Analysis-Higher dietary benefits in US give weight to push for fresh food from dollar stores By Reuters
© Reuters. Tins of tomatoes are seen in a fresh produce aisle at a Dollar General store in Norridge, Chicago, USA on August 24, 2021. Photo taken on August 24, 2021. REUTERS / Richa Naidu
By Richa Naidu and Aishwarya Venugopal
CHICAGO (Reuters) – US dollar stores, including Dollar General (NYSE 🙂 and Family Dollar, are expected to see sales and profits increase thanks to the Biden administration’s plan to increase food stamp benefits, an additional gain for the chain’s strategy to tap into the $ 274 billion fresh food market.
The United States Department of Agriculture (USDA) said last week that, as part of a plan to promote a more nutritious diet among Americans, it was increasing the average benefits of the Supplemental Nutritional Assistance Program (SNAP ) by more than 25% from pre-pandemic levels.
In a $ 1,000 billion home restaurant industry, the additional payment is expected to potentially add about $ 6 billion in additional funding to buyers’ portfolios starting in October, Evercore analysts said.
Under the new rules, the average monthly benefit, $ 121 per person before the pandemic, will increase by $ 36. The 42 million people participating in the program will receive additional help.
With the extra $ 36, “you would expect them to buy more things like meat, fish, fruits and vegetables, as these are high priced items that tend to react to changes in income. said Joe Glauber, former USDA chief economist and senior executive. researcher at the International Food Policy Research Institute.
Dollar stores rely on low-income shoppers, and wellness checks tend to boost sales. During the pandemic, sales have skyrocketed with the help of buyers benefiting from stimulus money, food stamps, child tax credits and higher wages in a tight labor market.
A Dollar general store in Norridge, Chicago sells bunches of bananas for 30 cents and charges 75 cents for a lemon. This compares to a single banana that costs 27 cents at a Kroger-owned Mariano’s store in a similar neighborhood in Chicago, where lemons cost 89 cents each.
A GREAT POSITION
“They (the dollar stores) are going to benefit tremendously from this increased government support,” said Mark Cohen, director of retail studies at Columbia Business School and former CEO of Sears Canada. “It suits their existing clientele perfectly, who will now have more money to spend.”
Dollar stores operate thousands of outlets within walking distance of shoppers who use government assistance to purchase food.
“We do well when she (the client) has a little extra money to spend … Now if things start to normalize and / or go the other way then we are also in great shape. position because it even needs us more, ”Dollar General CEO Todd Vasos said at an industry conference in June.
In securities filings, the company points out the importance of SNAP to its profits. Dollar General and Dollar Tree (NASDAQ :), who declined to comment, will release their results on Thursday.
If SNAP recipients have more to spend, they are more likely to purchase more expensive food from dollar stores, such as fresh produce that requires refrigeration, said Scott Vinson, vice president of the National Retail Federation. for government relations, food and energy policy.
Yet not everyone trusts dollar stores for fresh produce, especially with large retailers such as Walmart (NYSE 🙂 and Target (NYSE 🙂 stepping up their offerings.
“I just don’t like the quality of this one … I think the products would be better elsewhere, so I’ve never really looked here, to be honest with you,” said Laura, 56, accountant from Harwood Heights, Chicago loading his cart with packaged food at the Norridge store.