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Potential Cuts To Supplemental Nutrition Assistance Program Benefits Put These Top Lines At Risk

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Potential Cuts To Supplemental Nutrition Assistance Program Benefits Put These Top Lines At Risk
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The lawmakers are embarked on the mission of doing a makeover of the Supplemental Nutrition Assistance Program, or SNAP, which was formerly called as the Food Stamp Program. With health data revealing that mortality rates are higher among those participating in SNAP, the end use of SNAP benefits has become a contentious issue.

The SNAP is a program that offers nutrition assistance to millions of eligible low-income individuals and families. Currently, the eligible food items include foods such as bread and cereals, fruits and vegetables, meat, fish and poultry and dairy products. The USDA is now running a pilot test on the feasibility of allowing SNAP beneficiaries to use their benefits through online transactions.

Junk Food Is Bad, But Restriction Won't Work

In a hearing on Thursday, the House Agricultural Committee heard testimony regarding the implications of restricting what can be purchased with the food stamp. Although the hearing revealed that there have been concerns over the food stamps being used to buy unhealthy foods, it is overwhelmingly felt any restriction would be difficult to implement. Some of the arguments put forth include the difficulty in defining junk food and administrative inconveniences. Instead of imposing restrictions, experts recommended offering incentives to purchase fruits and vegetables.

Related Link: Government Food Benefit Cuts Could Be Bigger Headwind For Dollar General Than Dollar Tree

The Grocery Manufacturers Association, when contacted by Benzinga said, "GMA supports a uniform federal SNAP program with expanded nutrition education as a way to promote healthier diets for SNAP recipients. People using SNAP benefits make the same grocery-buying decisions as we all do.

"Restricting consumer food and beverage choices would be a bureaucratic mess for the USDA and shoppers alike. We look forward to working with Congress to find ways to improve national nutrition programs," GMA added.

SNAP Funding Of Junk Foods

A USDA report on foods typically purchased by SNAP households released in November 2016 showed that SNAP households spent 20 cents of every dollar of on sweetened beverages, desserts, salty snacks, candy and sugar. Forty cents went into the purchase of basic items such as meat, fruits, vegetables, milk, eggs, and bread and another 40 was spent on a variety of items such as cereal, prepared foods, dairy products, rice and beans.

The data was based on a survey of grocery store purchased in 2011. If the results were extrapolated to the annual SNAP spending of $66 billion in 2016, it would mean $13.2 billion of SNAP funds financing the buying of junk food. According to Height Securities, purchases of sugar-sweetened beverages make up about 9 percent of SNAP benefit expenditure.

Retailers, Beverage Giants Tap Into SNAP

Even as the debate rages, Benzinga looked at how and to what extent companies, which benefit from food stamps, would be impacted if restrictions are put in place.

Kraft Foods, which has since then merged with Heinz to form Kraft Heinz Co (NASDAQ: KHC), had said in 2012 that SNAP made up one-sixth of its revenues.

Related Link: Kraft Heinz Wanted Unilever, But Alas...

A Wall Street Journal report estimated that about 18 percent of all food stamp dollars was spent at Wal-Mart Stores Inc (NYSE: WMT) in 2013. If the percentage is applied to the 2016 food stamp dollars, Wal-Mart would have received roughly $12 billion revenues from food stamp dollars.

Kroger Co (NYSE: KR) and Costco Wholesale Corporation (NASDAQ: COST) are among the other retailers that significantly benefit from SNAP.

Although estimates are not available, beverage giants such as PepsiCo, Inc. (NYSE: PEP), Dr Pepper Snapple Group Inc. (NYSE: DPS) and The Coca-Cola Co (NYSE: KO) also benefit from SNAP. When there was a move in 2011 to bring about restrictions on SNAP purchases, Pepsi reportedly spent $750,000 in the third quarter of 2011 on lobbying alone.

Height Securities believes the restrictions being debated may not advance past a pilot program or study at worst. Congress is looking to write a new Farm Bill in 2018, which would automatically include changes to SNAP, which accounts for about 79 percent of Farm Bill expenditures.

"Overall potential SNAP cuts will be limited to $2B/year at the high end (about 3 percent of projected benefits) and probably closer to $1 billion annually with a focus on state-level "categorical eligibility" requirements rather than specific food/beverage restrictions," the firm said.

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