Following SNAP Restrictions on Junk Food, Pepsico Cuts Prices Due to Softening Consumer Demand
Some basic economic truths are playing out in the junk food market – the market where Pepsico engages in commerce. Much of its revenue has been in the form of redistributed taxpayer money, which passes through government to the recipients of what was once called “food stamps.” The recipients of SNAP benefits (Supplemental Nutrition Assistance Program) have historically spent considerable amounts of their federal food assistance on Doritos, Mountain Dew, and other low-nutrition foods sold by Pepsico.
But thanks to President Trump and Robert F. Kennedy, Jr., that is changing, as documented in a piece of mine from early January (“Thanks to MAHA, Several States Just Implemented Bans on Using SNAP Benefits for Junk Food”) in which I wrote “the USDA granted individual states the authority to implement waivers to federal regulations, thus allowing state-level determination of food products which may be considered ineligible for federal SNAP benefits.”
It didn’t take long for Pepsico to feel the pinch. By early February, the company was finding itself needing to cut prices in response to slowing sales.
But a few months earlier when SNAP recipients were still spending government money, Pepsico was able to steadily increase prices. Now that those same consumers are forced to buy Fritos and Cheetos using their own money, they have suddenly become price conscious.
In the media reports about Pepsico dropping prices, there is no discussion about the lost SNAP business. There is, however, an acknowledgement that the company had been very aggressive in raising prices at a rate well in excess of inflation. Suddenly, Pepsico finds itself having to cut prices by a rather significant 15%.
“PepsiCo cuts prices of Cheetos, Doritos and other snacks” [CBS News – 02/03/2026]
PepsiCo is lowering the prices of its Cheetos, Doritos, Lays and other snack brands by up to 15%, saying it wants to bring "relief" to consumers facing an affordability crunch.
CBS News - The food and beverage company said the price cuts — announced just before this weekend's Super Bowl game — are an effort to respond to the financial strain facing many consumers, who conveyed that "rising everyday costs are making their daily decisions harder."
The move comes amid a pullback in demand from consumers after PepsiCo instituted a series of price hikes. In the fourth quarter, PepsiCo increased beverage prices by 7% in North America, while its snack prices were up 1%.
So Pepsico raised prices in the fourth quarter (October, November, December) and then in January came “a pullback in demand from consumers.” Coincidentally, this pullback in demand occurred exactly when the SNAP restrictions commenced.
Peter Schiff had an excellent post on Twitter/X last week expanding on this subject:
PepsiCo spent $2.8 million last year lobbying to keep junk food eligible for food stamps. Then RFK got 18 states to ban SNAP purchases of soda, candy, and processed snacks.
Within a week, PepsiCo cut Doritos, Lay's, and Tostitos prices by up to 15%. The CEO blamed "affordability." But the timing tells the real story.
• Frito-SNAP is a $100 billion-a-year program. According to the USDA: 20 cents of every SNAP dollar goes to junk food.
• Frito-Lay products appeared in 7.2% of all SNAP shopping trips.
The moment the government stopped subsidizing demand, PepsiCo had to compete on price. No regulation. No price caps. No antitrust probe. The subsidy disappeared, and the market corrected overnight.
Now consider that this same pattern — government money in, prices up — plays out in college tuition, healthcare, defense, and every other industry with a guaranteed government buyer.
Federal spending is nearly a quarter of the entire economy. All of it inflating prices. All of it eroding your purchasing power.
When corporations and their executives made a hard-left political turn in the early 21st century it puzzled me, because the Democrats they allied with were not the party of free enterprise. But I’ve since come to realize that much of corporate America now rejects free enterprise too, and instead wants government to act on its behalf in redistributing money from taxpayers to corporations.
Be it SNAP benefits for junk food or EV credits for auto manufacturers, the Trump administration is putting an end to the corporatist business model and its parasitic attachment to taxpayer wallets.
With “affordability” such a visible political issue, and with the Pepsico case-study showing how consumer prices can be reduced, Republicans need to aggressively focus on cutting the government subsidies that result in higher consumer prices.
https://ace.mu.nu/archives/418681.php#418681
No comments:
Post a Comment