Soda and Candy Bans in Food Assistance Programs: A New Frontier for Health and Investment Risk?

The U.S. food assistance landscape is undergoing a seismic shift. Arkansas, Indiana, West Virginia, and Arizona have formally requested waivers from the USDA to block the use of Supplemental Nutrition Assistance Program (SNAP) benefits for purchasing soda, candy, and other non-nutritious items. These proposals, part of the Trump administration’s “Make America Healthy Again” (MAHA) initiative, could reshape consumer behavior and market dynamics for beverage and snack manufacturers—and investors must take note.

The Policy Landscape: A Bold Experiment in Nutrition Governance

The USDA’s decision to allow states to impose restrictions marks the first time in SNAP’s 60-year history that states can tailor eligibility lists for specific products. Arkansas’s waiver, set to take effect in July 2026, would ban sugary drinks (even diet sodas), fruit juices with less than 50% natural juice, and candy—including flour-based treats like Kit Kats. Meanwhile, Indiana’s proposal focuses on candy and soda while tightening work requirements for recipients.

The USDA’s approval of these waivers reflects a broader political push to address diet-related health crises like obesity and diabetes. Proponents argue that taxpayer dollars should not subsidize “unhealthy” foods. However, critics, including anti-hunger advocates, counter that such bans stigmatize low-income households and ignore systemic barriers like rising grocery costs. With average monthly SNAP benefits at $187—equivalent to $6.20 per day—recipients often prioritize calorie-dense, affordable options.

The Industry Impact: Soda and Candy Firms Face New Headwinds

The stakes are high for companies reliant on SNAP-driven sales. Beverage giants like Coca-Cola (KO) and PepsiCo (PEP), as well as candy manufacturers such as Hershey (HSY), could see reduced demand in states implementing these bans.

Analysts estimate that SNAP accounts for 2-4% of these companies’ sales, with candy representing just 2% of SNAP spending. However, the ripple effect could extend beyond direct sales. Retailers like Walmart (WMT) and Kroger (KR) might face inventory shifts, while dollar stores, which cater to low-income shoppers, could lose sales of discounted candies and sodas.

Market Reactions and Risks

Investors should monitor both the USDA’s waiver approvals and broader state-level actions. If Arkansas and Indiana’s bans gain traction, other states may follow, creating a patchwork of regulations. For instance, Idaho has already signed legislation to pursue a waiver, and West Virginia has signaled interest.

The potential for reduced sales in these markets could pressure beverage and snack stocks. Meanwhile, companies pivoting to healthier alternatives—such as plant-based snacks or fortified beverages—might gain an edge. However, logistical hurdles loom large: defining “unhealthy” products remains contentious. Arkansas’s vague “unhealthy drinks” category, for example, could lead to litigation or inconsistent enforcement.

Opposition and Challenges: A Battle Over Autonomy and Equity

Anti-hunger groups argue that bans fail to address the root cause of poor nutrition: stagnant SNAP benefits and soaring food prices. Grocery costs rose 24% from 2020 to 2024, with USDA projections of a further 2.7% increase in 2025. Advocates stress that most SNAP recipients already buy similar foods as non-participants, with 80% of benefits spent on staples like meat, bread, and milk.

Food industry trade groups, such as the American Beverage Association, warn of operational chaos. Multi-state retailers would face conflicting definitions of “candy” or “soda,” complicating compliance. Meanwhile, critics of the MAHA initiative call it “paternalistic,” arguing that it distracts from solutions like increasing SNAP benefits or expanding access to fresh produce in food deserts.

Conclusion: Navigating the Health vs. Equity Tightrope

Investors must weigh the risks and opportunities of these policy shifts carefully. While soda and candy companies could face modest near-term revenue hits in targeted states, the broader impact may be muted given the small share of SNAP spending on these items. However, the trend toward state-level nutrition governance signals a long-term shift in public policy—one that could accelerate demand for healthier alternatives and penalize companies lagging in innovation.

Key data points underscore the balance:
- SNAP’s role in the economy: 40 million Americans rely on SNAP, with benefits totaling $68 billion annually.
- Geographic concentration: The four states proposing bans represent ~15% of the U.S. population but ~12% of SNAP recipients.
- Profit margins: Beverage and snack companies derive most profits from high-margin items (e.g., premium sodas, chocolates), not bulk SNAP sales.

For now, the bans remain limited in scope. But if they expand, investors in traditional packaged goods may need to reassess their portfolios—while those in healthier food sectors could see tailwinds. The USDA’s waiver process will be a critical indicator of how far this experiment in nutritional governance extends—and what it means for the bottom line.