Costco to accept food stamps

PORTLAND, Ore. | With many families suddenly struggling to feed themselves, the big warehouse clubs known for king-size packages of steak and jumbo boxes of Cheerios are increasingly competing with grocery stores for the 36 million Americans now on food stamps.

Costco Wholesale Corp. said Wednesday that it would start accepting food stamps at its warehouse clubs nationwide after testing them at stores in New York. That is a big about-face for a chain that has catered to the bargain-hunting affluent with its gourmet foods, and a reflection of the fact food-stamp use has reached new highs.

Costco joins warehouse-club competitor BJ’s Wholesale Corp., which started taking food stamps in April, and Sam’s Club, which began accepting them last fall.

Until recently, some wholesale clubs were skeptical that low-income people would be willing to pay the $50-a-year membership fee or would be interested in buying food in the bulk quantities for which the stores are famous.

But now, in the current economy, stores are battling for every dollar and see a big potential market in the growing ranks of food-stamp recipients. From warehouse clubs to supermarkets and mom-and-pop groceries, stores are retraining their cashiers and hanging new signs to welcome such customers.

“Certainly, this economy was a wake-up call,” Costco Chief Financial Officer Richard Galanti recently told investors.

The rolls of food-stamp recipients have grown by 10 million over the past two years. The U.S. Department of Agriculture said nearly 200,000 retailers nationwide now accept food stamps, 20 percent more than in 2005.

Most major food chains - such as Wal-Mart Stores Inc. and Safeway Inc. - have accepted food stamps and other public assistance as payment for many years.

Costco had refused to do so, arguing there would not be enough shoppers to make it worth the trouble of updating its electronic payment systems and that food stamps would slow down the checkout lines.

In May, however, Costco began accepting food stamps in New York under political pressure, and the practice turned out to be more popular than expected.

The company hopes to accept food stamps in about half its 407 stores in the United States by Thanksgiving. The rest will be phased in as Costco gets the necessary state approvals.