New federal investments in school nutrition could create opportunities for CPG companies to develop and supply less-processed, nutrient-dense foods to schools, as policymakers and school districts look for alternatives to ultra-processed products.
The US Department of Health and Human Services (HHS) launched the Developing Evidence for Programs to Ensure Nutrition for Development (DEPEND) initiative last week. DEPEND will provide $32.5 million in funding for schools and school districts to pilot meal programs that replace “highly processed foods” with nutrient-dense whole foods and provide scalable solutions, according to HHS.
For food manufacturers and suppliers, the initiative could provide a window into what schools need to make that transition, including products that fit new nutrition priorities and solutions addressing procurement, labor, food production and meal economics.
DEPEND, which will be led by the Agency for Healthcare Research and Quality and the National Institutes of Health, will provide one-time funding to School Food Authorities, school districts and individual schools that propose innovative approaches toward food procurement, workforce and food production, student demand and meal economics and operations and infrastructure.
HHS’ funding ranges between $75,000 to $2.5 million depending on proposal scopes, with additional funding in fiscal year 2027 if the initiative is successful. HHS says it expects to fund the first round of funding in October, with applications opening in mid-September on the HHS website.
“Rather than prescribing a single model for every school, the initiative will fund pilots, partnerships and new ideas to identify approaches that can deliver healthier meals within schools’ existing recurring resources. The goal is to determine what works – and what does not – and give schools across America practical models they can replicate,” HHS said.
While the funding is directed toward schools rather than food manufacturers, the areas identified by HHS point to several potential pain points and opportunities for CPG suppliers. Schools will need products that meet nutrition goals while remaining affordable, scalable and practical for kitchens with limited labor and infrastructure.
Federal funding also targets local food procurement
Another joint investment between HHS and USDA aims to improve school nutrition programs by connecting qualifying schools with local farms.
The Harvest to Hallways initiative, announced last week, includes up to $70 million in investments for school cafeteria infrastructure, efforts to expand local food procurement and up to $25 million in Farm to School Grants for fiscal year 2026, a USDA-backed program that helps schools purchase local food, build gardens and provide nutrition education.
The initiative could further reshape school procurement, creating demand not only for fresh and locally sourced ingredients but also for suppliers capable of helping schools incorporate those foods into affordable, scalable meal programs.
Taken together, the federal initiatives point toward a school food system that prioritizes less-processed and more nutrient-dense foods, but they also leave an important question unresolved for food manufacturers: What, exactly, qualifies as “ultra-processed”?
A federal definition for ultra-processed foods is pending, but California is moving ahead of FDA. Last year, California Governor Gavin Newsom signed a landmark legislation (AB 1264) to define and ban UPFs from public school meals in the state. Earlier this week, California lawmakers unanimously passed AB 2244 to create a voluntary non-UPF food seal, which includes a broad UPF definition, setting a potential model for how other states define these foods on shelf and in schools.
Schools lack infrastructure to switch to less-processed foods
The School Nutrition Association (SNA) commends HHS for acknowledging the need for more investment in school meal programs via the DEPEND initiative, but grants for select schools will not fill critical funding gaps facing nearly all of SNA’s members of school nutrition professionals, according to an SNA spokesperson.
The funding gap could shape what CPG products they are able to buy.
Essentially all school meal program directors report needing more funds to support and expand scratch meal preparations and reduce ultra-processed foods, according to SNA’s 2025-26 School Nutrition Trends report released in January.
Among the responses from 1,240 school meal program directors nationwide, 71% reported offering scratch prepared entrees on at least a weekly basis. Yet, nearly all respondents report needing more staff (94%), culinary training (95%) and equipment and infrastructure (94%), citing high food costs, labor and equipment as challenges to their programs.
For CPG suppliers, those constraints suggest that simply offering a “cleaner” or less-processed product may not be enough. Products designed for school foodservice may also need to reduce labor, work within existing kitchen infrastructure and meet tight cost requirements.
School meals are subsidized for roughly 30 million children across 90,000 elementary and middle schools totaling $32 billion in FY 2024, according to congressional data.
School nutrition programs receive roughly $4.70 in subsidies for each free meal they prepare, while the schools are responsible for food, beverages, labor, equipment and supply costs, according to SNA. Federal funding does not cover enough for schools to meet nutrition standards set by the Dietary Guidelines for Americans, which provides new recommendations around limiting highly processed foods and increasing protein.
One 2020 study from the University of California Berkely found that the state of California needs roughly $5.81 billion to make scratch cooking possible in school kitchens – underscoring the varied operational needs for each states’ school nutrition programs.
