SNAP restrictions in 23 states to cut $830M in food sales

The USDA approved waivers restricting sugary drinks and candy purchases through SNAP in 23 states, affecting roughly one-third of participants and threatening to cut food sales by as much as $830 million this year, according to research firm Numerator.

"Customers are managing spend carefully and shopping with real intent," Kroger Chief Executive Officer Greg Foran said on the company's first-quarter earnings call, citing reduced SNAP benefits alongside higher gas prices as factors squeezing household budgets.

The restrictions, which took effect in 10 states already and are scheduled in 10 more by year-end, target sugar-sweetened beverages and confectionery products. Tennessee's rules, effective July 31, will bar purchases of items listing sugar, corn syrup or high-fructose corn syrup as the first ingredient, along with soda and energy drinks. Iowa last month became the first state to codify elements of the Make America Healthy Again movement into law, signing legislation that also bans synthetic dyes including Red 40 and Yellow 5 from K-12 school meals.

The shift represents a direct revenue headwind for the largest U.S. food and beverage companies. Walmart captures roughly a quarter of all SNAP grocery dollars, followed by Kroger at 8 percent, Costco at 6 percent and Amazon at 5 percent, according to Numerator. An estimated 3.5 million people have lost SNAP eligibility since President Donald Trump signed a sweeping benefits restriction bill last year, further reducing the program's footprint.

Hershey has deployed researchers in Texas to conduct in-store interviews with SNAP recipients, studying how purchasing behavior is shifting under the new rules. "We've observed some consumer uncertainty at the register as new restrictions take effect," a Hershey spokesperson said. The company is tracking product substitutions and budget tradeoffs as it assesses the potential impact on its confectionery portfolio.

J.M. Smucker Chief Executive Officer Mark Smucker struck a more measured tone, telling CNBC the policy changes have had "no meaningful impact" on the company's business so far. Still, broader definitions proposed in some states could eventually encompass packaged desserts and sweet baked goods, including Hostess products such as Twinkies and Donettes — the latter of which saw net sales grow 13 percent in the latest quarter.

Food companies accelerate reformulation

The regulatory push is accelerating product changes already underway. General Mills, Kraft Heinz and Target have pledged to phase out certain artificial colors and additives by 2027 or sooner. Nestle said Monday it had eliminated all FD&C colors from its U.S. food and beverage portfolio, meeting its commitment on schedule.

Health and Human Services Secretary Robert F. Kennedy Jr., who has championed the MAHA initiative, told a Senate committee in April he "would support" a ban on junk-food television advertising. The department has not yet taken steps to introduce such a ban.

The restrictions come as food companies navigate a broader consumer pullback. Kroger's Foran noted that customers are under pressure from multiple directions, with higher gas prices compounding the reduction in SNAP benefits. The combined effect is pushing shoppers toward private-label alternatives and more deliberate purchasing patterns, a trend that could benefit discount retailers and smaller healthier-alternative brands.

Tennessee, one of the states with the highest SNAP participation, illustrates the scale of the change. Roughly 587,000 people in the state received benefits in April 2026, with an average of $340 per family. Shelby County alone accounted for nearly 22 percent of recipients. After July 31, those households will no longer be able to use benefits for soda, energy drinks or processed foods listing sugar as the primary ingredient, though single-ingredient sugars for cooking and baking remain eligible.

This article is for informational purposes only and does not constitute investment advice.