Federal food assistance programs are returning to their original mission of helping low-income families afford nutritious food, as restrictions on Supplemental Nutrition Assistance Program benefits spread across nearly half the country and force major food companies to reckon with shifting consumer demand.
The U.S. Department of Agriculture had approved food restriction waivers for SNAP benefits in 23 states as of last month, affecting roughly one-third of all SNAP participants, according to Numerator. The research firm estimates the restrictions could reduce food and beverage sales by as much as $830 million this year as consumers either shift spending to approved products or cut back overall.
Market Impact and Corporate Response
Most waivers focus on limiting consumption of sugar-sweetened beverages and confectionery products, signaling a targeted approach rather than broad food restrictions. The changes are forcing major packaged food companies to monitor shopper behavior and assess whether they need to remake product lines, though many of them have already been changing what they offer after consumer habits shifted in recent years.
Kroger CEO Greg Foran said on the company's first-quarter earnings call 3 days ago that customers remain under pressure in part due to reduced SNAP benefits, as well as higher gas prices, "squeezing budgets." "Customers are managing spend carefully and shopping with real intent," Foran said.
At a Goldman Sachs conference last month, Hershey said it has researchers in Texas conducting in-store interviews with shoppers who receive SNAP benefits to understand how purchasing behavior is shifting under new restrictions in the state. "We've observed some consumer uncertainty at the register as new restrictions take effect," a Hershey spokesperson told CNBC. "We anticipate this will improve as store execution improves, rules become clearer, and SNAP users can plan and budget with more certainty."
The company is studying everything from product substitutions to budget tradeoffs, offering an early glimpse into how major food manufacturers are preparing for a potentially significant shift in consumer demand. Many of the products most exposed to the changes are produced by some of the largest companies in the industry like Kraft Heinz, PepsiCo, Coca-Cola, General Mills, Nestle and others.
Iowa Leads Legislative Reform
Iowa recently became the first state to codify elements of the "Make America Healthy Again," or MAHA, movement into law, approving legislation that targets artificial food dyes, ultra-processed foods in school and purchases made through SNAP.
"Altogether, this bill advances the health and wellness for every Iowan today and for generations to come," said Iowa Gov. Kim Reynolds when she signed the measure last month. She added the law helps "refocus federal food assistance programs on the actual purpose for which they were created: helping low-income families afford nutritious food."
The law bans several synthetic dyes, including Red 40 and Yellow 5, from most K-12 school meals and vending machines, while also restricting SNAP recipients from using benefits to buy products such as soda and candy.
Industry Adaptation and Eligibility Changes
J.M. Smucker CEO Mark Smucker, however, told CNBC he expects the SNAP policy changes to have a more muted impact. "I would say the current environment isn't really that different than what we've seen over time, and thus far some of the modifications have really had no meaningful impact to our business," he said.
Still, the company's Hostess products like Twinkies and Donettes — the latter of which saw net sales grow 13% in the latest quarter, according to the company — may be impacted under broader state restrictions on "highly processed snacks." Current SNAP waivers in states like Texas focus primarily on candy and sugary drinks, not snack cakes. However, some states have proposed broader definitions that could eventually encompass packaged desserts and sweet baked goods.
At the same time, fewer Americans are even receiving the benefits. One analysis estimates 3.5 million people have lost their SNAP aid since President Donald Trump last year signed a sweeping bill that restricts eligibility for SNAP, among other changes. Many U.S. households have found it harder to pay for groceries following the changes.
The restrictions have also meant fewer dollars flowing to major businesses. Walmart is particularly exposed to SNAP spending, capturing roughly a quarter of all SNAP grocery dollars nationwide, according to Numerator. Kroger, Costco and Amazon follow at about 8%, 6% and 5%, respectively.
The curbs on what consumers can buy with federal assistance are only one shift food companies are watching. At a hearing of the Senate Committee on Health, Education, Labor and Pensions 2 months ago, Health and Human Services Secretary Robert F. Kennedy Jr. went as far as to say he "would support" a ban on junk-food television advertising. The department has not yet taken steps to introduce such a ban.
Responding both to Kennedy's MAHA initiative and shifting consumer tastes, food manufacturers have also accelerated efforts to reformulate products and reduce synthetic ingredients in products like Kool-Aid, Fanta, Doritos and Flamin' Hot Cheetos, which contain dyes like Red 40 and Yellow 5. General Mills, Kraft Heinz and Target have all pledged to phase out certain artificial colors and additives by 2027 or sooner. Nestle announced 6 days ago it achieved its commitment on time to fully eliminate Food, Drug & Cosmetic colors from its U.S. food and beverage portfolio.
Why This Matters:
The restructuring of SNAP benefits represents a significant recalibration of federal assistance toward its stated purpose while demonstrating how targeted policy reforms can reshape market behavior without expanding government control. The $830 million reduction in sales of restricted products shows taxpayer dollars are being redirected toward nutritious food rather than subsidizing consumption of products with limited nutritional value. The simultaneous tightening of eligibility requirements, which removed 3.5 million recipients, further refocuses limited federal resources on those most in need. For food companies, the changes create market pressure to reformulate products in response to both policy shifts and evolving consumer preferences, demonstrating how private sector adaptation can align with public health goals without heavy-handed mandates. The state-level approach, led by Iowa's comprehensive legislation, allows for experimentation and local control rather than one-size-fits-all federal directives. Major retailers like Walmart and Kroger, which collectively capture significant SNAP spending, now face incentives to stock products that meet both consumer demand and program requirements, potentially accelerating industry-wide reformulation efforts already underway.