How Thin Margins and High Costs Engineered the Urban Food Gap.
On a weekday afternoon in the Willard-Hay neighborhood of North Minneapolis, a resident loading groceries onto a bus illustrates a basic problem: the nearest full-service supermarket is miles away. For households without a car, a routine shopping trip becomes a logistical ordeal. That scene, repeated daily across several of the city’s poorest neighborhoods, sits at the heart of what urban researchers and city officials have begun to call Minneapolis’s food access crisis.
The U.S. Department of Agriculture defines a food desert as a low-income census tract where a significant share of residents live far from a grocery store and lack reliable transportation. By that standard, Minneapolis has several. But the problem is not merely geographic. It is economic, historical, and, many advocates argue, racial.
As of 2023, the five-mile radius around the Cedar-Riverside neighborhood in zip code 55454 carried the highest food insecurity rate in the nine-county Greater Twin Cities region, according to the United Way. North Minneapolis, Phillips, and parts of South Minneapolis round out a geography of deprivation that tracks almost precisely onto the city’s legacy of racial segregation. And the situation may be worsening: a community newspaper serving South Minneapolis recently reported that the food desert is expanding, with two feeding sites in the Ventura Village neighborhood that together served over 700 meals a night closing in the past six months.
See also: Food Deserts in the Twin Cities, an interactive map tracing food access gaps across the metro region (ArcGIS StoryMap).
Why the Market Fails Here
To understand why grocery stores abandon low-income neighborhoods, it helps to understand how a supermarket actually makes money and why the numbers fall apart in concentrated poverty.
A conventional full-service grocery store operates on razor-thin margins, typically between 1 and 3 percent of revenue. Industry estimates suggest a standard supermarket needs between $20 million and $40 million in annual revenue to remain viable, which translates to weekly sales of $400,000 to $800,000. Achieving that threshold requires a specific set of conditions: a dense customer base with reliable car access, shoppers making large, infrequent stock-up trips averaging $50 to $100 per visit, and relatively predictable demand for perishable goods like produce, meat, and dairy.
In Minneapolis’s food deserts, nearly every assumption behind that model collapses. Household incomes are lower, and many residents rely on public transit or their own feet, which physically limits how much they can carry home. Shopping trips become frequent but small, averaging perhaps $25 to $30 per visit rather than the basket size that sustains a supermarket’s volume. To generate the same weekly revenue, a store in a low-income neighborhood would need dramatically more individual transactions than one in a wealthier zip code. The customer base simply may not be large enough to hit that threshold.
Then the cost side of the ledger cuts the other way. Shrinkage, the industry shorthand for losses from theft, spoilage, and administrative error, runs higher in lower-income areas. Security expenses add up. Managing perishable inventory in a neighborhood where demand is fragmented and unpredictable strains already thin margins. Commercial real estate in some of these neighborhoods is relatively cheap, but build-out costs, licensing, and logistics infrastructure are fixed regardless of location. Lenders and investors, looking at the revenue projections against the cost structure, routinely decline to finance these projects.
The presence of dollar stores and convenience stores compounds the problem in a way that is often underappreciated. These outlets operate on lower overhead and limited selection, capturing local spending on snacks, beverages, and shelf-stable goods without providing anything close to what a full grocery store would offer. Their proliferation fragments whatever retail demand exists in a neighborhood, making it still less likely that a full-service competitor can achieve the transaction volume needed to survive. Dollar stores, in this sense, are not a substitute for grocery stores; they are a structural barrier to them.
Minnesota’s grocery landscape has its own quirks that deepen the problem. It is the only state in the country in which neither Kroger nor Albertsons operates. The Twin Cities market is served instead by regional players like Cub Foods, Lunds and Byerlys, and Kowalski’s, along with a network of food co-ops. These companies compete vigorously in affluent and suburban markets. None of them have found a financially viable way to serve the city’s most underserved areas at scale, not because they lack interest in principle, but because the economics, as currently structured, do not support it.
The result is what economists call a market failure: a situation in which the private market consistently fails to produce a socially necessary good, not due to any single firm’s decision, but because the underlying incentive structure makes profitable provision impossible. Grocery stores are not choosing to punish low-income communities. They are responding rationally to a business environment that offers little prospect of financial return. That is precisely why market failure requires a policy response, because the market, left alone, will not correct itself.
Segregation’s Long Shadow
The geography of food deserts in Minneapolis did not emerge by accident. It follows, with striking precision, the contours of racial segregation that were deliberately engineered over most of the twentieth century. Bloomberg CityLab has mapped how thoroughly that history shaped the city’s present geography.
According to the University of Minnesota’s Mapping Prejudice project, Minneapolis was not particularly segregated before 1910. That changed as developers and white residents associations embedded racial covenants into property deeds, legal contracts that explicitly barred non-white buyers from purchasing or occupying land. The first such covenant appeared near Lake Nokomis; by 1940, the practice had spread across much of South Minneapolis, effectively pushing Black families northward into Near North.
Those housing restrictions were reinforced by the federal government’s own redlining maps, produced by the Home Owners’ Loan Corporation in the 1930s. Neighborhoods with significant Black or immigrant populations were graded “hazardous” in red ink, denying residents access to mortgage financing and the wealth accumulation that homeownership would have provided. Then came the highways: Olson Memorial Highway and Interstate 94 were routed directly through Near North and other Black neighborhoods in the 1960s, physically severing these communities from downtown and wiping out commercial corridors that had supported Black-owned businesses. The Minnesota Spokesman-Recorder has documented how those decisions continue to shape resource access today.
Minnesota banned racial restrictions on property deeds in 1953. The Fair Housing Act made them illegal nationally in 1968. But the consequences persist. Where you lived determined where your children went to school, what your home was worth, and what amenities your neighborhood could sustain. Supermarkets followed the money, which followed the covenants. The grocery redlining of today is, in that sense, a direct descendant of the housing redlining of decades past. Some advocates have begun pushing back on the term “food desert” itself, arguing it implies a natural emptiness rather than an engineered one. The preferred term in some circles is “food apartheid,” a framing that makes the human agency behind these conditions explicit.
City Hall Explores Its Options
The Minneapolis City Council has begun to take the problem seriously, though concrete solutions remain elusive. In November 2024, the Public Health and Safety Committee directed the Legislative Department to produce a comprehensive report examining the scope of food insecurity in Minneapolis, mapping the city’s food deserts, and reviewing policy options, including the possibility of a city-owned and operated grocery store.
That idea gained momentum after the council allocated $200,000 in the recent budget cycle to explore a city-run grocery concept. Ward 2 Council Member Robin Wonsley has been among the most outspoken advocates. “The government needs to fill in the gaps and step into the void the private market is not meeting,” Wonsley said, drawing an analogy to roads, public housing, and water infrastructure. By July 2025, the council had pivoted toward a public market model, an indoor market hall format, as a potentially more flexible alternative to a conventional supermarket.
A city-owned grocery store would not be without precedent, but it would not be without risk either. Municipal stores can prioritize access over profit and absorb losses a private operator cannot. But they also face genuine challenges: bureaucratic inefficiency, political pressure, and long-term fiscal burdens on taxpayers. The city’s own researchers noted that most American cities have not ventured into the grocery business, and those that have operated public markets have done so with significant ongoing public subsidy.
Complicating the picture is the end of pandemic-era federal funding. The city had used American Rescue Plan Act dollars to support food security programs serving nearly 185,000 households across Minneapolis. That funding expired in December 2024, creating an urgent gap at exactly the moment the council is trying to build something more durable.
Subsidies, Co-ops, and Mobile Markets
The municipal store is not the only model on the table. Nonprofit grocery stores represent perhaps the most promising path tried so far in Minneapolis. Pillsbury United Communities opened North Market on Humboldt Avenue North, a Black-led full-service grocery store explicitly designed to serve the Northside. The store was born out of a stark observation: the neighborhood had one of the highest SNAP and WIC enrollment rates in the city but a historically low usage rate, not because residents did not need food assistance, but because there was nowhere nearby to spend it. North Market required $6 million in capital, including $2 million in state funding, to get off the ground. That is the scale of public investment needed to make a single store viable where the market has failed.
The city’s experience with Wirth Cooperative Grocery offers a cautionary counterpoint. The co-op opened in 2017 in the Willard-Hay neighborhood after a decade of community organizing, supported in part by a $75,000 city loan. It closed in 2020, and the city wrote off its loan as uncollectable, a reminder that even community-driven solutions face the same underlying economics that deter private operators.
On a smaller scale, the Twin Cities Mobile Market, a grocery store on a bus operated by The Food Group, makes rounds through nine underserved sites in Minneapolis. “We’re seeing grocery redlining more and more, where groceries are abandoning many communities where basic needs aren’t being met,” said Stephanie Wagner, who runs the program. The mobile market fills genuine gaps, but it cannot substitute for a full-service store with consistent hours and complete inventory.
At the state level, the Consumer Grocery Pricing Fairness Act would require suppliers to offer uniform pricing to all buyers regardless of size, a measure aimed at closing the competitive gap that makes it nearly impossible for small neighborhood stores to offer prices comparable to large chains. Minneapolis also has a history as a national pioneer in food access policy: in 2008, it became the first city in the country to require corner stores to carry staple foods like produce, eggs, and grains. Corner store upgrades can help on the margins, but they cannot substitute for a full-service grocery store.
A Policy Problem, Not a Market Problem
What Minneapolis is grappling with is a textbook market failure rooted in deliberate public policy. The private market does not serve these neighborhoods because the economics do not work. The economics do not work in part because the neighborhoods were systematically impoverished through decades of racial housing policy that prevented wealth accumulation and drove out commercial investment. Solving one without addressing the other is likely impossible.
The $200,000 study authorized by the city council is a necessary first step, but it is only a study. What Minneapolis needs is not merely a fresh diagnosis of why its food deserts exist, that is already well understood, but a political commitment to pay for the remedy, whatever form that takes. Whether the answer is a municipal grocery store, an expanded network of nonprofits like North Market, subsidized private retailers, or some hybrid of all three, every serious option carries a price tag the city has not yet fully reckoned with.
“Grocery stores are oftentimes an indication of the health of a community,” Adair Mosley of Pillsbury United Communities has said. If that is the measure, parts of Minneapolis have been unwell for a very long time. The communities waiting for a solution have been waiting, in one form or another, for most of a century.
As residents of Willard Hay we shopped at the Lyndale Aldi a few times. Within a year it showed signs of problems. The staff could not keep up with the open packages, stealing and mess. We have a car so we shop in Golden Valley. And there’s always Amazon which has a warehouse in Golden Valley.
Northside residents can be their own worst enemy. With great fanfare in 2000, Wellington Company opened a new retail development at Penn and Lowry that was anchored by an Aldi Grocery store. Aldi is a national chain with a proven record if success in deeply urban neighborhoods. Yet, when the lease expired in 2015. Aldi did what it rarely does… it closed the store. The reason? Excessive shrinkage. The neighborhood literally stole their way into chasing an urban provider out of the neighborhood. A successor local store effort also failed for the same reason.
I fully agree that the failure to enforce the Robinson-Patman act is a major source of the problem. I recently sold a corner store after struggling for 20 years to find a way to operate it both profitably and in my neighborhood’s interest. Discriminatory pricing explained much of the problem, though I was unaware of the legal background until recently. I am a little surprised that David Schultz, who is usually well informed, missed this. Redlining played a role, but the Atlantic article (and others) have made it clear that there was a verifiable sharp change in the wrong direction when the Reagan administration stopped enforcing the Robinson-Patman act.
There is another problem which wasn’t discussed: Peoples’ food preferences are very slanted in the direction of unhealthy prepared snack items purveyed by large corporations such as Frito-Lay( now a Pepsi subsidiary). Those preferences are heavily affected, not just by advertising, but also by systematic laboratory work to make the products addictive.
Woods Halley
I am surprised no mention was made of the Seward Coop. I now live in Maryland, but whenever I am in Minneapolis I make it a point to shop at the Seward Coop on 38th and 3rd Avenue South. I find that I can purchase a week’s worth of food at that store, and its products are often fresher and healthier than conventional grocery stores. If the city is going to subsidize food outlets, put the money toward expanding coops like Seward, which is well-run and has a track record, and supplement coops with community farmers markets and community gardens. There is no single solution to this problem, just as there was no single cause for food deserts.
In life now, we all EXPECT a lot of options. Options that in previously generations we never had, and so didn’t miss, and we probably ate healthier. This idea of LARGE…full service grocery stores may be where we start. Why so LARGE, why ALL these options?!
From both sides of my family, the grandparents, with one set in Riverside/Cedar, living in a duplex where the Augsburg Community Garden is now, and then another in Ericsson, I don’t recall them EVER shopping in a large grocery store.
Now, granted, their family size was smaller by then, but one shopped and then later, after my grandfather died, had groceries delivered to them from a Norwegian owned small grocery store on Cedar Ave. A grandmother in Ericsson took her grandma cart down to 42nd Street near 28th Ave, where the local grocery store had enough, which included a butcher shop and produce section.
When I go into a large grocery store, now at about their same age, I usually buy the SAME groceries, if on sale, so I go to 3 or 4, maybe 5 aisles/ sections…at the most. I concede that folks that have more in the household may be “required” to buy more, different things, but these HUGE grocery stores, unless they are so busy.. morning until night, they all seem SO wasteful to me. They should be able to cut them in half the size AND sell the goods that sell the MOST, to the surrounding community.
Where an oversized independent full service grocery store is in East Nokomis is, ( which I do shop at, for one or maybe two things) than an oversized huge one in downtown Hopkins, and one in downtown Mound, ( when I am out there) these types of stores never make a a bit of sense to me, in filling their shelves with food that few of us would ever think to buy…as they are forced to liquidate the items coming up on their expiration dates. So, I think, no wonder their profit margins are lean.
Shrink the SIZE of these stores, whether for profit, non profit, or for our Co ops, ( which for them, thankfully, they tend to be well sized..as do Trader Joe’s and Aldi’s..mostly) and sell the healthiest, mostly fresh foods, the items that most of us really need, and not just want. Then take note of the percentage of folks, with much smaller family sizes now, than in the 50s, 60s, and 70s, that may run lean, who get all their groceries, or they subsidize their regular buys, directly from the local food shelves, which tend to be smaller/ to moderately sized facilities…with fewer options.
While we have developed an appetite for ALL THE OPTIONS, aisle, after aisle, after aisle, we may have forgotten what the point of all of this is, to sustain us/ our families with healthy food, and not break the bank doing it.
Ericssons is such a good example of a medium sized grocery store that has just about everything needed for a healthy diet and even an old-timey butcher shop. Aldis is a successful chain that has made it in the inner city, yet it’s not big and glitzy like a Lunds or a Byerly’s. Who could afford to buy plants and flowers on a regular basis in the neighborhoods they serve? Yet they have everything needed to feed a family a healthy diet. And, by-the-way, there is an Aldis around 13th and Franklin very close to the feeding programs that Mr. Schultz is writing about. Many times people attend those programs because they don’t even have the funds to shop at an Aldis when their WIC and/or SNAP runs out. Seward is a Coop that has stood the test of time in offering healthy food in a low-income neighborhood. Now, I don’t know what the $200k study found for the solutions for food deserts, but a good starting point, if they didn’t, should have started with finding out what is the secret of these grocery system’s success. Thank you Zubby for your insights.
In a December, 2024 article in The Atlantic, Stacy Mitchell pointed to the Reagan administration’s directive that the Robinson-Patman Act no longer be enforced. It’s still on the books, but the government simply ignores it. This is it in a nutshell:
“The law essentially bans price discrimination, making it illegal for suppliers to offer preferential deals and for retailers to demand them. It does, however, allow businesses to pass along legitimate savings. If it truly costs less to sell a product by the truckload rather than by the case, for example, then suppliers can adjust their prices accordingly—just so long as every retailer who buys by the truckload gets the same discount.”
It worked from the mid-thirties until it was effectively canceled by Reagan. Just start enforcing an existing federal policy and see if it will work as well as it for 50 years.
Here’s a link: https://www.theatlantic.com/ideas/archive/2024/12/food-deserts-robinson-patman/680765/
Thank you for this piece from the Atlantic. It was very informative and helpful to me in flushing this out. Hopefully the link opens for all readers. If not, I can post it as a gift article.