SNAP’s Effect at Shelf: A Look Back — And Forward

May 1, 2024

By Mike Wilkening, Communications Manager, ARC (CMA | SIMA)

Early last year, as retailers and CPGs coped with persistent high inflation, another challenge took root, as COVID-19-related benefit increases for U.S. Supplemental Nutritional Assistance Program (SNAP) recipients came to an end. The reductions to SNAP, affected about 1-in-8 Americans, who in total received about $6 billion less in 2023 than the previous year.

With a little more than a year in the books since the SNAP benefit changes, it’s a good time to take a closer look at the effect on the benefit reductions on consumers, suppliers, and CPGs. We’ll start with an overview of SNAP, then work our way through the present state, and finish with a few words on the future.

About SNAP

Established in 1939, SNAP provides financial help for families in need to purchase household food, such as meat, poultry, fish, fruits and vegetables, dairy products, cereals and breads, snacks, and non-alcoholic beverages. The program is run by U.S. Department of Agriculture (USDA) and administered through state programs.

As of the beginning of this year, about 41 million Americans and close to 22 million households utilized SNAP benefits, according to federal data. To be eligible, a family of four’s net income can’t exclude $2,500 per month, with that family receiving a maximum monthly allotment of $973. SNAP benefits are adjusted each year for cost of living changes, and these take effect each October

Household cannot use SNAP benefits for a variety of other items, including alcoholic beverages, tobacco,  and prepared foods / foods hot at the point of sale. This largely forbids SNAP dollars to be spent at restaurants, save for a few exceptions in some states.

Pandemic-Related Changes To SNAP

As with so many things, the COVID-19 pandemic had a major impact on SNAP. Several emergency measures were taken, first in April 2020, when the USDA temporarily bumped benefits by 40% as unemployment rose and grocery supply-chain issues came to the fore. Congress increased benefits again in 2021, by 15%, but these increases were designed to sunset once the pandemic ended, and the so-called emergency allotments expired in March 2023.

What Has Been the Impact of SNAP Changes?

We’ll begin with the obvious: SNAP participants have less benefits to spend, and that’s not even getting into the effects of inflation.

For starters, individuals on average saw their benefits drop about 8% in 2023, compared to pandemic-related spikes of 19% and 39% in 2020 and 2021, respectively. Even as some of the COVID-19 allotments began to fade in 2022, benefits were up 7% year-over-year. Overall, SNAP dispensed 6% fewer benefits in 2023 than the previous year.

Purchasing Behavior Changes

With less SNAP benefits to spend, how are program recipients spending their dollars, and where are they spending? Thankfully, we have a good deal of data on the topic. Here are a few a few key points.

Point No. 1: SNAP food and beverage spending is up, albeit not at the rate of non-SNAP spending.

In spite of SNAP dollars decreasing, SNAP food and beverage spending actually inched up 1% in 2023, according to Circana data released earlier this year. However, as food prices went up 5.8% last year, those gains are most likely inflation-driven. Non-SNAP food and beverage, for the record, was up 2.3%, and inflation is part of that, surely, as well.

Point No. 2: There were some clear winners and losers within the food-in-store categories.

General food spending (fruits, vegetables, breads, other staples) went up 3.3% among SNAP beneficiaries in 2023, according to Circana, with beverages (not including alcoholic beverages) up 4.4.%. By contrast, refrigerated meats were down 3.8% and seafood down 9.9%. While meats and seafood are not major SNAP basket components, their declines speak to the challenges faced with fewer dollars to go around.

Point No. 3: Quick-service restaurants saw visits rise.  

As noted earlier, SNAP dollars largely cannot be used in restaurants. With those benefits decreasing, trips to quick-service restaurants increased after the SNAP changes, according to Circana research from last summer. Per Nielsen IQ data from late last year, SNAP recipients sought to eat food outside of the home 32% for breakfast, 35% for lunch, and 42% per dinner.

Point No. 4: More food and beverage spending has made its way to the Dollar channel.

According to Nielsen IQ data covering March to July of last year, food and beverage spending in grocery stores among SNAP households fell from 41.3% to 38.1% — more than $2.3B in lost revenue to grocers if it kept up over a full year.

On the other hand, food/beverage spending in the Dollar channel rose to 9.1% in SNAP households, up from 8.3% previously. This comes as leaders in the Dollar channel such as Dollar General, Dollar Tree, and Family Dollar ramp up their food offerings (including produce) to meet this higher demand.

Point No.5: The Dollar channel overall remains the top destination for SNAP dollars, relative to all channels, but the reduction of SNAP dollars is having a business impact.

No channel gets a larger share of SNAP spend than Dollar. According to Circana’s SNAP U.S. Household Dollar Share of Channel and Index to All Venues Average, which excludes restaurants, 47.8% of spend at Dollar stores is SNAP.

As SNAP benefits have dipped, however, its effect have shown up in the financials of Dollar channel retailers. In Dollar Tree’s most recent earnings call, CEO Rick Dreiling noted that SNAP reductions impacted year-over-year Q4 results by about five percentage points. “Looking forward, we expect reduced SNAP benefits will be a headwind through at least the first half of FY ’24 before comparisons ease,” he told analysts.

A New Normal for Retailers & Suppliers

To get an on-the-ground sense of the impact of SNAP on shelf, we caught up with Martha Johns, director of category leadership at Mitchell Grocery, a CMA member and a wholesale distributor for nearly 200 combined independent and corporate stores in the Southeast. The stores Mitchell services includes a significant number of high-SNAP-usage locations, as well as others where SNAP is a smaller part of the puzzle.

“We have found, and what others as well have found, is that the stores that are typically flat-to-increase (in sales) are stores that are not SNAP-dependent, and the stores that are SNAP dependent are struggling somewhat because of the SNAP difference,” Johns said, noting that sales declines at SNAP-driven stores sometimes reached 20% in weeks where SNAP benefits are known to be declining. More recently, Johns said, stores with a higher SNAP spend have seen trends improving to prior year.

CMA member Kraft Heinz, which has had higher-than-average SNAP penetration even as benefits have declined, has taken a collaborative approach to its work with retailers. For instance, it has created a cross-functional partnership with Target on the retailer’s vast SNAP opportunity, with recommendations on assortment and insights on SNAP shopper behavior, as well as best practices for ensuring SNAP consumers can easily use their benefits in-store.

The Final Word

After a lot of words and plenty of statistics on SNAP, let’s re-center the discussion on what this is all about: people seeking to feed their families, to live their lives, to receive nourishment, to feel joy. At its heart, the SNAP program serves to help people do those things.

As we ponder this, let’s go back to some more data, this from Kraft Heinz, citing IRI and Numerator findings: 55% of money spent by SNAP households is earned income, with the rest SNAP.  That 55%, per Kraft Heinz’s data, often finds its way to smaller-format-store purchases (think convenience, gas, Dollar-channel non-food/beverage), fill-in trips (shopping that fills a need), and shopping trips that occur when benefits are at or near expiration, perhaps near the end of the month, as benefits typically flow at the beginning of the month.

In short: SNAP recipients often have various pools of income, and they want a happy, seamless, empowering shopping journey wherever they are.

“SNAP Shoppers ARE and WANT to be ‘normal’ shoppers,” said Justin Rezac, Category Management Lead at Kraft Heinz serving Target.  “They want to have a smooth experience that is easy to execute.”

But first, they must be ready to purchase. To that end, promotions are seen as a major key as inflation persists.

Johns, a 35-year veteran of Kraft Heinz before moving over to the retail side, remembers the  2008 economic crisis and what it took to keep and gain share. The CPGs who thrived, as she remembered, took this approach on promotions: “Let’s just go all in, and we’re going to find not only are we going to keep the customers that we’ve had in the past, but we’re going to get more people involved in our business, which means as you come out of that situation, you’re coming out of it with a higher number of shoppers, so you’re winning, and those that you partner well with, they’ll win as well.”

We would all agree a world where shopper, retailers, and suppliers win is the ideal one. It all starts, of course, with that first group. In the end, it’s their needs that matter.

So, let’s finish by going back to the matter of their heads, and hearts. We’ll let Johns end on this note.

“I think because of what’s going on in the world today, I think there’s a little bit more angst. I also think shoppers in general — even folks that may be in a pretty good place financially have anxiety.

“So I think as we look at helping shoppers and families, part of what we do is getting the family together for a meal, which I think helps with reducing that anxiety, just feeling good about where you are in the world.”

With 1-in-6 households receiving SNAP – and dollars needing to go farther for all families – the call for retailers and suppliers to meet the moment should be loud and clear.