Overview

The U.S. Supplemental Nutrition Assistance Program (SNAP), which provides over $90 billion annually to help roughly one in nine Americans afford groceries, is undergoing the most significant restructuring in its history. A combination of state-level waivers restricting the purchase of specific food categories and federal legislation tightening eligibility and work requirements is reshaping the consumer landscape for packaged food and beverage companies. As of June 2026, 23 states have secured USDA approval to ban SNAP purchases of soda, candy, and energy drinks, with more states slated to join through 2028. Simultaneously, the One Big Beautiful Bill Act (OBBBA), signed in July 2025, has cut SNAP enrollment by approximately 5 million recipients and is projected to reduce federal SNAP spending by $186 billion over a decade. These dual pressures—narrower eligible product categories and a shrinking beneficiary base—are forcing major manufacturers such as Coca-Cola, PepsiCo, and Kraft Heinz to rethink product portfolios, reformulation strategies, pricing architectures, and political engagement. This report examines the state-level policy timeline, the aggregate sales impact, corporate responses across reformulation, lobbying, and portfolio adjustment, retailer feedback loops, federal reform proposals, and market analyst perspectives on future revenue risks.

State-Level SNAP Restriction Policies: A Rapidly Expanding Patchwork

Timeline of Enactments (2023–2026)

The movement to restrict SNAP purchases of certain foods gained momentum in 2024 and accelerated dramatically in 2025–2026. As of late May 2026, ten states had already implemented USDA-approved waivers prohibiting the use of SNAP benefits for soda, candy, and energy drinks: Florida, Idaho, Indiana, Iowa, Louisiana, Nebraska, Oklahoma, Texas, Utah, and West Virginia [1][2]. By the end of 2026, an additional ten states are expected to activate their approved waivers: Arkansas, Colorado, Hawaii, Missouri, Montana, North Dakota, Ohio, South Carolina, Tennessee, and Virginia [1][3]. Colorado’s implementation deadline was pushed to October 2026 [3]. Kansas and Wyoming are scheduled to follow in 2027, and Nevada in 2028 [1][3]. By 2028, nearly half of all U.S. states will have restrictions in place [3].

Iowa became the first state to codify elements of the “Make America Healthy Again” (MAHA) movement into law, with Governor Kim Reynolds signing legislation in May 2026 that not only restricts SNAP purchases of soda and candy but also bans synthetic dyes such as Red 40 and Yellow 5 from K-12 school meals and vending machines [2][4]. This law represents a broader regulatory trend that extends beyond SNAP into school nutrition and ingredient standards.

At the federal level, the One Big Beautiful Bill Act (OBBBA), signed in July 2025, imposed new work requirements and eligibility restrictions that drove a steep decline in SNAP enrollment. The USDA required states to achieve full compliance by November 1, 2025, resulting in the largest single-month drop in program history—over 1.09 million recipients exited between October and November 2025 [5][6]. Overall, SNAP enrollment fell from approximately 42.8 million in January 2025 to 37.8 million by February 2026, an 11% decline, and stood at about 37.3 million by March 2026 [5][6]. An estimated 3.5 million people lost SNAP access between July 2025 and February 2026 [7]. At least 776,000 children lost benefits across 12 states that publish age-specific data [8]. The steepest state-level declines included Arizona (53.9%), Florida (21.1%), North Carolina (19.6%), Louisiana (17.4%), Nevada (16.7%), and Oklahoma (16.3%) [5][9]. Only Alaska and Hawaii saw enrollment increases [5].

Additionally, on April 1, 2026, approximately 70,000 resettled refugees and humanitarian immigrants in California lost SNAP (CalFresh) benefits due to eligibility restrictions mandated by H.R.1, the OBBBA [10]. These enrollment declines compound the effect of purchase restrictions by reducing the total pool of SNAP shoppers, further pressuring sales of SNAP-dependent categories.

Categories of Restricted Items

The state-level waivers overwhelmingly target three categories: sugar-sweetened beverages (soda), confectionery products (candy), and energy drinks [1][2][3]. These categories were already disproportionately represented in SNAP baskets, according to Numerator analysis [1]. Iowa’s legislation goes further by banning synthetic dyes from school meals, a move that is influencing national reformulation trends even among products not directly restricted by SNAP waivers [2][4]. Health and Human Services Secretary Robert F. Kennedy Jr. has also stated he “would support” a ban on junk-food television advertising, signaling potential future restrictions that could affect brand marketing [2].

Aggregate National Impact on Packaged Food Sales

Consumer research firm Numerator estimates that SNAP purchase restrictions on soda, candy, and energy drinks could cause up to $830 million in lost sales across affected states in 2026. The breakdown is up to $430 million for soda, $300 million for candy, and $100 million for energy drinks [1][2][3]. TD Cowen retail data through early May 2026 confirms weakening volume trends in restricted states: soft drinks were down 2% year-to-date (310 basis points below the U.S. average), hard candy down 4% (370 bps below), chocolate down 5% (120 bps below), and energy drinks up 9% but 590 bps below growth in non-restricted states [1][3].

Through April 2026, states implementing soda restrictions covered 24% of the U.S. population, and those restricting both soda and candy covered 22% [1]. By February 2027, 21 states are expected to have restrictions in place, with soda-restricted states covering 40% of the population and soda-plus-candy states covering 30% [1]. This expanding geographic coverage means the sales headwind will intensify over the next 18 months.

The total SNAP market is enormous: SNAP-authorized retailers accept over $90 billion annually, or $236 million per day, in taxpayer dollars [3][11]. Walmart alone captures roughly 25% of all SNAP grocery dollars, followed by Kroger (8%), Costco (6%), and Amazon (5%) [2]. The 2025 federal government shutdown provided a preview of SNAP disruption: weekly grocery spending among SNAP households fell by 10%, from $233 to $210, during the 43-day shutdown [1][2]. This sensitivity underscores the direct link between SNAP access and packaged food demand.

Corporate Responses: How Coca-Cola, PepsiCo, and Kraft Heinz Are Adapting

Revenue Exposure Analysis

None of the three companies explicitly disclose SNAP-related revenue exposure in their SEC 10-K filings, and no specific SNAP risk factors were identified in public filings. However, the category-level data makes clear that Coca-Cola faces the most direct exposure, given that soda represents the largest restricted category with an estimated $430 million in potential 2026 sales losses [1]. PepsiCo’s exposure is split between its beverage portfolio (Pepsi, Mountain Dew, Gatorade) and its snack portfolio (Lay’s, Doritos, Cheetos), with beverages facing direct restriction risk and snacks facing indirect pressure from reduced SNAP purchasing power. Kraft Heinz has less direct exposure to the restricted categories—its portfolio is centered on condiments, macaroni and cheese, lunch meats, and other packaged foods—but is vulnerable to the broader SNAP enrollment decline and the shift toward private label among budget-constrained shoppers.

Coca-Cola President and CFO John Murphy acknowledged the pressure on lower-income consumers at a June 4, 2026 investor conference, noting that cumulative cost pressures on households earning less than $60,000 annually make their typical basket unaffordable, forcing them to choose what to stop buying. He stated the company aims to be “the last guy to go” by leveraging price-pack architectures, channel segmentation, and differentiated engagement models [12]. PepsiCo generated nearly $94 billion in net revenue in 2025 across its global portfolio, but no SNAP-specific revenue breakdown is available [13]. Kraft Heinz reported Q1 2026 net sales of $6.05 billion, with organic net sales down 0.4% and operating income down 4.3%, partly due to inflationary pressures and higher advertising spending [14].

Product Reformulation Strategies

Coca-Cola

Coca-Cola has accelerated innovation in better-for-you and functional beverages. The company launched BodyArmor Fit, a sugar-free, sparkling sports beverage with electrolytes, caffeine, choline, and green tea extract, positioned as a functional hydration option for active consumers [15]. This product aligns with the shift toward SNAP-eligible or health-perception-friendly categories. Coca-Cola’s Sprite Chill and Topo Chico Sabores were among Circana’s top 2025 New Product Pacesetters, generating $87.2 million and $75.6 million in first-year sales, respectively [16]. These innovations demonstrate a strategy of diversifying beyond traditional sugary sodas into sparkling water, functional beverages, and lower-sugar variants that may face less regulatory risk.

PepsiCo

PepsiCo is embedding functional nutrition and nutrient density into its existing portfolio. Tara Glasgow, PepsiCo’s chief science officer and EVP of R&D, stated that “functional nutrition and nutrient density are moving mainstream,” and the company is leveraging over 2,500 scientists across 19 global R&D centers to develop products that deliver targeted benefits such as hydration, protein, fiber, and whole grains while maintaining taste [17]. This approach positions PepsiCo to adapt to a regulatory environment that increasingly penalizes products perceived as nutritionally empty. The company’s pep+ (PepsiCo Positive) strategic transformation also emphasizes sustainability and human capital, aligning with broader policy trends [13].

Kraft Heinz

Kraft Heinz is pursuing reformulation through its “taste elevation” platform and health-conscious sub-brands. The Heinz Simply and Heinz Zero platforms target clean-label and health-and-wellness consumers, with CEO Steven Cahillane stating they “speak to consumers who are looking for clean label, who are looking for health and wellness, who are looking for nutrition” [18]. The company launched Kraft PowerMac Mac and Cheese, which adds protein and fiber, and introduced a plastic resealable bottle for Capri Sun to retain older children, which also opened 25,000 additional convenience store doors [18]. A new Capri Sun hydration beverage with electrolytes further extends the brand into functional hydration [18]. Kraft Heinz has also pledged to phase out certain artificial colors by 2027, alongside General Mills and Target [2].

Industry-Wide Trends

The MAHA movement and Iowa’s synthetic dye ban are accelerating reformulation across the industry. Nestlé announced it has fully eliminated FD&C colors from its U.S. portfolio [2]. General Mills, Kraft Heinz, and Target have committed to removing certain artificial colors by 2027 [2]. These changes are not solely driven by SNAP restrictions but are closely tied to the same political and regulatory currents, reducing the risk that products will be targeted in future restriction waves.

Lobbying Efforts and Political Strategy

Specific lobbying expenditure data tied to SNAP policy is limited. OpenSecrets records show that Coca-Cola spent $4.93 million on federal lobbying in 2024, while PepsiCo reported $306,927 in individual contributions and $173,387 in PAC contributions in the 2024 cycle [19][20]. No SNAP-specific lobbying filings were identified for Kraft Heinz, nor for the American Beverage Association or other trade groups in the search results. This absence of publicly documented SNAP-focused lobbying may reflect a strategic choice by companies to avoid high-profile opposition to popular health-oriented policies, instead focusing on product reformulation, consumer retention, and behind-the-scenes engagement through trade associations.

The broader political landscape is shaped by the OBBBA and the Farm Bill. The Farm, Food, and National Security Act (2026 Farm Bill) passed the House on April 30, 2026, with a 224-200 vote, and includes cuts to SNAP and conservation programs. It now awaits Senate consideration, with the latest short-term extension expiring September 30, 2026 [21]. The MAHA movement secured a win in the House Farm Bill when an amendment removed pesticide industry protections that would have preempted state labeling laws, signaling the movement’s growing influence [22]. Companies are likely monitoring these developments closely, but the primary corporate response appears to be adaptation rather than direct confrontation.

Hershey’s approach offers an alternative model: the company is conducting in-store interviews with SNAP recipients in Texas to understand purchasing behavior shifts as restrictions take effect. A Hershey spokesperson noted “some consumer uncertainty at the register” but expressed confidence that clarity would improve as store execution and rules stabilize [2]. This consumer-research-driven strategy may be more politically palatable than aggressive lobbying against restrictions framed as health measures.

Portfolio Adjustments and Strategic Shifts

Kraft Heinz has undertaken the most visible portfolio restructuring. The company paused its planned demerger and instead reallocated $600 million into top-line growth, avoiding $300 million in separation costs. Two-thirds of the investment is directed toward commercial levers such as packaging, marketing, and commercial headcount; the remaining third is allocated to pricing to improve affordability for cost-pressured consumers [23]. Effective July 1, 2026, Kraft Heinz is consolidating its global operating structure into three regions—North America, Europe and Pacific Developed Markets, and Emerging Markets—and combining procurement and supply chain into one central function [24]. CEO Cahillane’s brand segmentation strategy categorizes brands as “hold,” “win,” or “win big,” with 35% of the portfolio gaining or holding share as of early 2026, up from 21% across 2025. The company downgraded its frozen-food business from “win big” to “hold” while upgrading hydration products from “win” to “win big” [14]. These moves reflect a deliberate shift toward categories with better growth prospects in a constrained consumer environment.

Coca-Cola is focusing on retaining lower-income consumers through price-pack architectures—offering smaller, more affordable pack sizes and channel-specific pricing—to remain “the last guy to go” when households cut spending [12]. The company reported 10% organic revenue growth in Q1 2026, a 35% operating margin, and expects $12.2 billion in adjusted free cash flow for the full year, while announcing a 4% dividend increase, its 64th consecutive year of dividend hikes [25]. This financial strength provides a buffer against SNAP-related headwinds.

PepsiCo’s portfolio adjustments are centered on functional nutrition and nutrient density, embedding health-oriented attributes into its massive snack and beverage brands rather than making dramatic structural changes [17]. J.M. Smucker CEO Mark Smucker told CNBC that the current environment has had “no meaningful impact” on his company’s business so far, suggesting that the effects are uneven across categories and companies [2].

Retailer Impacts and the Feedback Loop to Manufacturers

Retailer Exposure and Responses

Walmart, as the largest SNAP retailer with roughly 25% of all SNAP grocery dollars, is the most exposed to both purchase restrictions and enrollment declines [2]. CFO John David Rainey noted that the average number of gallons per fuel fill-up recently fell below 10 for the first time since 2022, calling it “an indication of stress” among lower-income shoppers. Walmart is responding by emphasizing low prices and faster delivery, including 30-minute options, and is gaining market share across all income groups, though lower-income shoppers remain cautious [26]. Kroger CEO Greg Foran said on the company’s Q1 2026 earnings call that customers are “managing spend carefully and shopping with real intent” due to reduced SNAP benefits and higher gas prices squeezing budgets [2]. Kroger has deployed Electronic Shelf Labels (ESLs) in virtually all stores in its Cincinnati-Dayton division and nearly one in four of its roughly 2,700 stores nationally, and has outlined plans to cut prices on “thousands of products” [3]. Kroger also launched a protein-focused extension of its Simple Truth private label with over 80 high-protein meals and snacks [27].

Target executives described shoppers as “highly choiceful” about where they spend their “valuable time and money,” and the company has pledged to phase out certain artificial colors and additives by 2027 or sooner [2][26]. In December 2025, Sam’s Club, Dollar Tree, and Aldi saw increased spending from SNAP households aged 55–64, while Amazon and Walmart.com saw pullbacks from this demographic [2][28]. This channel shift toward discount and dollar stores has implications for manufacturers, as these retailers often emphasize private label and smaller pack sizes.

Private Label and Category Management Shifts

A June 2026 FMI report found that 92% of grocery shoppers now have store brands in their homes, up from 89% in 2025, and half of shoppers increased private label purchases in the past year. Critically, 94% of consumers said they would continue buying private label even if grocery prices fell, and 56% use private label availability as a criterion for where to shop [15]. Among SNAP households specifically, 37% plan to buy private label and cheaper brands if benefits are reduced further, alongside shopping sales (54%), visiting food pantries (36%), and shopping at dollar/discount stores (30%) [2][28]. This structural shift toward private label erodes branded manufacturers’ pricing power and shelf space, compounding the direct impact of SNAP restrictions.

USDA Retailer Stocking Rules and Implications

New USDA rules effective November 4, 2026, require all SNAP-authorized retailers to stock at least seven varieties of food in each of four staple categories (dairy, produce, grains, protein), with at least one perishable item in three of the four categories—up from the previous requirement of three items per category. Items like beef jerky and butter will no longer count toward these requirements [8][11]. Agriculture Secretary Brooke Rollins stated the rules ensure that retailers accepting over $90 billion annually in taxpayer dollars are “actually in the business of selling food” [3][11].

However, both convenience store trade groups and anti-hunger organizations warn that the rules may cause many small shops, corner markets, and bodegas to stop accepting SNAP benefits altogether, reducing food access in low-income communities [8]. For manufacturers, this could shift SNAP purchasing toward larger-format retailers like Walmart and Kroger, which are better equipped to meet the stocking requirements but also have stronger private label programs and more aggressive pricing strategies. This channel consolidation would further pressure branded packaged food companies.

Federal-Level SNAP Reform Proposals and Their Implications

The One Big Beautiful Bill Act (OBBBA)

The OBBBA, signed in July 2025, is the most consequential federal SNAP reform in decades. Key provisions include expanding work requirements to able-bodied adults aged 18–64 (up from 54) who must work at least 80 hours per month; adding veterans, homeless individuals, and former foster youth (ages 18–24) to work requirements; narrowing caregiver exemptions; reversing eligibility for some documented immigrants, including refugees and sex trafficking survivors; and shifting administrative and benefit costs to states [5][6][7]. Starting October 1, 2026, states must cover 75% of administrative costs (up from 50%), and by October 1, 2027, most states must pay up to 15% of food benefits for payment errors above 6% [5][7]. The Congressional Budget Office projects the law will cut $186 billion in federal SNAP spending over 10 years—a roughly 20% reduction, the largest in program history [5][7].

The enrollment impact has been dramatic: from 42.2 million in March 2025 to 37.3 million in March 2026, a decline of about 5 million recipients [5]. The steepest declines occurred in Arizona (53.9%), Georgia (33.2%), Florida (21.1%), and other states [5][6]. At least 776,000 children lost benefits across 12 states that publish age-specific data [8]. These cuts reduce the total addressable market for packaged food companies that rely on SNAP-driven demand, particularly in categories like beverages, snacks, and affordable meal solutions.

The Farm Bill Reauthorization

The Farm, Food, and National Security Act passed the House on April 30, 2026, with a 224-200 vote, and includes further cuts to SNAP and conservation funding. The bill now moves to the Senate Agriculture, Nutrition, and Forestry Committee, where Chair John Boozman (R-AR) has indicated a Senate version will address “urgent needs of agriculture” [21]. The MAHA movement secured a significant win when an amendment by Rep. Anna Paulina Luna (R-Fla.) removed pesticide industry protections that would have barred states from enacting stricter pesticide labeling laws, and MAHA activists are warning the Senate against restoring the provision [22]. The Farm Bill’s SNAP provisions, combined with the OBBBA, create a multi-year trajectory of shrinking SNAP resources, reinforcing the need for companies to adapt their product portfolios and pricing strategies.

Legal Challenges and Future Uncertainty

On June 5, 2026, U.S. District Judge Myong Joun granted a preliminary injunction blocking the Trump administration from enforcing new conditions on billions of dollars in USDA nutrition funding, including SNAP. The lawsuit, filed by 20 Democratic-led states and Washington, D.C., challenged USDA directives requiring states to certify compliance with federal policies on “gender ideology,” “immigration,” and “fair athletic opportunities” to continue receiving funding. The plaintiff states receive over $74 billion annually from USDA programs [9][29]. While this injunction does not directly affect the state-level food restriction waivers or the OBBBA’s eligibility cuts, it introduces legal uncertainty around the broader funding environment and signals that aggressive federal SNAP conditions may face judicial scrutiny. Separately, Ohio passed a bipartisan bill (House Bill 163) mandating chip-enabled EBT cards to combat skimming fraud, which stole over $17 million in SNAP benefits between June 2023 and January 2025 [30]. This type of operational legislation, while not directly affecting product eligibility, adds to the administrative complexity of the program.

Market Analyst Perspectives on Future Revenue Risks

Numerator and TD Cowen Projections

Numerator’s $830 million lost sales estimate for 2026 is the most comprehensive projection available, with soda accounting for more than half the total ($430 million) [1]. TD Cowen analyst Robert Moskow provided state-level volume data confirming that restricted states are underperforming non-restricted states by 120 to 590 basis points across categories, and noted that coverage will expand from 24% of the population in April 2026 to 37% by October 2026 and 40% by February 2027 [1]. Moskow’s data suggests the revenue impact will grow proportionally as more states implement waivers, potentially reaching well over $1 billion annually if restrictions spread to half of all states by 2028.

Consumer Behavior and Substitution Patterns

Numerator’s survey of over 1,000 SNAP households found 86% awareness of the restrictions, indicating that the policy changes are already influencing shopping behavior [1]. While 63% of SNAP consumers said they would use non-SNAP dollars to buy soda if it became ineligible, and 60% would do so for candy, roughly half of soda and candy shoppers in waiver states expect to either reduce purchases or shift to cheaper alternatives using non-SNAP dollars [1][2]. Substitution patterns favor SNAP-eligible categories such as tea, juice, coffee, fruit, ice cream, and fruit snacks [1][2]. This partial offset means the net sales loss is less than the full value of restricted purchases, but the shift toward lower-margin or private-label alternatives still pressures branded manufacturers.

The 2025 government shutdown provided a real-world stress test: weekly SNAP household grocery spending fell 10% during the 43-day disruption, from $233 to $210 [1][2]. Among SNAP-eligible adults aged 55–64 subject to new work requirements, 54% reported reduced benefits since November 2025, and 48% expect further reductions. Their planned coping strategies—shopping sales (54%), buying private label (37%), visiting food pantries (36%), and shopping at dollar/discount stores (30%)—all point toward reduced spending on branded packaged goods [2][28].

Broader Economic Context

The SNAP restrictions are unfolding against a backdrop of persistent food inflation and a K-shaped economic recovery. The New York Fed linked rising food insecurity to the K-shaped economy, noting that “a higher cost of living, combined with cuts to the Supplemental Nutrition Assistance Program, have led to renewed concerns about food insecurity among those at the bottom of the K-shape” [31]. Additionally, the rapid adoption of GLP-1 weight loss drugs is reducing snacking demand; the National Retail Federation estimates $6.5 billion in U.S. grocery sales have been lost due to reduced snacking among GLP-1 users, with the number of Americans taking these drugs more than doubling to 12.4% by 2024 [27]. While GLP-1 impact is distinct from SNAP policy, both trends converge to reduce demand for indulgent, high-sugar, and high-calorie packaged foods—the very categories most targeted by SNAP restrictions.

Food banks are reporting record demand but cannot fill the gap, as SNAP provides nine meals for every one meal a food bank offers [7]. In Phoenix, St. Mary’s Food Bank expects to serve 300,000 more meals and must spend an extra $12 million due to reduced USDA food supplies [32]. This humanitarian crisis underscores the scale of the demand destruction for food companies that have historically relied on SNAP as a stable source of revenue for affordable, shelf-stable products.

Conclusion

The expanding patchwork of state-level SNAP purchase restrictions, combined with the largest federal SNAP cuts in history, is reshaping the U.S. packaged food market in ways that will intensify through 2028. An estimated $830 million in 2026 sales losses across soda, candy, and energy drinks is likely to grow as the share of the population covered by restrictions rises from 24% to 40% or more. Coca-Cola, PepsiCo, and Kraft Heinz are responding not through high-profile lobbying against the restrictions—at least not visibly—but through product reformulation toward functional, clean-label, and health-oriented offerings, strategic portfolio reallocation, and pricing innovations designed to retain cost-pressured consumers. Retailers, led by Walmart and Kroger, are leveraging private label expansion and price investments to capture shifting SNAP spending, creating additional competitive pressure on branded manufacturers. Federal legislation, legal challenges, and the MAHA movement add layers of uncertainty, but the trajectory is clear: SNAP is becoming a smaller, more constrained program, and packaged food companies must adapt their product portfolios and go-to-market strategies to a world where government-funded purchases of sugary drinks and candy are increasingly off-limits.