Retail Compass Autumn 2022

It's a supermarket sweep as HFSS products face sweeping promotion and placement restrictions

Published on 12 October 2022

What is happening?

In an attempt to tackle obesity in the UK, in particular childhood obesity, a swathe of restrictions on the placement and promotion of HFSS products in-store and online will be introduced in phases from October 2022 to January 2024.

Subject to certain specific exemptions, 'qualifying businesses' i.e. those with 50 or more employees that sell pre-packaged HFSS products direct to consumers in-store or online, must comply with the new restrictions. 

Although, it has recently been reported that the Government has launched a review of England’s anti-obesity strategy as part of a wider deregulation initiative which could lead to delays to, or even a complete abandonment of, the upcoming HFSS restrictions. However, the government is yet to confirm whether the review is taking place and there may well be legal obstacles to being able to reverse the restrictions at this late stage, therefore the current position is that upcoming HFSS restrictions will come into force as expected and retailers should prepare accordingly.

Why does it matter?

Most medium to large retailers are likely to fall within the definition of qualifying businesses and therefore be prohibited from:

  1. Displaying HFSS products in-store at aisle ends, store entrances, near checkouts and queuing areas;
  2. Displaying HFSS products online on home pages, landing pages for non-HFSS food categories that appear whilst the customer is searching for other items, pop-up pages, shopping baskets or payment pages;
  3. Offering HFSS products as part of volume price promotions and providing free refills for HFSS soft drinks which are not pre-packed; and / or
  4. Running TV and paid-for online ads in relation to HFSS products before 9pm.

For retailers, compliance with the new rules is only one piece in the puzzle, albeit a crucial piece given that failure to adhere to the new rules may result in the issuing of improvement notices, fixed penalty notices and criminal prosecution. Retailers must also consider how the restrictions may impact sales and how best to re-invent product placement in order to mitigate any potential losses in this regard.  

What action should you consider?

To minimise any consequences the restrictions may have on businesses' profit, the following preparatory steps should be considered before the new rules come into force: 

  • Identify which products will fall within the scope of the restrictions and assess the potential impact on the sales of those products. One way of assessing sales impact might be to run HFSS product placement trials in certain stores. An assessment of the impact on seasonal sales should also feed into this analysis where possible.
  • Consult with key brands and suppliers on, (i) the re-formulation of recipes to prevent certain products from being captured by the restrictions, and (ii) on opportunities for new, healthier products.
  • Embrace the changes in order to promote and help customers make healthier lifestyle choices by emphasising non-HFSS products. Consider which brands might benefit from the newly available promotion space, for example non-HFSS products in the alcohol (particularly the lo / no category) and health and beauty space.
  • Try implementing changes incrementally to prevent customer confusion.
  • This isn't the end for HFSS products - the strategy for the category just needs some re-examination. HFSS products could be placed in the middle of aisles, or single items could be moved to food-to-go areas and these new locations can be signposted to guide customers.

Actions to take when the new rules are in force:

  • Education is key - ensure employees are up to speed with changes to product placement and why such changes have been made so they can educate customers on the rationale behind the changes and, where necessary, guide shoppers to the new location of HFSS products.
  • Monitor the effects of the restrictions: how is the newly available promotional space being used; how do brands perform in aisle or on the back wall; how have buying habits changed in relation to HFSS products e.g. frequency, basket size, switching brands. This kind of analysis will be key to ensuring that the restrictions don't impinge on the bottom line going forwards.
  • Maintain an ongoing dialogue with customers - how do they view the changes, are there any areas for improvement and what have been the main adjustments in their view?  

Statistics

  • IRI analysis suggests that the new rules will have a £1.7bn impact across grocery and convenience channels (see here).
  • A recent GS1 article provided that:
    • 43% of businesses feel unprepared for the new legislation.
    • 33% of businesses have assessed their products to see how they are affected. 20% are unaware of the changes.
    • Over a quarter of businesses in the food and drink industry say that they will be negatively impacted.
    • 50% of shoppers buy HFSS products regularly.
    • Almost 66% of shoppers say that the position of HFSS products impacts their decision to purchase.
    • 68% of shoppers agree that regulations to tackle obesity should be introduced.
    • A quarter of shoppers would buy fewer HFSS products if they were only available at full price.

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