SNAP Spending Shift Could Hit General Mills, PepsiCo Hard, Warns Analyst

In a recent interview, United States Secretary of Agriculture Brooke Rollins signaled a new wave of regulatory scrutiny headed for America’s largest food, beverage, and retail brands.

What Happened: Speaking on the All-in Podcast on Sunday, Secretary Rollins discussed the Supplemental Nutrition Assistance Program (SNAP), highlighting its $123 billion annual cost.

She noted that SNAP accounts for 70% of the U.S. Department of Agriculture's budget and roughly 2% of the entire federal budget.

Rollins further adds that roughly 10% of this budget, or $15 billion a year, is spent on soda, with 75% of the population on SNAP being clinically obese. “Taxpayer dollars be[ing] spent on sugary drinks and junk food that’s making our kids sick? Absolutely not,” she says.

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She blames this squarely on the lobbyists, saying that “the amount of money that is at stake is reflected in the amount of lobbyists that are out and about,” but adds that the program will not be eliminated, and will instead be realigned to “make America healthy again.”

Why It Matters: SNAP benefits have been in focus ever since the new administration took over, with plenty of pushback against potential cuts, coming from the likes of Rep. Ro Khanna (D-CA), who called it “slashing benefits for working-class Americans to pay for tax breaks for the ultra-rich.”

Several leading food, beverage, and retail brands too face a top-line hit if these changes come into effect, with a substantial portion of their revenues coming from purchases made using SNAP.

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According to analyst Alexia Howard from Bernstein, a wide-scale cut to SNAP could hit General Mills Inc. GIS the hardest, given its cereal line-up.

Besides this, there are beverage stocks such as Coca-Cola Co. KO, PepsiCo Inc. PEP, and Monster Beverage Corp. MNST, which are likely to be hit hard, according to a Citi Research note.

Among retailers, dollar stores such as Dollar General Corp. DG and Dollar Tree Inc. DLTR are the most likely to be impacted by cuts to the SNAP program, according to Bernstein analyst Zhihan Ma. “If you're a dollar store, your full value proposition is predicated on servicing the lower-income consumers,” Ma said, in a report by CNBC.

Stock	Year-To-Date Performance
General Mills Inc. GIS	-12.79%
Coca-Cola Co. KO	+15.86%
PepsiCo Inc. PEP	-10.96%
Monster Beverage Corp. MNST	+14.80%
Dollar General Corp. DG	+19.40%
Dollar Tree Inc. DLTR	+10.23%