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Food and beverage companies are bracing for a sales hit as more states begin restricting shoppers’ use of food assistance benefits for candy and soda.
So far, 18 states have received approval from the Trump administration to ban the purchase of certain foods and beverages using the Supplemental Nutrition Assistance Program. The ban primarily targeted soft drinks and other “sweetened beverages,” but some states also restricted candy and prepared desserts.
According to the National Grocers Association, SNAP accounts for 12% of total grocery spending. Funding cuts will have a major impact on both buying patterns and sales. Last year, nearly a third of consumers told NielsenIQ that they would purchase less food in response to reduced SNAP benefits.
As more restrictions are enacted, candy and soda manufacturers are closely monitoring the impact. They are also still trying to understand how retailers are enforcing the ban. Definitions of candy and soda can vary from state to state, adding further confusion to the rollout.
Hershey and Keurig Dr Pepper noted that it is still too early to quantify the impact of SNAP restrictions on income. Eight states have already implemented restrictions, and others are expected to take effect later this year.
However, Hershey is working closely with retailers to understand how restrictions apply to shelves.
“We’re trying to predict different ways in which that could unfold,” CFO Steven Voskuil said. “And let’s look at how our portfolio can respond to these challenges.”
Meanwhile, Keurig Dr Pepper is seeing “mixed signals” across states that have enacted restrictions, according to Timothy Cofer, CEO. Cofer expects soda consumption to remain roughly the same despite state restrictions, and predicts that SNAP recipients will use more of their own dollars to finance purchases.
“SNAP recipients use a combination of their SNAP benefits and their own money to finance their groceries,” Cofer said. “So we often see that there’s a kind of left-pocket, right-pocket kind of redistribution associated with it.”
Keurig Dr Pepper is more concerned about other possible SNAP changes that would reduce overall benefits. New job and citizenship requirements could force millions of people off SNAP, which could have a more pronounced impact on grocery spending.
“If there were meaningful changes to the scale of SNAP benefits in the aggregate, this could have a greater impact on consumers’ purchasing power for certain groceries and could lead to some degree of trade-off decisions,” Cofer said.
Any changes to SNAP may affect your income, even if only for a short period of time. J&J Snack Foods, the maker of Icee and Superpretzel, said in November that it had experienced “a decline in dollar sales” due to the temporary suspension of benefits due to the government shutdown.
With more restrictions expected to come into effect this year, businesses are preparing to respond with a greater focus on affordability. In addition to specific promotions, Keurig may explore new packaging sizes, such as value packs.
“We think the overall impact on our business is manageable, and we should expect to respond as we get more information,” Cofer said.
