The High in Fat, Salt and Sugar (HFSS) legislation will be effective in the UK from April 2022. The legislation is expected to impact the promotion of more than 40% of the top 500 bestselling packaged food & beverage product lines in the UK. A recent study from IRI estimates that £1.7bn of sales are at risk per year across the market[1].

What is HFSS?

HFSS is the latest UK legislation in the Government’s campaign to promote a healthy lifestyle and follows similar legislation already implemented by other countries. It comes into effect from April 2022, after which price volume promotions on HFSS products will be prohibited, and restrictions will be placed on the areas of stores (both bricks and mortar and online) in which such products can be displayed. 

Why does the legislation present a risk to Consumer Goods companies?

We see four key risks as a result of the legislation:

  • Loss of revenue: As noted above, the financial impact on existing HFSS product lines is expected to be significant. Losing aisle-end and front of store revenue could cost (annually), for example, the biscuit product lines could lose £280m, chilled dairy and desert almost £500m and breakfast cereals more than £100m. That is on top of the £791m threat faced by confectionery product lines[2].
  • Ineffective or slow realignment of TPM spend: Promotions on food and drink in the UK are amongst the highest in Europe, with 40% of spend being on promotions[3]. A substantial proportion of these purchases are of HFSS products. How will the unused promotion budget be deployed to deliver the best ROI for the companies?
  • Competitive switch to low-fat salt sugar (LFSS) products: The LFSS market is expected to become much more competitive, favouring those with the fastest go to market strategy. Brand loyalty may suffer, as consumers trial the LFSS alternatives to their traditional product choices. An increasing array of LFSS alternatives also has the potential to increase costs for incumbents (new formulation/ recipes, changed ingredients, changed ways of manufacturing, labelling), as they are forced to react to changing customer expectations, further impacting profitability.
  • TPM compliance failures: HFSS Compliance failures may result in improvement notices and monetary penalties. As well as the direct financial impact, these may adversely impact the brand image[4].

What should organisations be doing?

We believe that for Consumer Goods organisations, it is imperative to have a Trade Promotion Management (TPM) action plan ready to effectively mitigate and, potentially, even capitalise on the risk posed by this legislation. This legislation also presents a lucrative opportunity for Low in Fat, Salt and Sugar (LFSS) alternatives being positioned to replace some of the market share currently held by HFSS products.

Your organisation needs a technology enabled strategy to effectively mitigate these risks, that encompasses both the holistic management of end-to-end TPM and the rollout of LFSS alternatives from back-office to field reps, through to retail execution in an agile manner. Such a strategy will support your organisation in:

  1. Ensuring legal compliance for topic of trade promotion:
    • Plan and Segment for compliant outlets by embedding HFSS rules.
    • Make simple to run relevant promotions in the right location and within the guidelines
    • Allow field reps to effectively check compliance during store visit
  2. Accelerating go to market strategy for LFSS alternatives:
    • Develop faster go to market plans across channels with consistent pricing, bundles and discounts
    • Experience total engagement – whether it is TPM managers strategizing promotions on desktops, or field reps executing the same promotions.
  3. Continuing high visibility product placement:
    • Enable mobile visit capabilities to make it simpler for sales teams and merchandisers to confirm product availability and visibility.
    • Embedded AI intelligence for big data analytics and to know about any out-of-stock products.
    • Close loop process between planning and execution with real time updates

 

[1] https://www.iriworldwide.com/en-gb/hfss

[2] https://www.thegrocer.co.uk/prices-and-promotions/hfss-promotions-ban-cost-could-top-3bn-data-reveals/648896.article

[3] https://www.gov.uk/government/consultations/restricting-promotions-of-food-and-drink-that-is-high-in-fat-sugar-and-salt/outcome/restricting-promotions-of-products-high-in-fat-sugar-and-salt-by-location-and-by-price-government-response-to-public-consultation#fn:19

[4] https://www.gov.uk/government/consultations/restricting-promotions-of-products-high-in-fat-sugar-and-salt-enforcement/restricting-promotions-of-products-high-in-fat-sugar-and-salt-by-location-and-by-price-enforcement#penalties-for-non-compliance

Would you like more information?

If you want to get more information about this insight please get in touch with our experts who would be pleased to hear from you.

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