In 2022 (was April, now October) the UK government will introduce new rules for High Fat, Sugar and Salt (actually Sodium levels not Salt!). The new rules impact three areas of brand behaviour:
- Volume Promotions
- Display Space
- Media (kicks in end 2022)
Estimated by IRI that £1.1bn of sales is at risk.
What you need to know:
Only certain categories are included in the restrictions and only products classified as HFSS will be directly affected.
The points scoring is:
- Total “A” points (energy + sat’ fat + sugars + sodium)
- Total “C” points (fruit and veg’ and nuts + fibre + protein)
A food is classified as less healthy where it scores 4 points or more. A drink is classified as less healthy where it scores 1 point or more.
Rules differ depending on store location and size, i.e. , England only, so retailers with locations across Wales, Scotland and/or with different store sizes are affected to varying degrees.
The impact will vary across categories and brands
- Categories on the list
- Nutritional data of SKUs within the named categories
- Display location(s) to volume/value sold of affected categories/brands
- Promotional volume/value of affected categories/brands
Actions taken on the above will impact “non HFSS” categories/brands.
HFSS introduction has the potential to impact across the total store, i.e., categories/brands that think they are unaffected may get some surprises (good/bad) in relation to:
- POP : physical location, primary and secondary space (all year round and/or seasonal), additional/loss of promo’ slots
- Promo’ behavioural requirements/demands
- Terms and investment changes to possibly compensate for potential losses in HFSS categories
The impact varies across retailers
Retailers more reliant on HFSS secondary display space and promotions will be more impacted, e.g., Co-op and Tesco most impacted versus Waitrose least impacted (but this doesn’t necessarily reflect the level of a retailer’s level of ambition).
There’s about £190m of advertising spend at risk! Brand advertising will be allowed online and on TV, provided there are no identifiable HFSS products in the adverts. This is to ensure that BRANDS are not seen as HFSS brands (there is no such thing).
Strength of branded assets will be severely tested. Brands can move HFSS advertising spend to post watershed or other channels OR, refocus on non-HFSS products or launch non-HFSS NPD. Cadbury’s Gorilla ad’ remains their most impactful and it didn’t show product, so it can be done!
Impacted HFSS Categories/Brands should be considering and exploring:
- What’s the impact across the portfolio?
- How does this differ by Customer?
- What proportion of investment/sales/profit will be affected?
- What should we do to mitigate the impact and ensure we’re shaping Customer thinking?
Non HFSS Categories/Brands should be considering and exploring:
- What are my Customers doing?
- What are the possible opportunities/threats?
- What should we do to take advantage of the situation?
Space and Location consequences will be the biggest disruptors to store layouts and shopping behaviours
As an example, chilled is one of the most affected areas. Based on current product spec’s, HFSS categories would go from 52% of display to just 18%. In ambient, the most logical direction is:
- HFSS categories
- New/more power aisles
- Layout changes
- Gondola ends go with permanent non HFSS segments/brands e.g Water
- Range simplification
Non HFSS categories
- Seek new/more display space
- Defend in aisle space against HFSS products
- Seek new secondary locations
HFSS promo’ changes are less impactful on volume/value than Space
Most Retailers and Brands have evolved promo’ strategies in light of Discounters, i.e., EDLP/Price Cuts rather than M’buys, so in reality volume promo’s only make up c2.0% of sales in Impulse categories.
What it boils down to…
Never have full cross functional Teams needed to work together to get a cohesive Consumer, Shopper, Customer “story” together to support compelling Category and Brand recommendations. The changes impact across the whole value chain and financial structure of HFSS effected businesses. The same impact could be felt by non HFSS businesses if they allow HFSS to shape their business.