The combined push from HHS and USDA targets two persistent bottlenecks in school nutrition: the dominance of ultra-processed foods on cafeteria trays and the lack of kitchen infrastructure to prepare meals from scratch. For CPG suppliers, the initiatives signal a procurement shift that rewards nutrient-dense, labor-light products over conventional processed offerings.
DEPEND Initiative Targets Processed Food Replacement
HHS launched the Developing Evidence for Programs to Ensure Nutrition for Development initiative last week, committing $32.5 million in one-time funding to School Food Authorities, districts, and individual schools. The program, led by the Agency for Healthcare Research and Quality and the National Institutes of Health, will fund pilots that replace highly processed foods with whole, nutrient-dense alternatives.
Grants will range from $75,000 to $2.5 million depending on proposal scope, with applications opening in mid-September and first-round funding expected in October. HHS has left the door open for additional funding in fiscal year 2027 if the pilots prove successful.
Rather than mandating a single nutritional model, DEPEND will back innovative approaches across food procurement, workforce development, food production, student demand, and meal economics. HHS said the goal is to identify practical models that schools can replicate within existing resources.
USDA Joins With Harvest to Hallways Investment
A separate joint investment from HHS and USDA adds up to $70 million for school cafeteria infrastructure and local food procurement through the Harvest to Hallways initiative. The package includes up to $25 million in Farm to School Grants for fiscal year 2026, a USDA program that helps schools buy local food, build gardens, and deliver nutrition education.
Together, the two federal efforts could reshape how schools source ingredients, creating demand not only for fresh and locally produced foods but also for CPG suppliers capable of integrating those ingredients into affordable, scalable meal programs.
Schools Face Deep Infrastructure Gaps
The School Nutrition Association praised HHS for acknowledging investment needs but warned that grants for select schools will not close funding gaps affecting nearly all of its members. According to SNA’s 2025-26 School Nutrition Trends report, based on responses from 1,240 school meal program directors nationwide, 71% already offer scratch-prepared entrees at least weekly.
Yet 94% of directors reported needing more staff, 95% need culinary training, and 94% need equipment and infrastructure. High food costs, labor shortages, and aging kitchens remain the dominant barriers to expanding scratch cooking.
For CPG suppliers, those constraints carry a clear message: a cleaner ingredient list alone will not win school contracts. Products must also reduce labor demands, fit existing kitchen infrastructure, and meet tight per-meal cost targets.
The Economics of School Meals
School nutrition programs serve roughly 30 million children across 90,000 schools, with federal subsidies totaling $32 billion in fiscal year 2024. Schools receive approximately $4.70 per free meal, but that figure must cover food, beverages, labor, equipment, and supplies, according to SNA.
Federal funding falls short of what schools need to meet nutrition standards under the Dietary Guidelines for Americans, which now includes recommendations to limit highly processed foods and increase protein. A 2020 University of California Berkeley study found that California alone would need roughly $5.81 billion to make scratch cooking possible statewide, underscoring the scale of the infrastructure challenge.
California Moves Ahead on Ultra-Processed Food Definition
While a federal definition for ultra-processed foods remains pending, California has moved ahead of the FDA. Governor Gavin Newsom signed AB 1264 last year, banning ultra-processed foods from public school meals. This week, California lawmakers unanimously passed AB 2244, which creates a voluntary non-UPF food seal with a broad definition that could serve as a model for other states.
The California framework gives CPG manufacturers a preview of the labeling and formulation standards likely to spread nationally. Companies that reformulate now to meet the state’s non-UPF criteria may gain a first-mover advantage as other states adopt similar rules.
What Happens Next
Watch for DEPEND application details in mid-September and first-round awards in October, which will reveal which school districts are piloting processed-food replacements and what products they seek. CPG suppliers should monitor California’s AB 2244 implementation as a likely template for broader state and federal action on ultra-processed food definitions. The real test will come in fiscal year 2027, when HHS evaluates whether DEPEND pilots delivered scalable models, and whether Congress expands funding to close the infrastructure gaps that SNA says constrain nearly every school nutrition program in the country.
— Isabella Morales, food desk, AXO News