With the introduction of restrictions on using food assistance benefits for sugary beverages and snacks in more states, food and beverage companies are preparing for a potential decrease in sales.
Currently, 18 states have been granted approval by the Trump administration to prohibit the purchase of certain foods and drinks through the Supplemental Nutrition Assistance Program (SNAP). These restrictions primarily target soft drinks and other sweetened beverages, with some states also limiting the purchase of candy or desserts.
SNAP accounts for 12% of total grocery spending, according to the National Grocers Association. A reduction in funding is expected to significantly impact consumer purchasing habits and sales, as nearly a third of consumers indicated last year that they would buy less food in response to cuts in SNAP benefits.
As more restrictions are put in place, candy and soda manufacturers are closely monitoring the situation. The implementation of bans may vary between states, leading to confusion among retailers about what constitutes candy and soda.
Hershey and Keurig Dr Pepper have acknowledged that it is still too early to determine the financial impact of SNAP restrictions. While eight states have already enforced the restrictions, the remaining states are expected to follow suit later this year.
Hershey is actively collaborating with retailers to understand how the restrictions are affecting product placement on shelves.
Keurig Dr Pepper has observed mixed reactions in states that have implemented restrictions, with CEO Timothy Cofer predicting that soda consumption will remain stable despite the bans. He believes that SNAP recipients will use more of their own funds to cover the cost of these purchases.
Keurig Dr Pepper is more concerned about potential changes to SNAP that could reduce overall benefits, such as new work and citizenship requirements that may result in millions of people losing SNAP eligibility.
Changes to SNAP benefits, even temporarily, can impact company earnings. J&J Snack Foods experienced a decline in sales during the government shutdown in November when SNAP benefits were temporarily halted.
With additional restrictions expected to take effect this year, companies are preparing to adjust their strategies to focus on affordability. Keurig may consider introducing new packaging sizes and promotions to adapt to the changing landscape.
“Overall, we anticipate that the impact on the business will be manageable, and we are ready to adapt as we gather more insights,” said Cofer.