Prepare now for HFSS Impact on Promotions

First COVID, then Brexit – there’s no shortage of challenge in the grocery industry right now.  But while the industry is still reacting to these two major disruptions a third is already imminent – as the government plans to restrict promotions ongoing on High Fat Sugar and Salt (HFSS) products as early as April 2022.  Since HFSS products account for over 40% of food & drink sales*, this legislation will directly restrict promos on 40% of the market, create opportunities for the other 60% and disrupt the majority of categories that have both.  We believe the businesses that are prepared and pro-active will emerge stronger from this legislation, and this article will focus on Promotions while the next will look at the implications for Customer Terms. 

The proposed HFSS restrictions are reasonably simple – there will be a ban on secondary (off shelf) display and Multibuy promotions for all HFSS products.  This will apply in nearly all physical stores over 2,000 sq ft along with a corresponding ban on ‘equivalent’ online locations such as homepages, landing pages and checkout pages.  The definition of HFSS products is achieved using a nutritional scoring system that’s easy to use and widely available, and the government have recently been encouraged by news that the soft drink sugar tax has reduced sugar consumption by 10%. The timing of April 2022 is being hotly contested by some leading retailers and suppliers, but the most likely outcome would be a delay by a few months rather than a cancellation.  And with Tesco committing to reduce the proportion of HFSS products they sell from 42% down to 35% in 2025* it seems as though retailers are already anticipating the impact this will have on HFSS categories.

So what does this mean for HFSS brands & products?  The impact will vary widely for

High HFSS Categories, such as Confectionery, Chocolate and Crisps

  • These categories will lose all their off-shelf display space and likely see category sales decline in the short term, due to the reduced visibility and change in promo type. 
  • There will be significant sales gaps for off-shelf only events, such as Easter Egg displays, and Xmas chocolate tubs

Mixed HFSS Categories, such as Soft Drinks and Ready Meals

  • These categories will see some complex disruption, as the standard ‘2-for’ promotions across all variants on display will halve in size when the high sugar variants are relegated to a different promotion mechanic off shelf.  This not only reduces the sales available from the display but will split some brand activations permanently – think Diet Coke and Coke Zero together on a front of store display, while red Coke is left loitering on shelf.

Low HFSS Categories, such as Pasta, Dairy Alternative drinks and Tinned Goods

  • Historically these categories may have struggled to get display space – this is about to change!  Not only do the promotion plans stay the same but the higher opportunity for display will need both planning and funding

For many categories the Multibuy is an effective promotional mechanic, so when it is banned we expect a range of options to replace it, including

  1. TPR Price Promotions – these are the closest mechanic equivalent to multibuys, and the easiest change to make for suppliers and retailers
  2. EDLP pricing – (ie convert all promotion funding to support a lower everyday price point).  This is attractive for retailers due to pricing pressure from discounters and could be made easy if promotion money is funded on invoice already, but is a significant watch out for Impulse brands where this mechanic has historically been less effective.
  3. Link Deals – expect to see an increase in dual shelf locations for a range of new link deals, similar to the current meal deal model
  4. Creative feature space – expect to see aisles with more mid aisle display areas that abide by the letter of the law, but provide brands with feature space such as the one in Boots below:

We believe there are 4 key actions for businesses to take now to prepare for this transition

1. Updated Promotional Insights

All promotional plans are only as good as the insight behind them – and now is the time to ensure that your understanding of past performance is fully updated and robust.  Knowing the relative impact of different levels of discount levels and display is crucial to modelling a future plan, and there is also the chance now to trial some new combinations in the coming months.

2. New Promotional Strategy

The year of 2022 demands an insight-led, bottom-up promotional strategy more than any other year. A simple ‘copy paste’ from 2021 will not work, particularly for the high or mixed HFSS categories that will see major changes in display and promotion types.  Which products are affected by the legislation in your portfolio?  How will your brands cope with ‘split’ promotions across different HFSS levels? How does the funding change? How will your sales forecast change?  If your category is going to lose 10-20% of sales from HFSS legislation, how do you emerge with a higher share?

3. Review shelf space for top-selling lines and categories

Some lines can achieve a 4x or 5x uplift with a standard promotion and only stay on sale due to the extra product space they have on display.  When this display is banned – brands will either need to reduce the uplift by using a weaker discount, or allocate a greater share of the everyday shelf to best-sellers so they can still be promoted, with a corresponding impact on NPD and smaller skus.  The Category Management team will need to work closely with the Promotion Management team to ensure your brands get the optimal balance of uplift and availability when promoting from the shelf.

4. Robust Tools and Resources

This is the time to correct any under-investment in promotions management.  Do you have the right tools and systems to get useful insights out of past events, and do you have the manpower with the headroom to capture and use the insight?   In an ideal world your sales and insights teams have the resources at their fingertips and the time to prepare thoroughly ahead of 2022.  For those businesses that have not run any promotional research for a while, there’s never been a better time than now to draft in some extra resource to plan and prepare, to keep a competitive edge.

At the moment many see the impact of HFSS restrictions as mostly negative, however the brands that emerge stronger will be the ones that prepared for the transition and met the challenges head on.  If you would like to discuss how Sellex can help you prepare to win, please contact us using the button below:

* Tesco report current sales of ‘healthy foods’ is just 42% as of March ’21, see their commitment to grow this at