Proposed SNAP cuts could pressure low-income shoppers — and retailers that serve them

For millions of low-income Americans — already rattled by the threat of tariffs and higher prices — changes to a program that helps with grocery costs could make life more expensive.

House Republicans are seeking to cut $230 billion of the U.S. Department of Agriculture’s budget over the next decade to pay for tax cuts. The Senate version of the bill calls for at least $1 billion in USDA cuts. Most, or all, of those savings would come from cutting funding for the Supplemental Nutrition Assistance Program, formerly known as food stamps.

The proposed cut, if approved, would be three times steeper than the largest previous reduction ever made, after adjusting the average annual cut for inflation, according to UnidosUS, which advocates for Latinos in the U.S.

Still, the plan faces hurdles: Congress still needs to reconcile the two very different bills passed by the House of Representatives and the Senate, and it could ultimately toss out the potential reductions to the food assistance funding to avoid losing critical votes needed to pass the farm bill.

But the changes could threaten sales for major retailers or divert spending to lower-priced brands at a time when consumers have already shown signs of financial stress.

In a statement, the USDA defended the cut and said the Trump administration “is attempting to right size the program.”

“The Supplemental Nutrition Assistance Program is just that, supplemental,” the statement said. “It was never intended to be a windfall for food companies and retailers, rather a temporary safety net for families and communities in need.”

The number of people participating in SNAP has historically fluctuated with the state of the economy and rules around eligibility, but the cohort is a significant sales driver.

Shoppers who use the benefits tend to come from larger households and spend 20% more on their monthly groceries compared with non-SNAP shoppers, according to Numerator, a market research firm that surveys U.S. consumers.

SNAP accounts for about $112.8 billion, or 4% of the total U.S. food spending, according to an Evercore ISI analysis of USDA data. For the likes of Walmart, Kroger, General Mills and PepsiCo, the sales from SNAP shoppers meaningfully add to their top lines every quarter.

On the state level, changes could be coming, too. At least 11 states have proposed limits on what families could buy with funding from the SNAP program, such as bans on using the government funding to buy soda, candy or other junk food. On Tuesday, Arkansas and Indiana both formally requested to prohibit the use of SNAP funds for such products.

Those state-level efforts to ban sugary and less-nutritious food and beverages from the program look likely to move forward, given support from the Trump administration. The proposals have gotten a boost from Health and Human Services Secretary Robert F. Kennedy Jr. and his campaign to fight chronic diseases, dubbed “Make America Healthy Again,” or “MAHA” for short.

“I’m working with [Secretary of Agriculture Brooke Rollins] and governors now in 24 states for advancing MAHA legislation to get soda pops off of the food stamp program, off the SNAP program,” Kennedy said during a Cabinet meeting at the White House on April 10.

While Kennedy doesn’t have the authority to approve those changes, Rollins has already said that she will sign waivers that states need to ban those purchases using SNAP benefits.

Dollar General, which caters to lower-income shoppers, has noticed strain among its customer base, CEO Todd Vasos said on a mid-March earnings call.

“Our customers continue to report that their financial situation has worsened over the last year as they have been negatively impacted by ongoing inflation,” he said on the call. “Many of our customers report that only have enough money for basic essentials with some noting that they have had to sacrifice even on the necessities.”

Walmart — the nation’s largest grocer — said consumer spending patterns have looked bumpier in recent months. Its Chief Financial Officer John David Rainey said during the company’s investor day in Dallas last week, “the uncertainty and decline in consumer sentiment has led to a little more sales volatility week to week, and frankly, day to day.”

More recently, tariffs on imported goods from across the globe, including clothing, furniture and shoes, have fueled concerns that prices will rise again and force Americans to pick and choose where and what to buy.

Consumer sentiment this month came in worse across all demographics, including age, income and political affiliation, according to Joanne Hsu, the director of the closely watched University of Michigan survey.

Even recent sales results of luxury retailers, including Restoration Hardware and Tiffany & Co. and Louis Vuitton parent LVMH, have reflected a slowdown.

As rising prices and potential SNAP cuts eat into grocery spending, food and beverage makers like Hershey and Monster Beverage could feel the sting.

Nearly 9% of food-at-home spending comes from SNAP recipients, according to Bernstein Research estimates.

Widescale cuts to SNAP would hit General Mills the hardest, thanks to its cereal lineup, according to Bernstein analyst Alexia Howard. J.M. Smucker is the next-most exposed, fueled by its frozen Uncrustables and sweet snacks portfolio resulting from its acquisition of Hostess. Then there’s Kraft Heinz, with its lunch meats, and Tyson Foods, with its meats and frozen options.

Beverage companies would also likely be affected by any belt-tightening. About 5% of SNAP benefits are spent on soda alone, according to USDA studies. More broadly, about 9% of SNAP spending goes toward “sweetened beverages,” which also includes sports drinks, energy drinks, juices and powder mixes.

That leaves beverage company Monster at risk, given its high exposure to the energy drink category and lower-income consumers, according to Citi Research analyst Filippo Falorni. Beverage giants Coca-Cola and PepsiCo would likely see their sales take a hit, too, but their diversified portfolios and away-from-home demand puts the risk to global sales at roughly 1.5%, according to a Citi Research note from late March.

Walmart did not comment on potential changes to SNAP at its investor day last week. The big-box retailer, known for its low-priced, no frills approach, has attracted wealthier shoppers in recent years.

Yet the retailer is still the top grocer for consistent SNAP shoppers, with nearly 26% market share as of late July, according to Numerator, and CEO Doug McMillon told reporters at the investor event that the big-box retailer remains focused on having “opening price points” on items that families need, such as offering alternatives to national brands with its own cheaper private label versions.

The top three grocers for SNAP shoppers are rounded out by Kroger, which captures about 9% of the group’s annual grocery spend, and Albertsons, with nearly 7%, according to the market researcher’s data.

The total amount that Walmart and others make from the taxpayer-funded food program is unclear. The USDA doesn’t release data on the amount of money grocers and retailers receive from SNAP. The Supreme Court in 2019 ruled to keep that data from the public after the Food Industry Association, then called the Food Marketing Institute, an industry group that represents grocers and food manufacturers, fought to keep it private.

Dollars stores like Dollar General and Dollar Tree are most exposed to any changes in SNAP benefits, according to Bernstein retail analyst Zhihan Ma.

“If you’re a dollar store, your full value proposition is predicated on servicing the lower-income consumers,” Ma said.

About 60% of Dollar General’s overall sales come from households with an annual income of less than $30,000 per year, CEO Vasos said at a Goldman Sachs’ retail conference last year.

Shifting behavior at the dollar store can ripple back to food and beverage companies.

Since dollar stores rely on SNAP shoppers, they are more likely to make changes on their shelves to serve those customers, Ma said. If Utah consumers can no longer use their SNAP benefits to buy soda, for example, dollar stores in that states might prioritize stocking other products.

“They’re smaller box, and they have more limited shelf space,” Ma said. “It may be a move in the right direction from a health and wellness perspective, but could be a double whammy for some of the food manufacturers, on the other side of things.”

If low-income households have less money from SNAP to cover their grocery bills, that means they’ll have less to spend on housing, electricity or other expenses outside of the grocery aisles, said Lauren Bauer, a fellow in economic studies at the Brookings Institution.

Shoppers that receive SNAP funding turn to low-priced retailers for non-grocery purchases, too. About 95% of SNAP shoppers purchased non-grocery items at Walmart in the past year and spent an average of $1,878 during that time, according to Numerator. Dollar Tree and Dollar General also win many non-food purchases from the group, the firm found.

And, Bauer added, if customers have less grocery money, they may be able to afford fewer healthy items like lean meats and fresh fruits and vegetables because those tend to be pricier than processed and packaged food.