New York – Costco Under Fire For Not Accepting Food Stamps

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    New York – Farmers’ markets accept food stamps. The Harlem Fairway offers food stamp take-out meals. The new Trader Joe’s in Brooklyn accepts food stamps. Even Whole Foods, which has been trying to shake that “Whole Paycheck” image, accepts food stamps. But Costco, the warehouse retailer that made its reputation as the anti-Wal-Mart, generous not only to Costco’s customers but to its workers as well, does not.

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    “Costco in general has a reputation of being a socially conscious company,” said Eric N. Gioia, a city councilman from Queens who last year began a campaign asking Costco to accept food stamps after discovering it did not during the “live on food stamps for a week” stunt. “There is no logical reason for someone not to accept food stamps. It is not only compassionate, but it’s good for their bottom line.”

    Specifically, Mr. Gioia points to the Costco on Vernon Boulevard in Long Island City, Queens, in his district. First opened in 1996, the store is within walking distance for nearly 30,000 residents of three public housing projects: the Queensbridge, Ravenswood and Astoria Homes. “This is their best chance of eating healthy wholesome food at deep discounts,” Mr. Goia said. “And so in this particular case, it’s an especially glaring omission not to accept food stamps.”

    Richard Galanti, the chief financial officer of Costco, who handles news media inquiries, declined to comment on the issue.

    There has been keen interest in the food stamp program in recent months, as the nation slides deeper into a recession. Last spring, even before the latest economic convulsions, food stamp enrollment was projected to reach 28 million in the coming year, the highest level since the federally financed aid program began in the 1960s. But rising food prices have cut into what food stamps can buy, forcing government officials to come up with creative ways to increase food stamp allotments. For example, Gov. David A. Paterson decided to use a provision in the state’s energy assistance program to increase food assistance.

    Pilot food stamp programs were initiated during the Great Depression and again under President John F. Kennedy, but it was during the Great Society era of the mid-1960s that the food stamp program became formally established. The paper coupons were replaced with electronic debit cards that use four-digit identity codes similar to bank cards in 2004, which prompted the renaming of the program to the Supplemental Nutrition Assistance Program as of Oct. 1 this year. The new cards are preferred by users because they reduce the stigma of the paper coupons and preferred by vendors because they get paid more quickly, often within 48 hours.

    According to Mr. Gioia’s office, executives at Costco told the office that they declined to accept food stamps for three reasons.
    # They did not think they would qualify based on the federal government requirements.
    # It was too expensive to adapt their equipment to accept food stamps.
    # With their annual fee/bulk-purchase model, people on food stamps probably could not shop there anyway.

    Are these valid concerns? If the corner bodega could qualify to accept food stamps, why would Costco, a publicly traded company with $71 billion in annual revenue, not qualify?

    A look at the Agriculture Department’s store-eligibility requirements showed that the process of applying seemed simple and pretty straightforward. Merchants can even apply online.

    There are apparently two ways to qualify to accept food stamps. The first way is to have at least 50 percent of the total sales — food, goods and services — at the store be from the sale of eligible staple food (i.e. not junk food). Given the diversity of services (for example, photo processing) and goods (like coffins) that Costco offers, Costco may not qualify under this requirement.

    But Costco definitely qualifies under the alternate requirement, which is requires that the store (more or less) offer at least three different varieties of food in each of the following four staple food groups on a daily basis: bread and grains; dairy; fruits and vegetables; and meat, poultry and fish. Costco stores sell a wide selection of food in all of these categories. In fact, the high volume of their dairy business (along with Wal-Mart’s) actually helped ease in the redesign of the gallon milk jug.

    Even if qualified, is it hard for a store to start taking food stamps? According to the Agriculture Department’s Web site, there are three ways for stores to accept food stamps. One uses old-fashioned paperwork — for stores that do not have electricity or a phone line, or do not average at least $100 a month in food stamp transactions. (Costco has electricity and phone lines and would be likely do more than $100 per month per store.)

    Larger stores that average more than $100 a month in food stamp transactions per customer can receive devices from their state governments that accept the debit cards free of charge. They simply have to sign an agreement to cover the use of the equipment and provide banking information to the company that handles processing before they can receive a device. And the number of devices per store depends on the percentage of food stamp sales. (Having a separate food stamp card-reading device can be cumbersome, so most businesses simply reprogram their payment-processing machines to accept the food cards. This would not seem to be a big stumbling block for a Fortune 500 company like Costco.)

    The last point about memberships is interesting: Costco makes the bulk of its profit by charging an annual membership fee for access to its stores, executives have said — more than $1 billion a year. The basic membership for most households is $50, which is a one-time outlay that cannot be covered by the food stamps themselves.

    While some food stamps recipients are destitute and could not come up with the $50, many surely would pay the fee if they knew that it would save them far more money over time, said Joel Berg, executive director of the New York City Coalition Against Hunger.

    Mr. Gioia added, “Not only does it amount to 14 cents a day, but you’ll find that people who are on a fixed income and trying to feed their children become amazingly sophisticated at making smart economic choices.”

    Mr. Berg noted that the Agriculture Department recently did a survey that found that food stamps recipients spent an average of $6 to travel for their food shopping, which probably means that many poor people are savvy enough to pay for car services and taxis to travel longer distances to buy food at discount stores that do accept food stamps.

    “I am sure that many food stamp recipients would scrimp and save and borrow and do what it takes to get into a discount program — particularly since there are about 30,000 public housing residents near the Astoria Costco,” Mr. Berg argued.

    And at a time when many New Yorkers are finding it more difficult to find fresh food within walking distance because of the decline of the neighborhood supermarkets (in part because of competition from the big-box retailers that can offer lower prices), the idea of a Costco within walking distance is appealing.

    “It is inexplicable why Costco clings to a policy that is against both their public interest and the company’s own self-interest,” Mr. Berg said. “More than one million New Yorkers a year use more than one billion dollars worth of food stamps benefits. I can’t understand why Costco is essentially placing a sign in their window that says ‘Your Business Not Wanted.’ ”

    The government pays dollar-for-dollar for the food stamp use, so it is not as though Costco has to discount their margins. Costco, which has created an image that has both upscale and downscale appeal, has been known for attracting the elite (at least in Washington). But perhaps Costco is more wary of the other end of the spectrum, finding western Queens appealing for its real estate, but not for its customer base.


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    24 Comments
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    Big Masmid
    Big Masmid
    15 years ago

    I agree that its not nice of them, on the other hand we voted for C H A N G E , it was not specified what change includes, well lets start making a list:
    1) no food stamps for the poor
    2)

    yeshiva coupons
    yeshiva coupons
    15 years ago

    its time we all get together and cancel the Yeshiva Chesed Dollars, the grocery stores are loosing 5% – 10% on every purchase, as it is they are burly making it, Costco you are an eye opener.

    Food Stamps
    Food Stamps
    15 years ago

    The whole food stamp program is unfair. If I have a 401k or life insurance policy that has a value of over $3000 you are not eligible. If they take assets into account they should also take liabilities into account. If I owe on my credit cards $50,000 and have $25,000 in assets technically I am in the hole as bad or worse than someone who has no assets and no liabilities, yet the one with no assets gets food stamps and the one who owes more moeney then he has does not get food stamps. Is this fair????????????????????????

    Anonymous
    Anonymous
    15 years ago

    why should they accept food stamps? people that are on food stamps dont pay anyways so why are they entitled to discount products? What a bunch of selfish pigs. Its bad enough they mooch off the government , now we have to accomodate them on where to shop? How about Saks and macys as well

    Anonymous
    Anonymous
    15 years ago

    how would someone on food stamps have to money to pay the membership??

    Anonymous
    Anonymous
    15 years ago

    I was thinking the same a person on food stamps should not have extra money to spend on membership. I am not sure but if anything target and walmart should accept food stamps if they do not yet that would be affordable. I think the whole idea of costco to accept foodstamps is absurd.

    JoeFlix
    JoeFlix
    15 years ago

    I am a Costco costumer and fan – they are the best.

    Their prices are good enough – its crazy what you can pay there for big packs of fruits and veggies and even Kedem Grape juice if you have a big family and you can use your credit card to buy there once a month.

    They dont HAVE to deal with the extra expense and headache of food stamps

    Anonymous
    Anonymous
    15 years ago

    may be they are thinking that accepting stamps will bring in a lower class of people . who know?

    Anonymous
    Anonymous
    15 years ago

    i actually switched over to BJ’S (FL) a few years ago, because 1) they accept food stamps and 2) they accept all coupons.

    Anonymous
    Anonymous
    15 years ago

    They don’t accept food stamps

    1. because they don’t want the government telling them what they can or can’t sell.

    2.The POS system needs to be upgraded. The register gal would need to charge two cards – for food items the food-card- and none food items the credit card.

    3. They are making enough money as is.

    Charlie Hall
    Charlie Hall
    15 years ago

    All kosher food stores in my neighborhood accept food stamps — I’ve been told that it is a requirement of the local Vaad if they want the hechsher.

    Anonymous
    Anonymous
    15 years ago

    Thats all we need. All the escalades and fur coats showing up to cosco with the Benefit Card. It is so unfortunate, the ones that need it really need it . The ones that abuse it make it look bad for everyone.