If food stamp funds dry up because of the government shutdown, grocers would feel a big strain — especially those who cater to lower-income customers.
Supplemental Nutrition Assistance Program benefits are in jeopardy due to the shutdown, starting with those set to go out Saturday. While two judges have ruled that the Trump administration will have to tap into a $5 billion emergency fund to make up for that pause, that pot of money will not cover the whole month of November, and grocers will soon be reckoning with reduced purchasing power on the part of their customers.
Stephanie Johnson is the vice president of government relations at the National Grocers Association, a trade association comprising more than 1,500 members representing the retail and wholesale grocers. She said that the impact of SNAP is quite variable from store to store but would be notable, given the billions of dollars in lost funding that would come from SNAP being paused.
“It’s $8 billion, so any industry taking an $8 billion hit would be pretty dramatic in one month,” Johnson told the Washington Examiner.
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Grocery stores with a higher percentage of customers on SNAP will be most affected, while some stores in high-income areas might see little impact if SNAP funds are not disbursed.
Johnson also pointed out that profit margins are slim for many of the grocery stores across the country.
“It’s kind of community-specific how the impacts will happen, but our members work on a 1.4% margin, so they’re not getting rich off of SNAP,” she said. “Those dollars really go back into jobs in their community and buy products and things like that.”
SNAP recipients were set to see their benefits stopped on Saturday due to insufficient funds from the government shutdown. But in an eleventh-hour ruling, a pair of federal judges said the Trump administration must tap into a contingency fund to help cover food stamp benefits during the government shutdown.
The SNAP contingency fund is worth some $5 billion, which, although not enough to cover all of November for SNAP beneficiaries, does stave off some of the biggest losses for the 42 million people who are part of the program and for grocery stores around the country.
Still, there is no real end in sight for the government shutdown as of yet, meaning that the same problems facing both consumers and grocers could materialize again in a few weeks if no deal to reopen the federal government is agreed to.
“But if the shutdown were to drag on past Thanksgiving and the contingency fund became depleted as well, without the administration illegally repurposing other money to keep SNAP funded, the consequences would be significant for the roughly quarter million retailers that accept SNAP benefits,” Romina Boccia, the director of budget and entitlement policy at the Cato Institute, told the Washington Examiner.
She also pointed out that certain retailers and grocers would feel a bigger pinch from the cessation of SNAP benefits. For instance, Boccia noted that Walmart captures 24% of all SNAP spending.
So Walmart might take a bigger hit than, say, Target, which attracts a more middle-class customer base that might be less likely to rely on food stamps.
Taylor Ricketts, a grocery analyst and vice president at RetailStat, said some premium grocery stores might not even notice much of a change from SNAP benefits being cut off because it might only represent a 2%-3% headwind on sales.
Ricketts also told the Washington Examiner that some of the bigger and wealthier grocers likely have the wherewithal and wealth to weather the loss of revenue from SNAP being paused.
“The ones where I would get concerned are your mom-and-pop IGAs that may already be skewing towards kind of a lower income demographic,” he said. “Let’s just say this played out to some degree indefinitely, that could be easily 15% of their sales are coming from SNAP benefits.”
Johnson said that if SNAP benefits are halted, stores might start implementing changes to adjust to the new circumstances.
“Some stores might decide to reduce employee hours to keep costs down, some stores might decide to increase employee hours to make sure that they’re supporting the folks in the stores,” she said.
If the shutdown dragged on and SNAP remained paused, there could start to be even more acute effects for grocers and retailers that sell SNAP-eligible food items.
“In certain states where you have smaller grocery chains, they may have to lay off people if they don’t have enough revenue coming in — the food pantries obviously would be strained in the absence of SNAP,” Boccia said.
There is also a big question mark about what will happen if SNAP benefits are restored. One question is whether there will be a sudden rush in demand that could end up snarling supply chains for grocers.
But regardless, grocery stores across the country are pushing for the Senate to tackle the shutdown head-on and vote to reopen the government before the worst of the impacts are felt.
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Jennifer Hatcher, the chief public policy officer at FMI – The Food Industry Association, released a statement urging Congress to act.
“When one leg of the stool that the government committed to provide is removed, it doesn’t just affect customers’ ability to feed their families; it also impacts store scheduling of employees, supplier orders and staffing, and the tax base of local economies across the country,” Hatcher said.
