As more states begin to restrict shoppers from using food assistance benefits for candy and soda, food and beverage companies are bracing themselves for a sales hit.
So far, 18 states have received approval from the Trump administration to ban purchases of certain foods and drinks using the Supplemental Nutrition Assistance Program. Bans largely target soft drinks and other “sweetened beverages,” though some states have also moved to restrict candy or prepared desserts.
SNAP makes up 12% of overall grocery spending, according to the National Grocers Association. A reduction in funding is set to have a profound impact on both purchasing patterns and sales: Close to a third of consumers told NielsenIQ last year that they would react to reductions in SNAP benefits by buying less food.
As more restrictions become enacted, candy and soda manufacturers are closely monitoring the impact. They’re also still trying to understand how the bans are being implemented by retailers — the definition of candy and soda can vary between states, adding even more confusion to the rollout.
Hershey and Keurig Dr Pepper both noted that it’s still too early to quantify the impact of SNAP restrictions on earnings. Eight states have already implemented the restrictions, with the remainder to follow later this year.
However, Hershey is working closely with retailers to understand how the restrictions are playing out on shelves.
“We’re trying to predict different ways it could play out,” CFO Steven Voskuil said. “And then how our portfolio can play offense against some of those challenges.”
Keurig Dr Pepper, meanwhile, is seeing “mixed signals” across the states that have enacted restrictions, according to CEO Timothy Cofer. Cofer expects soda consumption to largely remain the same despite state restrictions, predicting SNAP recipients will simply use more of their own dollars to fund the purchases.
“SNAP recipients fund their grocery bills through a combination of SNAP benefits and their own money,” Cofer said. “And so we’ve seen that there is often a reallocation, kind of left-pocket, right-pocket as it relates to that.”
Keurig Dr Pepper is more concerned with the possibility of other SNAP changes that will reduce overall benefits. New work and citizenship requirements could push millions of people off of SNAP, which would have a more pronounced impact on grocery spending.
“If there are meaningful changes in the magnitude of SNAP benefits in aggregate, that can be more impactful on certain grocery purchasing power for consumers and can merit some trade-off decisions,” Cofer said.
Any changes to SNAP, even for a short period of time, can have an effect on earnings. J&J Snack Foods, the maker of Icee and Superpretzel, said a temporary pause in benefits during the government shutdown in November led to a “dip in dollar sales.”
With more restrictions set to go into effect this year, companies are readying themselves to respond by focusing more on affordability. Keurig could explore new packaging sizes such as value packs, in addition to certain promotions.
“I think the overall impact on the business is going to be manageable, and you should expect us to respond as we learn more,” Cofer said.
