The Rundown
- Brand and retail leaders need to understand the impact and risk of SNAP benefits’ reduction on their categories–disproportionate volume declines are happening across nearly any size of departments and brands.
- SNAP recipients have had to deprioritize stocking up during a sale and prioritize cheaper brands due to limited funds. Brands and retailers should optimize existing promotions and timing more strategically to aid SNAP recipients, as well as consider promoting online shopping options to alleviate the financial burden of rising gas prices and discretionary expenses on this group.
- Despite facing challenges, SNAP recipients have not expressed greater concern about their financial outlook, and they have demonstrated resourcefulness in dealing with the situation. Should companies look to help SNAP recipients, they can consider offering opportunities to stretch their SNAP spending, advocating for government programs that combat food insecurity, and developing long-term plans to offer options for low-income households.
Meet Sara, a 60 year-old woman living in a rural area of the mid-Atlantics. She has just had her SNAP (Supplemental Nutrition Assistance Program) benefits drop by over $200 a month, and is looking to shop for low prices, cutting back on meats, and strategizing to get by with her reduced benefits. However, Sara is not a unique case– she and millions of other SNAP recipients are finding ways to stay afloat after the emergency benefits program ended this past February.
Back in January 2021, the US government implemented additional funding for the SNAP welfare program to help families afford groceries during the public health crisis. The program allotted households an increase of $95 a month or the maximum benefits for their household size, depending on which increase was greater. With the COVID emergency declaration coming to a close, thirty-two states dropped the program at the end of February 2023. The other eighteen states had already dropped the increased benefits prior to this recent round.
With a minimum of $95 per recipient lost every month and an estimated 41 million SNAP recipients, brands and retailers will face a $46+ billion gap in consumer spending in the year to come. Even more, brands and retailers across the store will need to understand how to remain in shoppers’ repertoire as SNAP recipients look to save wherever they can.
Not just a reduction in grocery, but across all sectors.
2023 has largely seen growth for brands thus far, with price increases exceeding volume declines. To continue growing, consumer goods companies will need new strategies to combat lost volume, especially among SNAP recipients who play a significant role in their growth. This is particularly important as grocery consumption among SNAP recipients in states that recently dropped the program has decreased by 12% in March 2023 compared to the previous year, which is twice the rate of non-recipients in those states and a steep hill to climb for the brands and retailers they shop.
Not a single grocery department eligible for SNAP benefits saw resilience against unit volume declines among recipients. From beverages to breakfast products to baked breads, all departments experienced a faster decline in unit volume for SNAP recipients than non-recipients. The departments that showed the largest difference between SNAP recipients and non-recipients in unit decline included shelf stable meals (SNAP recipients down 21% in March 2023 compared to the previous year), meats (down 18%), frozen foods (down 16%), and herbs & spices (down 15%).
Although larger CPG brands are typically viewed as the most impacted by SNAP benefit changes, the top 100 grocery brands in dollar value are losing volume at a slower rate (down 7.6% in March 2023 compared to the previous year) than the next 400 brands (down 11.7%). Meanwhile, brands outside the top 500 (i.e. emerging brands) saw similar volume declines to the top 100 brands, but the decrease was nearly five times larger than non-recipients.
From our interviews with SNAP recipients who have been affected by the reduction of benefits, limiting snacking occasions and ‘discretionary meals’ were common tactics. Brands, particularly smaller ones, will need to help SNAP recipients discover how to transform snacks and side dishes to become a main meal to hedge volume losses.
Even companies that don’t sell groceries are experiencing disproportionate volume declines among SNAP recipients. Our research shows that toy and home improvement categories are seeing nearly double-digit differences in volume declines between SNAP recipients and non-recipients. SNAP recipients account for more than 20% of total volume within these departments in the month of March, showing that the impact of benefit reductions extends beyond just food and beverages. To mitigate the effects of these declines, leaders should require their teams to measure the decrease in consumption among SNAP recipients to better forecast demand, inform supply and protect margins.
To reduce absolute costs, consumers are trading down.
In the month after the expiration of the emergency benefits, SNAP recipients made two strategic changes to cope with rising food prices: they are deprioritizing stock-ups during a sale and choosing cheaper brands.
Due to limited funds, those receiving SNAP benefits are becoming unable to purchase items in bulk and are forced to prioritize lower total prices. Brands and retailers are already responding by offering more deals and discounts on individual products. Single price point offers have increased their share of voice by four percentage points in March, now accounting for 20% of all promoted products.
Strategically timing promotions could prove to be a more effective strategy to aid SNAP recipients. A majority of those receiving SNAP benefits (58%) report that their monthly allocation only lasts them two weeks, as opposed to 41% who said the same in September 2022. To address this issue, leaders should push their brand and shopper marketing teams to evaluate the impact of their promotions on SNAP recipients. By identifying the most effective offer tactics and timing their local activation alongside SNAP disbursements, companies can extend the purchasing power of SNAP shoppers throughout the entire month.
Additionally, private label products are becoming increasingly popular among SNAP recipients, with surprising growth in certain categories. Private label products in grocery and health & beauty categories are popular among SNAP recipients at a slightly higher rate compared to non-recipients, but baby and home & garden brands should be particularly cautious. SNAP recipients in these categories are showing greater interest in private label products in significant volume categories compared to non-recipients. Although pet brands see some resilience with SNAP recipients, over 73% of volume in the sector represents categories growing a full unit share point towards private label.
Despite loosened public health restrictions and warmer weather encouraging more people to venture out, SNAP recipients have not significantly changed their shopping habits in terms of store selection and dining out. Rather than shifting their spending to lower cost options like dollar or mass stores, SNAP recipients are seeing a slower recovery in their overall trips. Store traffic growth for SNAP recipients has only increased by 4.5% in March 2023 compared to the previous month, which is nearly three times slower than non-recipients, whose traffic has grown by 11.6%.
Many SNAP recipients we interviewed have expressed difficulty balancing rising gas prices with their limited benefits, leading to reduced mobility. One solution retailers could consider: promoting online shopping options to help alleviate the financial burden on SNAP recipients. By developing audiences of SNAP users within CRM systems and offering specialized discounts for online purchases or subsidizing delivery fees, companies could help this group save a few miles per gallon and stretch their benefits further.
A transitory bump in the road.
Overall, SNAP recipients understand that they are facing a difficult moment in providing for their families. In a recent survey fielded in April, SNAP recipients’ ability to keep up with changes in the economy and feed their families saw steep declines in positive sentiment (down 12 and 11 percentage points compared to February 2023, respectively).
Despite needing to make significant changes to their shopping and consumption habits, SNAP recipients generally are not expressing greater concern about their financial outlook for 2023 compared to two months ago. While more than 40% of SNAP recipients are worried about their job security and over 60% are concerned about their financial stability, neither concern has increased since the emergency benefits program ended.
This tension reveals that SNAP recipients have proven to be resourceful and creative in the face of economic headwinds. For brands to help build trust and loyalty among SNAP recipients while also progressing ESG initiatives, leaders should not focus efforts on simply sympathizing with SNAP recipients, but seek to empower them by providing opportunities to optimize spending and advocating for government programs that combat food insecurity in the United States.
In our final interviews with SNAP recipients, many expressed the belief that economic conditions will improve over time, but not in the short term. Only 17% of those surveyed felt that the economy would improve within the next three months, while many feel that it will take years. For companies to help SNAP recipients, leaders will also need to develop long-term plans for low income households by tracking their consumption patterns for the years to come.
The names of interviewers have been changed for their anonymity.
This analysis is part of our Numerator’s SNAP Insights Center– bringing together our latest research on shopping trips where SNAP / WIC benefits are leveraged and the households using these programs.
