Retail Report: Cage-Free Eggs and SNAP Restrictions

The Trend Toward Cage-Free Eggs          

Not so long ago, buying eggs was a relatively simple matter. Eggs were typically packed by the dozen and available in a few different sizes. If a consumer wanted to get fancy, she might choose brown eggs over plain white.

But then things started to change. Shoppers became concerned about their eggs and the chickens who produced them. In response, egg suppliers began changing their feeding and housing practices, as well as their product labels.

In some cases, the labeling emphasized the diet fed to the chickens. But a more pressing concern for many shoppers was the way the birds were housed. Animal rights groups were raising awareness about the conditions that many battery hens were subjected to by egg producers. There were calls for more humane treatment of the birds, including not confining them to cages. Consumers proved willing to pay a premium for these “cage-free” eggs, and Wal-Mart Stores Inc. began stocking them in 2001.

Fast forward to 2016, and what was once considered to be a consumer choice that commanded higher prices is now becoming mainstream. Walmart, McDonald’s, Burger King, Trader Joe’s, The Kroger Co. and Costco Wholesale have all announced their intentions to eventually adopt a cage-free-only policy for eggs sold in their stores and restaurants. The timetables vary — with Burger King planning to go cage-free by 2017 and Walmart by 2025.

Analysts have noted that the increased demand for cage-free eggs may well lead to lower prices for cage-free eggs, though egg industry officials believe that the transition may be costly. Currently, only about 6 percent of the eggs in the United States come from birds raised outside cages.

The sea-change in retailer and consumer demand will likely prove a major challenge for suppliers over the next decade.

Retailers Taking Payments In-House

There’s nothing new about businesses branding their own credit cards. But recent trends show a stronger emphasis among retailers to manage their own payment systems. From credit cards to prepaid debit cards to mobile payments, retailers are seeing real cost benefits to keeping things in-house.

What are these benefits? Here are a few:

• Reducing or eliminating interchange fees charged by third-party credit card companies. Right now, these fees range between one and three percent per transaction. For low-margin retailers such as Wal-Mart Stores Inc. or Target Corp., that kind of savings is significant.

• Many consumers either don’t have access to traditional or store credit cards or prefer not to make use of credit. While there are third-party prepaid debit cards available, retailers can profit from selling their own branded debit cards.

• When a retailer controls the payment method, the retailer also has access to valuable consumer data. The retailer can use this data for its own marketing efforts or sell it to others.

Several retailers have been in the news recently over their new or revamped payment offerings:

• For years, Costco Wholesale only accepted credit card payments via American Express. Now it has switched to Visa and is co-branding its own card.

• Starbucks Corp. has teamed up with Chase to offer a prepaid debit card that is linked to Starbucks’ loyalty program.

• Walmart is encouraging consumers to use its credit card or prepaid debit card for purchases by offering cash back incentives.

As consumers continue to adapt to a changing economy and new ways to pay for retail purchases, retailers will have opportunities to save money, gather data and increase customer loyalty. It will be interesting to see which other retailers choose to hop on the payment innovation bandwagon.

SNAP Restrictions and Retail

Formerly known as “food stamps,” the Supplemental Nutrition Assistance Program (SNAP) provides recipients with funds to buy food from grocers that participate in the program. To receive benefits, applicants have to meet strict eligibility requirements, including income limits and, for able-bodied adults who need benefits for more than three months, the requirement that recipients must either be working or participate in a job training program.

During the recession of 2007 to 2009, unemployment in the United States increased, along with the number of people who qualified for the SNAP. Because jobs were scarce and incomes were low, some SNAP eligibility requirements were waived by the states during this time. The waivers remained in place until recently when, in the face of economic recovery, some states began to enforce work and work training requirements once again.

The result of this policy change is the possibility of between 500,000 and 1 million SNAP recipients losing their benefits. Some analysts are concerned that this could have a negative impact on retailers, particularly those who cater to lower-income customers.

Still, it isn’t entirely clear just how severely retailers will be affected, particularly since not everyone whose benefits are at risk will lose them at the same time.

“This gradual rollout will make it difficult to gauge exactly how much of an impact the change will have on retailers,” Craig Johnson, president of Customer Growth Partners, said in a CNBC online story.

According to social welfare advocates, legislators and state officials have the option of minimizing the impact of changing eligibility requirements, either by removing the requirements altogether or, in the case of state officials, choosing to waive them for individuals who are unable to find work or receive approved job training. Without these interventions, however, some consumers and retailers will be tightening their budgets.