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The HFSS space race: we’re about to see the most significant change to instore product location in decades

By Joe Harriman, Strategic HFSS Consultant, IRI

 

This is it. After years of discussing, planning, and preparing, the HFSS shakeup of the UK Grocery market is now only months away. Thanks to the UK Government regulated HFSS (High Fat, Sugar and Salt) guidelines, many FMCG products may be looking for new homes this year. With products featuring higher levels of salt, fat, sugar moving from off shelf promotional spaces, the search for a new position in the aisles is set to become even more fierce.

Whilst the HFSS regulations may present a challenge to directly affected suppliers, they also provide an opportunity for non-HFSS products, such as store cupboard items. This dichotomy is driving the industry towards a race for space, as non HFSS brands jostle for lucrative positions on displays and HFSS brands look for in aisle space. So how do suppliers on both sides of the guidelines prepare for change? And how will this shake up impact retailers considering what to do with their store layouts?

Preparing for change

By now, I would suggest that brands and retailers have spent a significant amount of time trying to understand the regulations and who they will impact. I recently joined a podcast hosted by Food Matters Live in which Andrea Martinez Inchausti from the British Retail Consortium and Chris Noice from The Association of Convenience Stores shared their thoughts on why the new restrictions might be challenging to understand for many in the industry. Whilst there is still plenty of nuance, essentially, from October 2022, the changes will mean that any product considered to fall into the HFSS category cannot be included in volume promotions such as buy one get one free offers. Neither can they be included in certain promotional, “off-shelf” display space. This represents a significant change in how UK retailers must operate, with an estimated £1.7 billion in sales at risk per year.

Whilst there is still plenty of nuance, essentially, from October 2022, the changes will mean that any product considered to fall into the HFSS category cannot be included in volume promotions such as buy one get one free offers. Neither can they be included in certain promotional, “off-shelf” display space. This represents a significant change in how UK retailers must operate, with an estimated £1.7 billion in sales at risk per year.

Currently, HFSS categories account for 38% of display space. After the HFSS rules come into effect, this is expected to shrink to just 12%. This means that 26% of lucrative display space out of supermarket aisles will be up for grabs, allowing non-HFSS products to vie for that space.

Notably, many in the industry still don’t feel confident about their knowledge and are unprepared for the incoming changes. In an IRI survey at the end of 2021, we found that almost three-quarters of respondents (74%) felt underprepared for HFSS. Even more worryingly, over 84% of respondents admitted they had no firm idea of the potential sales impact on their business once these changes come into effect.

Navigating a new era in retail

So, what can brands do to help them prepare for these changes? The good news is that it’s not too late.

  • Promoting different lines
    For suppliers that manufacture a variety of product lines, there is an option to reduce the ranges that fall into the HFSS category and promote alternative lines that aren’t affected by the regulation.
    If you don’t already understand incrementality levels across your portfolio, then this is an urgent task.
  • Making changes to macro space
    We’re currently supporting several retailers trialling new store layouts, point-of-sale and promotional locations to guide these new store changes. These changes range from the simple to the bigger and more structural store alterations. Brands should also be scenario planning to not only identify products that can replace anything directly impacted by HFSS but how to optimise the overall display strategy.

    Changes to displays will inevitably put pressure on in-aisle space, promotional mechanics and investments, and manufacturers need to get on the front foot now. IRI’s Display Space Optimiser has been created to provide recommendations on how display space can be used to generate incremental sales from non-HFSS products.

    If we consider the chilled aisle, for example - we can predict significant change. Relocating space from chilled desserts to chilled pastry and pre-packaged cheese (which does not fall into the HFSS category) could generate increased sales if given more shelf room.

    As well as the obvious display space impact, we also anticipate significant changes in-aisle where the competition for space and new in-aisle promotional bays will be fiercer than ever before. Manufacturers will need to justify shelf space and retailers will need to make larger than usual range changes, including adding new healthier products to the category. To help manufacturers prepare, IRI’s Assortment Optimisation solution has been providing brands and retailers across the industry with an in-depth understanding of the incremental and transferable volume generated from each product across their categories so that they can make informed recommendations through a category-wide lens.

    I’m sure this goes without saying but as the space race approaches, it is crucial to ensure your business can adopt a strategy that works for you by thinking and planning ahead for the changes.

How will HFSS regulations impact your business?

Do you have a plan to navigate the impact of the HFSS regulations? Or even turn the industry change to your advantage?
Get in touch with our HFSS team to discuss your next move.

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