grocery store, would be one of the top fifty grocery stores in the US. It serves over a million people every day. Military retirees often live close to base because they can get cheaper groceries.

A couple of my close colleagues — not socialists, not leftists, but folks who are business people who sell into commissaries — they love doing business with the commissary system. They’re flexible and innovative; they are true believers in their jobs. They want to make sure that service members are fed healthy food. They’re up on trends. One of my capitalist friends, an entrepreneur whom I’ve worked with for many years, said it’s actually-functioning socialism.

A part of the problem here is that Mamdani’s campaign has not articulated how they’re going to do this. They’ve left the door open to criticism. I think he’s got some great ideas. All my family lives in New York. I still identify as a diasporic New Yorker. I want it to work. But the idea they have on paper right now won’t work because it’s too small. It will open them up to criticism from the Right in terms of inefficiencies and lack of operational prowess. You need scale to do this right.

Mamdani’s talking about a $60 million investment, a rounding error in terms of the New York City budget. Raj Patel and I came up with a proposal for twenty stores — four or five stores per borough in New York City. A $400 million investment, which is a fraction of the NYPD’s $10 billion a year. It’s a fraction of sanitations, a fraction of the fire department. Raj wrote a brilliant follow-up article about it called “MAHA vs. Mamdani” in Boston Review recently talking about the legacy of public sector food provisioning. It’s a lot of stuff I didn’t know; I’m just a grocery guy.

I think Mamdani’s proposal is the most important idea in the food sector in decades. I can’t remember anything else that to me was as compelling as this. If he wins, I wish him the best of luck. And I really hope other folks who are in municipal and state-level policy pick up on it and take the operational considerations to heart and run with it.