Stores’ High Prices Put Children’s Aid at Risk

Some of California’s poorest children could soon be shut out of a government food program due to an explosion of stores that cater to low-income mothers but charge top dollar for milk, eggs and other staples.

Prices at the stores -- most in the Los Angeles area -- are as much as 16% higher than at supermarkets and other retailers. Many have sprung up in clusters near offices where young mothers go for food vouchers and nutrition classes.

Experts say the jump in the number of these businesses is now adding $33 million a year to the cost of the Women, Infants and Children program in California, which serves nearly 1.3 million people.

“Over the long haul, the major driving force that is raising our costs are these [stores].... To the extent that they become more predominant and charge more overall, we have to find ways to cut corners,” said Linnea Sallack, chief of the WIC branch of the California Department of Health Services.

Nationally, about 100,000 eligible children, pregnant women and new mothers could be denied benefits, one official estimated. It has not been determined how many of those would be in California.

The number of recipients the program can serve is limited by the amount of the federal grant that funds it, so high costs threaten its ability to serve all those who are eligible. Despite the rising costs brought about by these stores, in previous years the state has been able to serve all eligible participants by dipping into a federal emergency fund, but that money has now run out.

Although the WIC program is a quarter-century old and most state retailers accept its vouchers, the growth of stores exclusively serving its recipients has taken officials by surprise. The phenomenon is nationwide, but the biggest increase has been in California, where the number of stores has grown from 86 in 1996 to 322 in 2001 and to 659 this year. In the late 1990s, they accounted for only 11% of the WIC dollars spent on food; this year, the figure has vaulted to 43%. Nationally, the current number is about 11%.

According to federal data, nationwide there were 523 of the stores in 2000. In 2001, the number increased to 621, and by 2002 it had reached 778.

The federally funded program is administered by the state, and regulations to curb its costs have been grinding through Sacramento since 2000. The new rules are pending in the state Department of Health Services and are opposed by the specialty grocers, who have spent $427,113 on lobbyists and consultants in the last three years and have given campaign money to key politicians.

With names such as Mother’s Nutritional Center, Nutricion Fundamental and Fiesta Plaza Nutritional, the stores refer to themselves as WIC-only operations and often attract customers with giveaways of such items as kitchen appliances, toys and strollers.

These businesses note that their prices are within limits set by WIC and say they offer convenience and services their customers cannot get elsewhere.

Unlike food stamps, WIC vouchers are not for specific dollar amounts but for 60 particular food items. Other stores -- where competition generally keeps prices lower -- redeem them at the prices they charge paying customers.

But WIC-only stores have no such customers. They sell only to WIC recipients and generally stock just the milk, cheese, cereal, eggs, juice, peanut butter and other staples authorized by the program. And they tend to charge the government the WIC maximum, which is set high to make sure grocers in isolated or rural areas can cover their increased costs.

The maximum for a gallon of milk is $4.51, and for two dozen eggs, $7.19. A common package of staples -- two pounds of cheese, two dozen eggs, two gallons of milk -- can cost up to $24.60.

A single gallon of milk at L.A.-area chain supermarkets on Friday sold for $2.99 to $3.99, and a dozen eggs cost $1.50 to $2.39.

A study commissioned by the state found that WIC-only stores in California were charging 13% to 16% more for food items than other retailers (infant formula costs were calculated separately).

“For most of us who deal with the program at the national level, we’ve only really become aware of this in recent months,” said Robert Greenstein, executive director of the nonpartisan Center on Budget and Policy Priorities in Washington and former administrator of the U.S. Department of Agriculture’s Food and Nutrition Service, which oversees the WIC program.

“There’s a fairly uniform reaction of astonishment when people learn how the stores operate, the amount of taxpayer dollars they’re taking in, the degree to which they charge more than other stores and

The specialty stores aren’t doing anything illegal, Greenstein acknowledged. But had Congress foreseen their emergence 26 years ago, he said, it likely would have prohibited them.

Owners of the WIC stores said the focus on costs ignores the benefits they bring to the program.

Recipients flock to their stores, they said, because they offer convenience, easy access to authorized items, and clerks who speak their language and treat them respectfully.

“I think if you ask the participants, they’ll tell you they shop in WIC-only stores because ... they don’t like the way they’re treated by clerks in other stores,” said Manuel Castaneda, president of the Nutritional Grocers Assn. of California and co-owner of 32 WIC stores. “They don’t like the way they’re treated by other customers.”

“The dirty looks, the sneers, the grunts -- WIC transactions are complicated and time-consuming,” he said. “They come up to the register with six vouchers ... and everybody in line starts grunting.”

In WIC specialty stores, Castaneda said, customers don’t have to search the aisles for approved items; a clerk brings what they need to the counter and helps with the transactions.

“We give them dignity. We give them a comfortable environment that’s free of stigma,” Castaneda said.

In Baldwin Park, young mothers waiting at a WIC office to receive their monthly vouchers agreed. Next door is Mother’s Nutritional, a WIC-only store, and a few blocks away is Nutricion Fundamental. In between is an Albertson’s grocery store displaying a huge banner stating that it accepts WIC vouchers.

But the mothers leaving the WIC office head straight to the WIC-only stores. Pilar Valdes, the mother of two young children, said she liked to shop there “because it’s more convenient. You don’t have to wait in line.”

Francis Hernandez, the mother of a 2-year-old, agreed. “They get you everything right away,” she said. “And the kids always get a free gift. Sometimes there’s something for the mothers, like a cooking item.”

In Congress, where lawmakers face a rising federal deficit, Sen. Tom Harkin (D-Iowa) has proposed legislation to set prices based on an average of those charged for each item by commercial grocery stores.

“Congress provides the WIC program only a specific, limited amount of funding each year, so when WIC-only stores charge higher prices for food items, the end result will be a WIC program serving fewer mothers and young children in individual states and across the U.S.,” Harkin said.

Castaneda’s association has hired Washington lobbyists to fight the Harkin proposal.

The effort to cut WIC-only prices is “discriminatory,” said Castaneda, and would mostly affect minority mom-and-pop operations. California’s 659 WIC-only stores have 180 different owners, he said.

This “grass-roots” business, he said, is “surging, and they’re trying to take it away.”

Castaneda noted that WIC-only stores don’t get the price breaks and other allowances from manufacturers that big chains get for buying in volume. But “the Nutritional Grocers Assn. supports efforts to contain food costs,” he said.

Greenstein, who has analyzed the data from the state report on redemption costs, said it showed WIC-only stores consistently charged prices not only higher than chain supermarkets but also higher than grocers with one or two cash registers.

He denied that he and other advocates for the poor want to shut down the WIC stores but acknowledged that they hope to stop their growth.

“Given that the basic nature of these stores is fundamentally abusive and wasteful because they are not subject to the normal competitive market pressures, I see no reason whatsoever to allow them to spread further,” he said.