How will the HFSS regulations impact FMCG brands?

By Tom Hall, Director of Analytics and Technology, IRI

How will the HFSS regulations impact FMCG brands?

Many FMCG brands are at risk of being impacted by the UK Government’s recent ‘Better Health’ campaign launch, which sees a ban on promotions and displays of products deemed high in fat, salt or sugar (HFSS). Our recent analysis looks at Fat, Salt and Sugar but if we take a Sugar example first, analysis shows that with the new restrictions, if products with greater than 10% sugar ceased off-shelf promotions, £1.7 billion is at risk with massive implications for food and drink manufacturers and retailers alike.

The new guidelines revolve around the way HFSS foods are advertised and promoted by FMCG brands and retailers. New regulation includes a ban on television adverts before the 9pm watershed, the elimination of volume promotions, and the removal of unhealthy items from prominent in-store locations such as gondola ends and checkouts.

Moving HFSS products from shelves

Announced in late July, the regulations are part of the Government’s health campaign to help tackle obesity. According to Public Health England, more than two-thirds of adults and a third of children in England are overweight. Those figures are made all the more urgent following evidence that a higher BMI puts people at greater risk of serious illness from COVID-19.

The balance now for retailers and manufacturers is to ensure that this vital health strategy is manageable to encourage people to embrace a healthier lifestyle and to lose weight if they need to, while also managing business level concerns.

The Government’s nutrient profile, used to calculate the products that fall into the guidelines, means all biscuits, cakes, chocolate and confectionery – even low-sugar and low-fat varieties and including low sugar ranges will be banned from promotion positioning on end of aisle gondolas and at checkouts. Soft drinks are also barred if they have a sugar content of over 4.5%, whereas the cut-off for the sugar tax is 5%.

To determine how widely this will affect the industry, the IRI modelling team has assessed the impact on a range of categories and manufacturers. To illustrate, let’s look at the work we’ve done for one leading confectionery brand. Our modelling figures show that, for just this brand, off shelf display plays an important role such that 19% of their sales driven by display are incremental. With displays removed, this manufacturer would see a loss of up to 2.6 million KGs (against 2019 figures).

Whilst there are still some fairly sizeable questions around the details of the proposals, the potential scale of the impact on both manufacturers and retailers is clear and there is genuine concern across the food and drink industry. What’s not so clear, is exactly how to mitigate this challenge and navigate through the transition.

The power of data

Given the new Government regulations, detailed analysis of retail sales data, can help brands and manufacturers determine which products or areas of their range will be impacted and by how much, so they can determine how to move forward and what action to take.

Brands can assess how to adapt their retail strategy and instore execution to meet customer needs while still supporting the ‘Better Health’ campaign

How IRI can help you assess how HFSS guidelines will impact your brand

To help the industry through this transformation, IRI is putting its data analytics capabilities on the frontline, giving both manufacturers and retailers the ability to assess the impact.

IRI can help companies quantify the risk to brands and retailers and allow them to simulate scenarios to plan for the change. Statistical analysis of data can be built up from sku level analysis by individual retailers to help FMCG brands and retailers understand the bespoke impact of the new guidelines on their business. Simulations can be built to test a range of different scenarios, tailored to the entire category or portfolio.

FMCG manufacturers and retailers can get in touch with IRI today to discuss how your business might be impacted by the changes to HFSS promotions. We will leverage our market-leading data analytics capabilities to plot your roadmap through this new landscape.

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