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Welcome to Near Future. In this weekly feature, The Current spotlights innovations powering the next wave of commerce.
One of the promises of ecommerce is its potential to expand access. Often, this benefit is framed in terms of opening up availability of goods that might only be available in a single store, or reaching households far away from city centers.
In grocery ecommerce, this can mean ecommerce provides fresh food in neighborhoods and areas where there are minimal grocery stores, also known as food deserts.
Yet it's not just about where you live. It's also about putting technology within reach. Expanding access also means taking steps to make the advantages of digital shopping available to everyone. This has been visible through an expansion of digital grocery services accepting SNAP payments. Formerly known as food stamps, SNAP benefits are designed to provide access to nutritious food for low-income households, with participants generally at or below 130 percent of the poverty line. The benefits can be used at many grocery stores, and interest in expansion to online grocery has followed with adoption of pickup and delivery.
Grocers didn’t all activate the capabilities to accept SNAP for online ordering all at once. Grocers and the US Department of Agriculture, which administers the SNAP program, have been working to put the necessary integrations in place over the last several years, and each grocer has launched the capability when it's ready.
This rollout kicked off when the USDA launched a pilot to make the benefits available for online orders in 2019 in several states. Then the pandemic arrived, and it was expanded to eventually reach 49 states by 2021, as online grocery ordering became more normalized. Along with allowing participants to use the service, the USDA worked with retailers to put the online capabilities in place. Amazon was an early adopter, and now has SNAP availability in 48 states. Walmart now accepts SNAP payments for online orders in 49 states.
Instacart has been a key partner in bringing SNAP online, launching with Aldi, Publix and Ahold Delhaize, to name just a few of the larger chains with which it partnered. More grocers have followed this year: Wegmans, Sprouts Farmers Market, Safeway. In all, 130 grocers now accept SNAP for ecommerce, per the USDA.
Adoption by consumers has followed. The USDA said over 3 million SNAP households shopped online in May 2022. In March 2020, at the onset of the pandemic, the number that shopped online was 35,000.
With a new program that’s funded through the American Rescue Plan, the USDA is looking to help grow the number of independent grocers that accept the benefits digitally. The agency announced this week that it is accepting applications for a $5 million competitive grant. This will fund an organization to provide support to retailers with technology and systems necessary to expand SNAP benefits to more grocers.
The USDA’s announcement said that many of the initial adopters of online SNAP benefits were large grocers with ecommerce systems already in place as a foundation that made it easier to accept online benefits. But some smaller grocers often face technical challenges, while others might not have the resources for an ecommerce platform. Through the grant program, USDA hopes to see a wider diversity of grocery stores offering online SNAP benefits to “give SNAP participants more choice, better serve rural communities, and meet cultural food preferences.”
“Online grocery shopping is a vital resource that improves access and convenience for all, including low-income families,” said Stacy Dean, USDA’s deputy undersecretary for food, nutrition, and consumer services, in a statement. “We are excited about this grant’s potential to provide new and existing retailers with tools to redeem SNAP benefits in ways that improve customer service for SNAP participants, especially those that face barriers in traveling to a physical store.”
USDA said grant applications must be submitted by Sept. 6, 2022, and it plans to announce the recipient in the fall.
In other innovation news from SNAP, the USDA has a separate pilot program in the works that will allow participants to buy groceries at a physical store using a mobile device, without the need for a physical card.
These integrations provide SNAP customers with the same shopping options as everyone else. They also have the potential to make a big impact in the aggregate. There are 41.5 million SNAP participants in the US, representing 13% of the US population. When it comes to increasing ecommerce adoption, that’s a sizable group to add to the digital fold.
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Campbell Soup Company CEO Mark Clouse offered thoughts on messaging amid inflationary shifts in consumer behavior.
After months of elevated inflation and interest rate hikes that have the potential to cool demand, consumers are showing more signs of shifting behavior.
It’s showing up in retail sales data, but there’s also evidence in the observations of the brands responsible for grocery store staples.
The latest example came this week from Campbell Soup Company. CEO Mark Clouse told analysts that the consumer continues to be “resilient” despite continued price increases on food, but found that “consumers are beginning to feel that pressure” as time goes on.
This shows up in the categories they are buying. Overall, Clouse said Campbell sees a shift toward shelf-stable items, and away from more expensive prepared foods.
There is also change in when they make purchases. People are buying more at the beginning of the month. That’s because they are stretching paychecks as long as possible.
These shifts change how the company is communicating with consumers.
Clouse said the changes in behavior are an opportunity to “focus on value within our messaging without necessarily having to chase pricing all the way down.”
“No question that it's important that we protect affordability and that we make that relevant in the categories that we're in," Clouse said. "But I also think there's a lot of ways to frame value in different ways, right?”
A meal cooked with condensed soup may be cheaper than picking up a frozen item or ordering out. Consumers just need a reminder. Even within Campbell’s own portfolio, the company can elevate brands that have more value now, even if they may not always get the limelight.
The open question is whether the shift in behavior will begin to show up in the results of the companies that have raised prices. Campbell’s overall net sales grew 5% for the quarter ended April 30, while gross profit margins held steady around 30%. But the category-level results were more uneven. U.S. soup sales declined 11%, though the company said that was owed to comparisons with the quarter when supply chains reopened a year ago and expressed confidence that the category is seeing a longer-term resurgence as more people cook at home following the pandemic. Snacks, which includes Goldfish and Pepperidge Farm, were up 12% And while net sales increased overall, the amount of products people are buying is declining. Volumes were down 7%.
These are trends happening across the grocery store. Campbell is continuing to compete. It is leading with iconic brands, and a host of different ways to consume them. It is following that up with innovation that makes the products stand out. Then, it is driving home messaging that shows consumers how to fit the products into their lives, and even their tightening spending plans.
Campbell Soup is more than 150 years old, and has seen plenty of difficult economic environments. It is also a different business today, and will continue to evolve. At the end of the day, continued execution is what’s required.
“If it's good food, people are going to buy it, especially if it's a great value,” Clouse said.