And even if recipients reduce spending on things other than
food, growth for packaged-goods marketers and retailers could take
a hit. Kantar Retail estimates the cuts could carve 0.5 percentage
points off the anticipated 2.5% annual growth rate for consumables
retailing in the U.S.
Kantar's ShopperScape data indicate that about 8% of primary
shoppers used the Supplemental Nutrition Assistance Program (SNAP)
and/or the Women, Infants and Children program to pay for groceries
on their last trip. Usage was even higher at Walmart (10%), Dollar
General (15%) and Family Dollar (18%), while supermarkets generally
relied less on electronic-benefit transfers (7% of
Frank Badillo, Kantar Retail's senior economist, expects people
to spend less on consumables, trade down to less-costly products
and shop more at Walmart and dollar stores.
Value messaging crucial
The latter scenario is certainly welcomed by those stores. Speaking
to analysts last month, Walmart U.S. CEO Bill Simon said SNAP
reductions drive more business to Walmart.
"When the benefits expanded, our market share actually went
down," he said. "When price is more important, we're more
Speaking on the company's September earnings call, Dollar
General Chairman-CEO Richard Dreiling said only 5% to 6% of its
sales come from SNAP.
"Our customer spends the bulk of their wallet somewhere else
before they come to me," Mr. Dreiling said. "That somewhere else is
going to be where the impact is."
But Peter Cloutier, chief marketing officer of shopper-focused
Catapult Marketing, noted that Walmart and
dollar chains overindex in states that overindex for SNAP benefits,
such as Louisiana, Arkansas and Texas. He said the benefit cuts
represent an opportunity for brands and retailers to ramp up their
That's particularly true given that the cuts may not be over.
This round resulted from the expiration of provisions in the 2009
economic stimulus bill, but doesn't reflect a proposal by House
Republicans to cut another $3.9 billion annually from SNAP benefits
over the next 10 years.