The maintenance of cooperation in populations where public goods are equally accessible to all but inflict a fitness cost on individual producers is a long-standing puzzle of evolutionary biology. An example of such a scenario is the secretion of siderophores by bacteria into their environment to fetch soluble iron. In a planktonic culture, these molecules diffuse rapidly, such that the same concentration is experienced by all bacteria. However, on solid substrates, bacteria form dense and packed colonies that may alter the diffusion dynamics through cell–cell contact interactions. In Pseudomonas aeruginosa microcolonies growing on solid substrate, we found that the concentration of pyoverdine, a secreted iron chelator, is heterogeneous, with a maximum at the center of the colony. We quantitatively explain the formation of this gradient by local exchange between contacting cells rather than by global diffusion of pyoverdine. In addition, we show that this local trafficking modulates the growth rate of individual cells. Taken together, these data provide a physical basis that explains the stability of public goods production in packed colonies.