Discount retailers, grocers await impact of food-stamp cut

Annie Crist says she dreads telling her two daughters that cuts in food-stamp benefits taking effect Friday means less chicken and fewer hamburgers for dinner.

And with deeper cuts looming as part of a possible U.S. budget deal, Crist and other recipients may feel an even greater pinch — along with retailers such as Wal-Mart Stores Inc., Target Corp. and Kroger Co.

“I don’t bother them or worry them with adult issues or adult problems,” Crist, a 30-year-old self-employed babysitter in Lancaster, Ohio, southeast of Columbus, said. “But if they ask me, ‘Well, why can’t we get this? We always get this,’ how am I going to explain that?”

Food-stamp spending reached a record $78.4 billion in the fiscal year that ended Sept. 30, due in part to a temporary boost in benefits passed as part of the 2009 economic stimulus that expires Friday. Lawmakers battling over U.S. farm and budget policy are looking to cut deeper by tightening eligibility rules that could drop as many as 3 million people from the program.

With an estimated 8 percent of shoppers using food stamps, the impact will probably be felt most acutely by discount retailers such as Dollar General Corp., Family Dollar Stores Inc. and Wal-Mart, said Bryan Gildenberg, chief knowledge officer of Kantar Retail.

“You’ll find the effects will happen quite quickly,” Gildenberg said. “These are shoppers that have probably already allocated their spending down to the dollar.”

Few extras

Crist said her budget leaves little room for extras. The $547 a month she received in food benefits for herself and her daughters, ages 13 and 8, will become $497 Friday, as a roughly 5-percent benefit cut takes effect nationwide. With utilities and other expenses, she said she will be spending less on fresh meats, fruits and vegetables at the grocery store.

Grocers say they’re watching the situation closely. “We’re a little concerned about the food-stamp cut, I can tell you that,” Dennis Eidson, president and CEO of Spartan Stores Inc., a Grand Rapids, Mich.-based grocer, said on a conference call Oct. 24. “That could be a meaningful event for us.”

Kroger, the biggest U.S. grocery chain, said it doesn’t expect the food-stamp drop to affect its sales. “Customers may shift to spending more of their cash on food and less cash on other things,” Keith Dailey, a spokesman for the Cincinnati-based company, said in an e-mail.

SNAP enrollment

Monthly enrollment for what’s officially called the Supplemental Nutrition Assistance Program peaked last December at 47.8 million. It was 47.6 million in July, according to the most-recent data from the U.S. Department of Agriculture. That’s up from 28.2 million five years ago, when the program’s annual cost was $37.6 billion. Friday’s reduction in aid is equal to the amount donated to churches, synagogues and private food banks, according to a study by Washington, D.C.-based anti-hunger advocate Bread for the World.

“All retailers who sell food are likely to feel the impact of cuts, since people receiving assistance often don’t have excess income to make up the difference,” said Jennifer Bartashus, senior analyst for food retailing for Bloomberg Industries.

Big-box retailers

Almost half of all food stamp redemptions are in big-box supercenters such as Wal-Mart or Target, while most of the rest are in supermarkets, she said. Of the total $72.9 billion in food stamps redeemed, $36.2 billion went to supercenters such as Wal-Mart and Target, and $25 billion to supermarkets, she said.

Stores with a higher portion of low-income customers will lose some revenue, though it could partially be offset by those trading down to discount-style stores, Bartashus said. The cuts could change shopping patterns for those on assistance toward store-brand items, which are generally cheaper than name-brand, she said.

Target spokeswoman Amy Joiner said in an email that “we are monitoring the situation but aren’t going to discuss or speculate on impact to the business.”

Asked for comment, a Wal-Mart spokesman referred to remarks made by CEO Bill Simon on Oct. 15. Simon told analysts that the Bentonville, Ark.-based company, which is the biggest U.S. food-seller and retailer, may see some benefits from the reduction.

“Price will become more important” as food-stamp recipients pay more nutrition costs out of pocket. “And when price is more important, we’re more relevant,” Simon said.

Detroit grocer

At Najib Atisha’s two grocery stores in Detroit, about 50 percent of his customers in one location use food stamps and 70 percent in the other, said the owner.

“Many of our customers really don’t have any source of income,” Atisha, 55, said. If those customers can’t buy, “we can’t turn product over, it sits on the shelf longer, and then we have issues of quality control with our fresh foods.”

Atisha employs 40 people between the two stores. He said that while he’s watching government actions, he hasn’t yet made any changes in response to his anticipated income loss.

The reduction in benefits will ripple through the economy, Agriculture Secretary Tom Vilsack said Friday.

“If you can buy more at the grocery store, you will buy more at the grocery store,” Vilsack said in an interview on C-SPAN’s “Newsmakers” program to air Nov. 3. “If you can buy more, that means the grocer has to stock more that’s been purchased and processed and trucked to their facility. All of those are jobs in the supply chain. And it also means, obviously, producers — farmers and ranchers and producers — have to sell more and have a market to sell more. So it has an impact.”

Sen. Jeff Sessions of Alabama, the top Republican on the Senate Budget Committee, said on Oct. 30 that food stamps are among the items Republicans are eying for additional cuts as part of a House-Senate conference panel working to reconcile differences between Republican and Democratic budget blueprints for fiscal 2014.

The Senate-passed budget for fiscal year 2014 is about $90 billion more than a House-passed version. Farm bills being debated in a separate committee trying to replace agricultural legislation that expired Sept. 30 are considering cuts ranging from $18 billion over 10 years in the Senate plan to $52 billion in the House.

House plan

Of those amounts, the Senate would take $3.9 billion from nutrition programs while the House would cut $39 billion, according to nonpartisan congressional estimates. The House plan would also require work or job training and let states drug-test recipients as a condition of eligibility.

Rep. Marlin Stutzman, an Indiana Republican, said earlier this week that lawmakers should support the House food-stamp proposal as well as a timeline that divorces it from its longtime ties to farm aid.

“The American people are tired of this type of out-of-control spending,” he said in a prepared statement. The plan, he said, represents “dramatic reform.”

Margaret Keith, a 73-year-old widow from Ashfield, Mass., said she relies on food stamps and Social Security. She said she doesn’t know what’s left to cut.

“I am really skimming through right now,” she said.

For Crist, the challenge will be the simple squeeze on resources, and her desire to raise healthy daughters. “What worries me the most is just not being able to make it stretch,” she said. “The money only goes so far.”