An increasing pool of food-stamp recipients — along with a recent benefits increase through the federal economic stimulus bill — are shifting billions in purchasing power toward lower-income shoppers.
These changes should provide an additional pop for food retailers — particularly for discounters already seeing benefits of a flight to value among all shoppers, observers said.
As part of the American Recovery and Reinvestment Act of 2009, monthly benefits for recipients of Supplemental Nutrition Assistance Program (SNAP) increased by more than 13% across the board beginning April 1. For an eligible family of four, monthly benefits increased $80 per month.
SNAP is the new name for the federal Food Stamp program, reflecting a greater focus on nutrition for low-income households. It is administered by the U.S. Department of Agriculture's Food and Nutrition Service. About 32.2 million people receive SNAP benefits in the U.S. — or about one in 10 Americans, and their ranks are growing as unemployment rises, sources said.
“The effect of all of it is to add many billions of dollars of purchasing power to food-stamp recipients,” James D. Weill, president of the Food Research and Action Center, a national anti-hunger organization based in Washington, told SN. “So retailers should be even more open than they usually are to serving that population.”
Retailers contacted by SN last week said it was a little early to quantify the impact of the increased food stamps, but believed it would generally have positive effects, particularly among discounters and those emphasizing value in their brand.
“It's Easter week, so business has been strong anyway, so I haven't been able to say if anything this week is directly correlated to any increase in food stamps. But do I expect it? Absolutely,” John DeJesus, president and chief executive officer of Foodmaster, Chelsea, Mass., told SN last week. “We have several stores that do a substantial amount of business with food stamps, so we definitely expect to see an increase.”
According to USDA figures, retailers ought to be seeing the effects of the new changes shortly. About 80% of all SNAP benefits are redeemed within two weeks of receipt and 97% are spent within the month. Every $5 in new SNAP benefits generates $9.20 in total economic activity, the USDA added, which would include benefits for retailers, food manufacturers and farmers.
“This is something our merchandisers and buyers are aware of,” Jerry Kettler, director of consumer affairs for Niemann Foods, Quincy, Ill., told SN. “Anytime you have a customer base with more dollars to feed their families, it's going to have a positive impact.”
DeJesus said Foodmaster stores have turned to more value-oriented offerings already, and so he doesn't anticipate major merchandise changes. “With the state of the economy, you know what people are looking for,” he said. “They're trading down, and they've been doing it for a year now. There's no sense trying to sell filet mignon when people are looking for hamburger.”