View this email in your browser

Retail by Email - Issue 483 - HFSS

HFSS to be cancelled?

After a couple of weeks hiatus; we are back looking at HFSS and the impact on the food retail sector at large.

However, it appears that the government are going to cancel this legislation, alongside the wider promotional impact (IE no volume driving multibuys).

Whilst headlines have centred around the multibuy ban being the key element to this; in reality, the space/layout changes are the key challenge.

If it is to be cancelled this week; then it will represent a marked climbdown from the new administration.

The multibuy ban was already cancelled of course, given the cost of living crisis. But the challenge around the locations was unchanged, meaning that stores are unable to display HFSS products in key locations from October 1st.

In store, you may have noted these flat ends appearing in store; this is so stores can not infringe the HFSS rules. The challenge with HFSS is that promotions capture the attention, but the space related requirements are significant also.

It’s the biggest change to anything we have seen in retail and will drive the costs for retailers up significantly. In terms of the cost to fill (IE not as much secondary space permitted for seasonal product).

The “flat ends” mean that retailers are “hiding” unhealthy products in the aisle via hotspots; which reside in the main aisle itself.

We have seen some of the work in aisle; with sponsored bays in vogue in Tesco notably, with signage also highlighting the moves. There is nothing more frustrating for customers than the moving of products around, period.

Mainly because they assume that products are moved to encourage the customer to spend more (perhaps sometimes this is the case, but not here).

The key challenge for retail is how to trade seasonal events, the majority of HFSS products are as you would imagine - Chocolate and Cakes. However, others are more subtle, some fresh Pizza’s are allowed on the end, others are not.

So for seasonal events such as Halloween, Christmas and Easter too, alongside others. It becomes a challenge to find the space to trade “bulk lines” when the priority space (ends, front of store etc) can’t be used.

So it means more replenishment and more looking around for customers. Indeed there is absurdity in the regulations, due to complexity. Anything made “on site” in a Bakery etc is exempted, because the nutritional information can’t be known.

So whilst the Chocolates are disallowed, you can then site a lot of Doughnuts in the store doorways.

Controversy if you are an independent shopkeeper, if your store is over 2k sq.ft then you are included in the restrictions. Even if you are part of Nisa (eg) then you’re also clobbered.

Retailers will manage of course, the industry is nothing if not resilient, but was it necessary at all? We will have to go deeper on HFSS is the ban remains in situ.

There are rumours that it will be cancelled; indeed the multibuys (headline grabbers) but one would have to assume the location restrictions too. Especially since the Sugar tax was also then mentioned, even though that has been low on the list of priorities for many in retail.

If it is, then the changes can be reversed, but millions has been spent on this exercise on stores up and down the land. Not to mention the change in commercial agreements that will take some time to adjust to also.

Even though the multibuy ban was delayed for a year, Tesco and Sainsbury’s said they’d still proceed as if there was a ban.

Whereas other retailers like Morrisons said they’d retain the ability to offer multibuys because that’s what their customers wanted. Albeit they’d have to walk the store to find them.

For now, we’ll have to see but the millions spent re-arranging stores perhaps sums up the government’s reign. If that’s up in smoke because of rules that were extreme and indeed, no one has ever gone as far on before.

Perhaps it’s an exercise in understanding what’s possible and how the change in shopping habits may move retailers away from an overload of deals. That said, the industry had done away with BOGOF (for the large part / 99%) and as ever, they have to be customer led.

It feels as though there are better ways to attack a growing obesity crisis than policing promotions and where shops put the product…..

Because enforcement came down to trading standards and they’re hardly blessed with resources now.

But any regulation is on to a losing battle when it prohibits alcohol free G&T cans from a 3 for £7 deal & featured space because of the sugar content, but allows the alcoholic G&T cans because it’s an alcohol based drink first and foremost…..

Given the harm that drinking does, both to excess and over the long term? Yet entirely left alone in the HFSS rulebook. Baffling.

Hopefully regulation will be canned so retailers can get on with trying to serve the customers, manage inflation and manage their cost base too.

A customer base that is now incredibly nervous (if they weren’t already, any goodwill from the energy cap is up in smoke…) about the future….

More to come here; we’ll have a fuller look if it rolls out, but they’ll need to make a call quickly one would suspect. Especially as everything else bar the HFSS location based element had been delayed anyway.