Supervalu-Led Stores Chasing $55 Billion in Food Stamps: Retail

Supermarkets that had been adding Starbucks Corp. (SBUX) cafes and olive bars to draw wealthy shoppers are now catering to a different audience: food-stamp recipients.

Stores are moving their opening hours, adding products and revamping merchandise assortments as persistent joblessness pushes more shoppers to government support in buying groceries. Distributions from the federal Supplemental Nutrition Assistance Program rose 11 percent to a record $71.8 billion in fiscal 2011, according to a U.S. Department of Agriculture report.

Supervalu Inc. (SVU)’s 1,280-store Save-A-Lot chain opens some supermarkets at midnight, when government benefits are loaded onto food-stamp cards, and promotes higher-priced bulk items early in the month. The chain switches to smaller sizes later as money dwindles and customers make fill-in purchases.

“What we’re learning how to do is to merchandise to those events,” Chief Executive Officer Craig Herkert said in an interview. “You have to learn, market by market, when is that, and you have to merchandise to it, and in some cases, run your stores to it.”

A great deal is at stake for large grocers and supercenters. About 85 percent, or $54.8 billion, of all food stamps were spent there in 2010, according to the USDA. Food stamps account for about 40 percent of sales at Save-A-Lot, up from 26 percent two years ago, and their use is spreading at Eden Prairie, Minnesota-based Supervalu’s Acme, Albertsons and Shaw’s chains, Herkert said. The number of people receiving government food assistance is “shocking,” he said.

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Recipients spend an average of 21 percent of their benefit on the day it’s received and 59 percent within the first week, according to a USDA study. The money can be used to buy meat, dairy, fresh produce and dry goods such as cereal and pasta. Alcohol, cigarettes, pet food, vitamins and hot foods aren’t allowed.

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