Warning alert - HFSS is approaching fast! The legislation is due to come into force in October, but awareness is still surprisingly low. In fact, according to a recent survey, 44% of retailers and 54% of independent retailers haven’t even heard of it!
We recently ran our own poll at SalesOut and found that just over half of shoppers were aware of the HFSS changes coming in England. Interestingly, younger customers were much more aware (75%) while only 25% of over 65s knew anything about it. That suggests convenience retailers may see different levels of awareness with different groups when the legislation is introduced, and your strategies may need to vary depending on the average age of your customer base.
Main areas of concern
The three key areas impacting the channel are promotion, displays and media restrictions. In this blog, we’re taking a closer look at promotion and display, which will be the main areas of concern for the wholesale channel. It’s also worth noting that these restrictions do not apply to wholesalers who only sell food to other businesses.
The new rules will mainly affect convenience and retail with ‘free refills’ the only thing impacting foodservice. But also remember stores with a footprint of less than 2,000 ft² will escape having to make changes.
So, let’s dig a little deeper and explore the challenges and opportunities that lie in wait.
Promotions and HFSS
These are the rules you need to know regarding promotions, and what they’re likely to mean for you:
While price cuts are allowed, any variant of multibuys are not. So, using an example to help clarify the point, affected outlets can offer “£10 off a case”, but not "buy 10 cases and get 1 free" on HFSS products. This includes cross-category promotions where any product in the deal is HFSS.
So, what are the implications for wholesalers with promotions? IRI has found that Chocolate and Biscuits are likely to be the most impacted, as display makes such a difference with sales in these categories.
We are finding that price reductions are more common in categories like confectionery, with things like £1 sharing bags, so this can continue and we're unlikely to see promo-led changes here. Products typically sold on multibuy in convenience, such as sugary drinks at ‘2 for £2’, are sure to see volume drops on price reduction, so wholesalers should expect smaller volumes of these lines being purchased and a shift towards compliant drinks.
PMP to make a resurgence
PMP is allowed, but only if it's a price and not an extra percentage that’s offered free. So ‘£1 only’ is fine but not ‘33% extra’ or ‘2 extra bars’. This is where manufacturers will be impacted too as all packs like this will need to be phased out by October 2023.
We can definitely expect PMP to make a resurgence in affected categories with a fixed price point demonstrating value. Interestingly, a recent SalesOut poll discovered that 63% of shoppers found the messaging ‘Only £1’ more compelling than ‘2 for £2’. This suggests restrictions on multibuys will not have as much impact as you might have imagined. In our poll, however, Londoners bucked the trend with more shoppers preferring the ‘2 for £2 message’ which suggests you might need a split strategy for different parts of the country.
Meal deals allowed
Meal deals are allowed but only if they really do apply to a meal. So a sandwich with a pack of crisps and a drink is fine but bulk deals for things like pizzas, chips, ice cream and fish fingers will not be acceptable from October. As a result of all this, we expect to see a big change in promo plans within convenience.
Display and HFSS
There are two key changes here that will have a massive impact on convenience stores with more than 2,000ft². (Smaller stores are not affected.)
No HFSS products will be allowed on aisle ends, or on aisle within 50cm of the ends. As a result, convenience will be turned upside down and stores will need to test and trial new ends. We’d recommend things like sugar-free soft drinks, healthier crisps or snacks. Even non-food items like household medical products could be strong value drivers for aisle ends.
If they sell directly to the public (rather than just to other businesses), Retail will need to switch aisle ends too with no more big fizzy drink deals permitted. However, every cloud has a silver lining and this will be a great opportunity to encourage customers into using better selling lines for their feature spaces, such as tea, coffee, sugar-free drinks and even tuna.
The second big change on the way is that no HFSS products will be permitted within 2 metres of checkout or displayed at the front of the store. Convenience is sure to suffer and a big dip in customers purchasing individual chocolates and snacks has to be expected.
Instead, we’re likely to see a shift towards other convenience products such as jerky or healthy crisps, or even non-food items like medicines or tissues, as retailers help customers identify new HFSS-compliant products they can trial.
How can retail help their customers prepare for HFSS?
If retailers feel under-prepared for the arrival of HFSS in October, then you can imagine how much help customers will need getting their heads around it all.
When they do finally try to grasp the changes, your customers will appreciate as much support as you can give them, particularly those who are keen to make healthier choices. So, be prepared to highlight which products are HFSS compliant and which aren’t, and also to suggest product swaps for compliant SKUs.
Of course, compliant products are likely to be in greater demand once the legislation comes into force, so forward-thinking retailers will adjust their own range accordingly. Although, the expectation is that HFSS products will still sell and will continue to make up the majority of convenience value, so you certainly shouldn’t be thinking of removing key lines as your customers still want to purchase them.
So what can wholesalers do now?
Wholesalers who sell B2B need to educate their customers on the legislation and its likely impact. You should also let them know about the best alternatives to switch to from October and, importantly, you need to have the right range to offer your customers. SalesOut has a range of optimisation and customer targeting solutions to ensure customers get the advice they need.
Wholesalers who sell B2C have a different set of considerations. You might want to adopt split strategies for different parts of the country. You also need to have a good understanding of where you’re likely to be impacted most and adjust your range accordingly.
But, above all, you need to make sure your customers are fully prepared before the big day. It’s important to trial new promotions and store layouts as soon as possible, so you know what works best and you can hit the ground running in October. SalesOut is currently doing extensive work on price promotions and store layout trials, so we can definitely help with yours.
How can SalesOut help retail and convenience prepare for HFSS?
Our expertise across all areas of HFSS (it’s been top of mind with us for a while now) means we’re the right people to speak to if you have any questions about the new legislation.
We can provide you with a general consultancy service, supported by our wealth of resources and data. Our experts understand the impact you’re likely to experience and also how best to nullify negative consequences. More specifically, we can help you optimise price, promotion and range, as well as identify HFSS products with the most sales potential. We can also suggest alternatives for non-compliant products and help you design aisle ends and promo space to maximise your returns. We can even help you test different store layouts.
Speak to our team today
As you can see from this blog, HFSS raises so many questions. Having done their homework, our experts are perfectly placed to give you the answers you need and help you adjust, as seamlessly as possible, when the new legislation is introduced in October. We look forward to hearing from you.
