With the new HFSS regulations rapidly approaching, the experts at SalesOut have taken a deep dive into the data to better understand the impact these hard-hitting new directives are likely to have for the Convenience sector. The unnerving topline stat is that, across this sector, we estimate £583m of annual sales are at risk.
HFSS explained in two paragraphs
To anyone who’s still unaware of these regulations, here's a quick resumé: HFSS stands for High Fat, Salt and Sugar and it’s a classification of products deemed to be “less healthy”’ by the Department of Health’s Nutrient Profiling Model (NPM). The regulations will hit the usual suspects like burgers, pizzas and fizzy drinks, but they also include a few surprises such as sandwiches and yoghurt.
The Government will be implementing a total ban on paid-for advertising online for certain HFSS products by the end of 2022. It’s also going to introduce a 9pm watershed on TV, as they are particularly focusing on products that appeal to children. As well as the advertising restrictions, HFSS products will not be able to run multibuys or promotions from secondary displays in-store, and this will have a particular impact on Convenience stores.
Convenience to be hit harder than Supermarkets
We should start this analysis of sales data by saying that Convenience stores rely on HFSS categories considerably more than Supermarkets. Our data divides Convenience stores into three types: smaller Symbols & Independents, Convenience Multiples and Petrol & Travel outlets. Symbol & Independent stores and Petrol & Travel outlets will be particularly threatened by the new regulations.
As you can see from the chart below, while 50% of food sales in Supermarkets are HFSS products, this figure is as high as 71% in Petrol & Travel outlets.
It’s worth mentioning that Convenience stores below the 2000 square feet threshold have a far lower sales risk from the HFSS regulations as they are exempt from Display Space restrictions.
Bigger stores face bigger issues
We can put this distinction into figures to give you a better understanding. The difference is less apparent when we look at volume promotion alone. The estimated annual sales risk for volume promotion for the smaller stores is £12.5m which amounts to less than 0.1% of food sales. The figure rises to £21m for convenience stores above 2.000 square feet, but this still only amounts to 0.1% of overall food sales.
However, the sales risk in terms of display space in the larger stores is a massive £549.9m. This amounts to 2.5% of food sales at risk, whereas the small stores are not touched by this part of the regulations. As a result, we would recommend retailers and manufacturers looking to soften the impact focus their HFSS planning efforts on display space planning in stores greater than 2,000 square feet.
Crisps facing the crunch
When we take a look at which of the top 5 food categories will be most impacted, we need to remember that the picture will inevitably vary across Convenience store types, sizes and retailers.
While bearing this in mind, it’s apparent that Crisps, Snacks and Nuts are in most jeopardy with 11.1% of total convenience sales at risk, closely followed by biscuits at 10%. Soft drinks face less disruption to their food sales with only 2.7% at risk.
Avoid the extra cost of penalties
As tough as the new HFSS regulations could prove to be for Convenience, there’s a big incentive to comply. Enforcement officers will be checking in-store to ensure all promotions abide by the new legislation. If they don’t, then an improvement notice will be served, and failure to respond appropriately will result in a fixed penalty of £2,500,
Start planning now
This promises to be the biggest change for the Convenience sector in decades and you need to do what you can to mitigate the impact on your business. The retailers who get a plan in place early, that has a solid foundation in data are most likely to come out on top.
To help you with this, watch out for our upcoming whitepaper that focuses on the active steps you can take to minimise the impact of HFSS on your business. It should help put you back on the front foot.
If you'd like to speak to one of our experts about how HFSS will impact your business, please get in touch.
