On Monday, benefits from the Supplemental Nutrition Assistance Program (SNAP) that provided more purchasing power to low-income Americans at grocery stores under new policies included in President Trump’s tax laws began to come into effect. According to one estimate, it is “the biggest cut in history,” a federal program that dates back in one form to the New Deal era and currently provides basic food aid to over 40 million people.
Large and small grocery stores are preparing for the impact of changes to the SNAP program. A CBO analysis released this month estimates that 2.4 million Americans, including families with children, are expected to receive food stamp benefits per month. Other estimates show families across the US could lose between $72 and $231 in support per month.
While low-income Americans make it more difficult to qualify for profit, many experts predict that some of the biggest grocery stores could actually make a profit despite having many snap recipients within their customer ranks.
According to the Consumer Data Company, verified purchase data for Snap users: Walmart Snap Shopper’s lead spent 24% and then Croger (8%), Costco (6%), Amazon (5%) and Sam’s Club (4%).
“On the surface, you’d think there’s less snaps, but the way these things have unfolded in the past and this time, this time, these kinds of economic headwinds are positive for low-income customers, a discounted grocery store that focuses on value,” said analysts at DA Davidson & Co.
Baker cited Walmart as one of the retailers, saying it is likely to have a positive impact from the changes in the snap.
“Consumers need to find other ways to save money, but they need groceries. They can have a slightly negative impact on the size of purchases or units per transaction, but that tends to be offset by increased traffic,” Baker said.
He believes that customers are spending dollars target Or Costco trades down to increase the dollar. Other retailers such as BJ WholesaleAccording to Baker, it may benefit as it places itself as a value-based destination for weekly club store grocery shopping.
Scott Moses, group head of Solomon Partners’ grocery store, restaurant and pharmacy investment banks, is also hoping to win the winner with the Snap change.
“The world’s largest grocery store – with a very wide margin – can use its size and very low cost debt to take advantage of snap reductions, as it did with food inflation.
According to Baker, the biggest impact on grocery stores is felt around the edges, and the most painful is expected at the level of an independent store. Independent grocery store operators are on the edge.
Stephanie Johnson, vice president of government relations for the National Grocery Association, which represents 20,000 independent small chain grocery stores across the country, says the change will collide with grocery stores in two waves.
Johnson says that job requirements – if an adult does not work 20 hours a week or report full paperwork to qualify for the exemption, then only three months of SNAP benefits are eligible.
“It will fall soon as the state implements the changes,” Johnson said, adding that those changes are about half the effects of the Snap changes. “And the impact varies from neighborhood to neighborhood. There are a lot of unknowns,” she added.
NGA members make up a third of the grocery industry and $250 billion in sales per year, but snap exposure is very different, with some grocery stores pushing 70% of their sales as snaps.
“Our members have a net profit margin of 1-2%, which is a big change. Because of these margins, our members don’t become richer from SNAP,” she said.
Citing data such as the fact that SNAP accounts for around 12% of US grocery sales, trade groups have been involved in Congress, saying that 6-10% of these sales could affect losses of profits by having a wave-like impact on sector employment, but it is unlikely that changes will be carried forward in Congress today.
Katina Holiday, owner of Fresh Market in Aberdeen, Mississippi, opened food as a way to combat the food desert. She is in the process of opening a second fresh one in another nearby community. So, snap changes are at a bad time. “Our sales have completely reduced the past few months to the lowest I’ve seen,” Holiday said.
She says new businesses have dropped by 35-45%, reducing time, consolidating managers and forced them to introduce employment freezes. “Walmart will benefit entirely because we can get volumes at a lower price. We don’t get a lot, we’ll already pay higher prices,” added Holiday. “We don’t have the loyalty we once had,” she added.
Walmart, and most major grocery chains, declined to comment. However, Pittsburgh-based Giant Eagle said it is the number one grocery store in the market, with stores in Columbus, Ohio and Cleveland, and is working to limit the impact on shoppers from changes to SNAP.
“As retailers look to the next 12-24 months, there is a recognition that changes in the Supplemental Nutrition Assistance Program (SNAP) could affect the food budgets of some families,” said a huge Eagle spokesman. He noted that profit cuts will be brought about during periods when consumers prioritize value more than ever. Over the past 12 months, he said industry grocery prices have been affected by compounding factors, including recent and existing tariff implementation, fluctuations in transportation costs, and product availability challenges driven by a variety of factors.
In addition to the widespread, discounts on the giant Eagle mobile app, weekly sales available for grocery and fuel rewards through the loyalty program, the spokesman said the giant Eagle will work with suppliers to explore all opportunities to maintain and reduce costs. “We feel this is the best way we can help our customers save on groceries regardless of the individual budget challenges they may be facing,” he said.
Costs for Americans ultimately exceed grocery stores’ dollars, according to Michael Goldberg, an associate professor at the Weatherhead School of Management at Case Western Reserve University.
Goldberg says SNAP acted as a kind of partnership between the federal government and the grocery store.
“The dollar is much more advanced at Walmart than at Farmers’ Market,” Goldberg said.
This means that while once costly, it is more likely that customers who may have spent the benefit of producing a healthier farmer market are choosing Walmart aisles. He says these social costs are difficult to calculate.
“If people aren’t eating healthy, we pay for this in some way,” Goldberg said.
