655 15TH ST, NW, SUITE 700 WASHINGTON, DC 20005 TELEPHONE: 202/452-8444 FAX: 202/429-4519

August 23, 1999

Ms. Judy Love
Redemption Management Branch
Benefit Redemption Division
Food and Nutrition Service
3101 Park Center Drive
Alexandria, Virginia 22302-1594

Dear Ms. Love,

The Food Marketing Institute (FMI) is pleased to submit the following comments on the Food and Nutrition Service's (FNS's) proposed amendments to the "retail food store" definition under the Food Stamp Program regulations. As discussed more fully below, FMI supports the proposed amendments to the retail food store definition and the resulting eligibility criteria. The revisions will help to ensure that a wide range of legitimate food stores are eligible to serve Food Stamp Program participants, while preventing the inclusion of retail entities that cannot meet participants' nutritional needs. Moreover, we recommend that FNS support the use of the simplest means of verifying retailer eligibility to conserve Program resources and to minimize disruption to legitimate retailers.

FMI is a non-profit association that conducts programs in research, education, industry relations and public affairs on behalf of its 1,500 members and their subsidiaries. Our membership includes food retailers and wholesalers, as well as their customers, in the United States and around the world. FMI's domestic member companies operate approximately 21,000 retail food stores with a combined annual sales volume of $220 billion, which accounts for more than half of all grocery sales in the United States. FMI's retail membership is composed of large multi-store chains, small regional firms, and independent supermarkets. Our international membership includes 200 members from 60 countries.

1. Proposed Revisions to Retail Food Store Definition Will Enhance Integrity of Food Stamp Program While Ensuring Ability of Legitimate Food Stores To Serve Program Participants

The Food Stamp Improvements Act of 1994 (the Act) amended the definition of "retail food store" to achieve two goals: to provide food stamp recipients with maximum access to the stores that provide a nutritious variety of foods and to prevent "marginal" stores from participating in the Food Stamp Program. The Act requires that a retail food store meet either of two criteria to accept and redeem food stamp coupons under the Food Stamp Program; these criteria are reflected in the proposed rules.

1. Criterion A

Under the first criterion, a retail food store must stock and offer for sale a variety of foods on a continuous basis in each of the four defined staple food categories, with perishable foods in at least two of those categories. Perishable foods are items that are either (1) frozen staple foods or (2) fresh, unrefrigerated, or refrigerated staple foods that will spoil or suffer significant deterioration in two to three weeks. The Department has particularly requested comments on the "variety" and "continuous basis" requirements of Criterion A.

FNS proposes to define "variety" as at least three different types of staple food items for home preparation and consumption in each of the four defined staple food categories. FMI agrees that, to ensure that adequate nutritional sources are available to participants, a variety of foods should be offered under this criterion; three types of food in each of the four staple food categories is a reasonable minimum to achieve a "variety." Our members carry an ample variety of food items to provide sound nutritional choices for all consumers, including those on a limited income.

The proposed explanation of "variety," however, is written in the negative, i.e., that which will not be considered to be a variety. Proposed 7 C.F.R. § 278.1(b)(1)(ii)(D). We respectfully recommend that the Agency include some positive examples of items that would constitute a variety, e.g., a variety of dairy products would be achieved by stocking milk, cheese, and yogurt products.

To demonstrate that the store meets the "continuous basis" requirement of Criterion A, the Department proposes to require that the retail food store meet a minimum annual staple food wholesale purchase requirement of $30,000. The purpose is to ensure sufficient depth of stock. The $30,000 minimum should be sufficient to achieve the Program's goal without eliminating legitimate grocers from the program.

1. Criterion B

Under the second criterion, more than 50 percent of a retail food store's total gross retail sales must be in staple foods. Although the gross retail sales standard is intended to cover all retail sales of the firm, including food and non-food merchandise, rental fees, professional fees, and entertainment/sports/game income, retail service fees directly connected to the processing of staple foods, e.g., grinding raw meat, would be calculated as staple food sales.

The purpose of this definition is to encompass legitimate food retailers that may specialize in specific types of food with recognized nutritional value, such as fish, meat, poultry, or produce. FMI supports the standard proposed in Criterion B.

2. Program Officials Should Use Simplest Appropriate Means of Verifying Retail Food Store Eligibility

Several sections of the proposed regulations set forth means to verify retail store eligibility to participate in the Food Stamp Program. For example, the "retail food store" definition proposed in Section 271.2 requires that an entity that meets either of the criteria discussed above must also have "indicators which may be used to establish that a firm is a legitimate food store," such as appropriate licenses, accessible food, and posted prices. The definition further requires that an entity must meet the regulatory definition based on "visual inspection, sales records, wholesale purchase records, counting of stockkeeping units, or other inventory or accounting recordkeeping methods that are customary or reasonable in the retail food industry." Similar methods are listed in proposed Section 278.1(b)(1)(C) to determine whether a given retail food store is eligible for participation in the Food Stamp Program.

The methods listed in the proposed regulations for verifying compliance seem generally reasonable to us. However, in keeping with the wording of the proposed regulation, we recommend that they be used as alternatives, and that the simplest methods be used, as appropriate. This approach to implementing the regulation will conserve Program resources and minimize the disruption to legitimate food retailers.

As noted above, the purpose of the retailer eligibility criteria is to ensure that entities that are not legitimate food retailers are not authorized to accept food stamp coupons. In this regard, the eligibility criteria may be considered to be baseline criteria, i.e., the minimal standards for an acceptable food retailer. Where a food store obviously meets these criteria by visual inspection alone, we respectfully submit that a simple written report by the program official of his or her observations of the store should be sufficient documentation of the legitimacy of the store and the fact that the store meets the regulatory criteria. For example, if an official knows that a given supermarket has an established track record, and observes that the store's shelves are fully stocked with an abundance of different types of perishable and non-perishable staple foods, the Program's resources should not be spent on photographing the store or reviewing the store's sales or wholesale purchase records. A simple written report of the official's observations should suffice for file documentation purposes.

FMI supports FNS's efforts to develop retail food store eligibility criteria in keeping with the Food Stamp Improvements Act, and we appreciate the opportunity to provide you with our comments in this regard. If we may be of further assistance on this matter, please do not hesitate to let us know.

Cordially yours,

Tim Hammonds
President and CEO