First it was COVID-19, then it was Brexit, and now looming is yet another treacherous landscape for the grocery industry to navigate.
As you may already know, the UK Government has publicised its intentions to restrict promotions on HFSS products (foods and drinks high in fat, salt and sugar) as early as April 2022, just a year from now.
There is no question that the ban is going to have huge implications for many brands and all retailers. Latest reports show that the impact of the UK government’s proposed restrictions on HFSS promotions in store could add up to more than £3bn.
Obesity is one of the biggest health problems the UK currently faces, with one in three children in Year 6 overweight or obese and 63% of adults in England are overweight or obese. To help tackle the issue, the Government has announced that it aims to halve childhood obesity by 2030.
To achieve this, it is taking drastic action.
The Government’s policy paper “Tackling obesity: empowering adults and children to live healthier lives” explains how many overweight or obese people in the UK want to lose weight but find it hard, in part due to the fact they face “endless prompts to eat”.
It mentions that in supermarkets, special offers and promotions “tempt us to buy foods that are not on the shopping list but are hard to resist”, adding “we are biologically programmed to eat and when we are bombarded by advertisements and promotions for food – it’s hard to eat healthily, especially if we are busy, tired or stressed”.
Recent research has shown that shoppers too feel strongly about the topic, with 66% of people supporting reducing price promotional of unhealthy food and 72% supporting restricting promotion of unhealthy food in prominent places like checkouts. A huge percentage (84%) of parents also agree that ‘characters’ should be removed from unhealthy sweets, confectionery and snack products.
Interestingly, the Government’s paper also highlights a strong connection between obesity and dying from Covid19 and suggests the pandemic spurred the momentum behind the ban, remarking: “COVID-19 has given us a wake-up call. We need to use this moment to kick start our health, get active and eat better.” It also states “we owe it to the NHS to move towards a healthier weight”.
It is not wrong. Obesity-related diseases cost the NHS a whopping £6 billion annually.
To work out what is a HFSS product, the Government is using a nutritional profiling model, and a surprising array of products come under the HFSS umbrella. This includes obvious culprits like confectionery, biscuits and crisps, but also less expected goods like breakfast cereals, pizzas, ready meals and yogurts too. The model, originally brought ini n 2004, balances less favourable nutrients “A points” (like energy, saturated fats, sugar and sodium) against more favourable nutrients “C points” (like fruit, vegetables, nuts, fibre and protein). Foods scoring 4 or more points and drinks scoring 1 or more points are classified as HFSS and must obey the Government’s strict advertising regulations.
Adrian Whitefoord, P&W’s Co-Founder, has over thirty years of experience in the creative industry, working closely with food and beverage national brands as well as retail brands on their strategic creative strategies, from commercially successful packaging design to promotional materials like in-store theatre and POS displays. He comments:
“The Government’s HFSS guidelines are a vital aspect of their campaign to encourage Britons to enjoy a healthier lifestyle and to lose weight, putting less strain on their bodies and, in turn, the NHS. The contacts we have spoken to in the FMCG industry support the initiative, but there is no question that it will greatly affect sales for many brands. The P&W team is in the process of working closely with a household name confectionery brand to help them take steps to mitigate the impact of the new measures as effectively as possible.”
As the UK is currently struggling financially, and much of the hospitality sector is still suffering significantly, the Government’s proposition to increase costs (not only for manufacturers and retailers but also ultimately for shoppers and consumers too) has not gone down favourably with many.
One report has suggested that the restrictions could cost the convenience sector alone more than £90 million, and the Government has been urged to rethink the store size exception from 2,000 sq.ft to 3,000 sq.ft, thus affecting fewer convenience stores. Data analytics and market research company, IRI, has also warned that losing aisle-end and front-of-store revenue could cost the biscuit sector £280m, the chilled dairy and desert sector almost £500m, and breakfast cereals more than £100m. That is on top of the £791m threat faced by the confectionery sector.
And a Public Health England report (‘Sugar reduction: Report on progress between 2015 and 2018’), published in September 2019, has claimed that the ban on promotions is expected to result in a £600 per year per family increase in costs (assuming they purchase the same products), not good for shoppers, many of which are already on tight budgets.
So, what are the proposed HFSS restrictions exactly? Fortunately, they are relatively easy to understand…
Essentially, HFSS products will see a ban on off-shelf displays and multibuy promotions. If the restrictions currently drafted are approved, this will apply in nearly all physical stores over 2,000 sq ft. The Government is not doing things by halves, there is also a corresponding ban on ‘equivalent’ online locations like website homepages, landing pages, and checkout pages.
For clarity, we’ve split out products into the three different HFSS categories and explained how the restrictions will affect each specifically:
High HFSS Categories (eg: Chocolate, crisps, sweets, biscuits)
• These categories will lose all their off-shelf display space. The includes any type of display or promotion that is not part of the regular store arrangement, such as cardboard POP displays and beverage tower stacks. Essentially, it means the removal of unhealthy items from prominent in-store locations, like standalone in-aisle promotions, gondola ends , and front-of-store.
• Promotional restrictions will prohibit retailers from offering volume promotions of HFSS products including: “BOGOF”,“3 for 2” and “50% extra free” deals.
• As a result, HFSS products are highly likely to see a drop in sales due to reduced visibility and change in promo type (so knowing how brands and brand consultancies can future-proof is going to be essential!)
Mixed Low and High FSS Categories (eg: ready meals, soft drinks, cereals, yogurts and fromage frais, pizzas)
• This category will probably see ‘2-for-1’ (or similar) off-shelf promotions on products that are Low HFSS, yet those that fall within the High HFSS category have a different promotion mechanic on-shelf. The impact of this will probably be a reduction in sales and possibly, consumer confusion. For example, Pepsi Max and Diet Pepsi may be merchandised together in an off-shelf display at the front of the store whereas regular Pepsi will be relegated to the Soft Drinks aisle.
Low FSS Categories (eg: tinned goods, pasta, many fresh vegetables)
• Historically these categories may have struggled to get display space, but we think that this is likely to change. Not only can the promotion plans for these products remain, but there is now an exciting opportunity to display these products with ingenuity…..
So what can YOU, as a brand manager, do to take action now and prepare your brand for the inevitable ban?
2022 is going to demand a promotional strategy that is insight-led, strategic, and innovative. Particularly for the high or mixed HFSS categories, there will be MAJOR changes in display and promotion types and you will need to work out logistics in terms of which of your brands/products are most affected, which promotions will work the best and what your sales forecast will now be. It may be that product reformulations are on the cards (aka “tooth-kind” Ribena a few years ago).
No one can deny that the “multibuy” has proven to be very effective but when it is banned for HFSS products, what promotions might replace it? Retailers may resort to Everyday Low Prices (EDLP), an attractive option for them due to pricing pressure from discounters (but historically proved less effective for Impulse brands). We may also see more Link Deals (connecting different areas of store like current meal deal models), and Temporary Price Reduction (TPR) Promotions (the closest mechanic equivalent to multibuys, so the easiest adjustment to make) or ‘Rollback’ Price Promotions. However, perhaps most exciting from a creative perspective, we expect there will be more Creative Feature Space, mid-aisle displays that abide by the law whilst providing brands areas of the store where they can really stand out from competitor products.
Engaging with a design consultancy that has its finger on the pulse of what is going on within the industry and with the Government’s restrictions is going to be your best strategy in terms of defining a new creative approach to your brand’s in-store promotions. The POS units and in-store theatre formats relied on for years are now going to have togo back to the drawing board.
In summary, many retailers and brands are indeed seeing the alterations they are having to make to their promotional strategies as a huge negative. However, the brands that take on board the inevitable now and are prepared for the transition with plenty of time, will emerge stronger.
P&W is already working closely with a global brand house to provide innovative, creative solutions which remain honest to the consumers but efficacious to the brand, so rest assured that we have the expertise you’re after.
P&W can engage with your team to define a creative strategy that is in-line with your overarching brand strategy and future business objectives (perhaps including reformulation of products or even the creation of new SKU’s that are defined as ‘Low FSS’ by the Government?). We will work alongside you as your “creative arm” to share our expertise and create a resourceful promotional and packaging strategy for your brand that helps ensure it will thrive in the new retail landscape.
If you would like to speak to our Creative Director today about evolving your brand’s creative approach to its promotional strategy, get in contact today.
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