The Food Stamp Cuts Mean More Money for Walmart

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There are those, like The Washington Post, that will suggest that the cuts to the nation's food stamp allotments by about $36 per family per month are a bad thing. But, a silver lining: Walmart could make more money.

An increase to the monthly allotment provided under the Supplemental Nutrition Assistance Program (food stamps' official name), which went into effect during the height of the recession, expired on November 1. As we've noted, this change affected some 47 million Americans, with monthly allotments dropping some 13 percent per family. While $36 a month — the average for a family of four — may not seem like a lot, it reduces that family's monthly allotment to $240 or so. While this is intended to be supplemental (hence the name), it also means that such families will now have $15 per person per week to spend on food.

According to a report in AdAge, that means more people relying on hyper-cheap retailers like Walmart.

Frank Badillo, Kantar Retail's senior economist, expects people to spend less on consumables, trade down to less-costly products and shop more at Walmart and dollar stores.

The latter scenario is certainly welcomed by those stores. Speaking to analysts last month, Walmart U.S. CEO Bill Simon said SNAP reductions drive more business to Walmart.

"When the benefits expanded, our market share actually went down," he said. "When price is more important, we're more relevant."

"Welcomed" is the language of the reporter, not the store. But it's likely appropriate. According to retailer data, 10 percent of transactions at Walmart involved the use of food stamps prior to the cuts, compared to 7 percent at supermarkets and 15 and 18 percent at Dollar General and Family Dollar. With the drop in monthly allotments, the figures for the value chains will increase. "When the benefits expanded, our market share actually went down," Simon on that same analyst call. Less money for food means more federal SNAP dollars flowing to Walmart.

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Over the weekend, The Washington Post documented the effects of living on SNAP, focusing on a family in Texas. The family is "suffering from both a shortage of nutritious food and a diet of excess — paradoxical problems that have become increasingly interconnected," the Post writes.

For almost a decade, Blanca had supported her five children by stretching $430 in monthly food stamp benefits, adding lard to thicken her refried beans and buying instant soup by the case at a nearby dollar store. She shopped for “quantity over quality,” she said, aiming to fill a grocery cart for $100 or less.

Less SNAP funding means more trips to that dollar store or to Walmart. That chain's Bill Simon, whose 2011 compensation topped $14 million, sees this as a decent business opportunity.

This article is from the archive of our partner The Wire.