Dive Brief:
- The U.S. Department of Agriculture has initiated talks with grocery retailers about the role they might play in implementing its "America's Harvest Box" proposal for the Supplemental Nutritional Assistance Program (SNAP), widely known as food stamps, according to Bloomberg.
- Supermarkets are rapidly adopting home delivery in conjunction with online food sales, and this kind of distribution method is being considered as a way to solve logistical challenges for the food box program, said Sonny Perdue, U.S. Secretary of Agriculture.
- The Harvest Boxes would replace SNAP payments to consumers with food packages containing cereal, pasta, canned fruit and meat. But most importantly to retailers, it would cut the amount of money they receive through the program. By delivering food boxes, the Trump administration estimates $129 billion savings in a decade.
Dive Insight:
The Harvest Box proposal, which is part of the Trump administration's 2019 budget, does not add up for the food business, even for retailers that offer home delivery.
While Perdue did not name the grocers contacted about the Harvest Box program, it is known that retailers are unhappy with it. The proposal, which would roughly cut spending in half, would cost food retailers like Walmart, Target and Aldi, who are authorized to accept SNAP benefits, billions per year.
Food stamps make up 7.5% of grocery sales, according to Customer Growth Partners. By itself, Walmart accounts for more than one-fifth of program sales. The Food Marketing Institute called the Harvest Box plan inefficient, and said it would cost more than what it might save.
Perdue's suggestion of using grocer's e-commerce programs, meanwhile, isn't entirely new. Last year, the USDA began piloting a two-year program that would enable SNAP recipients in seven states to have food delivered to their home through retailers such as FreshDirect, Amazon, Safeway, and ShopRite, and to pay for them using federal benefits. But his proposal leaves some important questions unanswered — like how to reach consumers outside major metropolitan markets, where home delivery services are concentrated, and how to make the logistics work for retailers. Online grocery is unprofitable for most retailers right now, and adding additional labor and low-price inventory may deepen that problem.
It's also unclear how consumers outside population-dense markets, where home delivery is concentrated, would receive their boxes. What about those in rural areas? Shipping hundreds of pounds of food to consumers each year through the postal system would be expensive and logistically complex.
Manufacturers of food and beverages also will likely lose billions under the program. USDA reported that SNAP recipients spend more on soft drinks than any other item.
The U.S. Congress has been lukewarm to the proposal, Bloomberg reported. It conflicts with plans for a new farm bill due at the end of September, but Perdue said a pilot program is a possibility. The lawmakers said they would give the proposal "due diligence." SNAP gave out $63.7 billion in 2017, with the overall program costing $68.1 billion.