The lowdown on HFSS

The upcoming restrictions on products high in fat, sugar and salt (HFSS) could lead to some of the most significant changes to UK food and drink retailers in decades.

The rules, set to come into force this October, will limit the placement and promotion, including digital and in-store promotions, of HFSS products, with the aim of reducing uptake of unhealthy products as part of the government’s strategy to tackle obesity.

“It’s estimated that up to 50% of convenience stores will need to comply with restrictions on location and display, limiting HFSS products’ ability to disrupt the shopper and drive impulse purchases,” says Oliver Crick, category development director at Coca-Cola Europacific Partners (CCEP). This could mean many will need to review ranges, and remerchandise – with some needing to update layouts.

A wholesale market report from Lumina Intelligence at the start of 2022 found 54% of independent retailers had not heard of the legislation. This may be understandable, given the thousands of stores that won’t be directly affected by restrictions, but the wider effect on suppliers and wholesalers means every convenience retailer should be aware of the potential impact on products and customer attitudes. “A lot of stores are exempt and can carry on as they have been doing, but they won’t be able to because there will be a shift in consumer tastes and behaviour,” says David Gilroy, managing director of Store Excel, a digital platform for independent retailers, and former operations director at Bestway.

“Suppliers will want to push products that comply with legislation, and that will permeate the supply chain to all retailers. I don’t think they will run twin strategies for affected and unaffected stores.”

HFSS – what restrictions does it enforce?

• Extra free and buy-one-get-one-free promotions will be banned
• Multibuys (two for the price of one) will be banned
• HFSS products will be barred from secondary locations in stores, such as gondola ends, store entrances and checkouts
• The legislation also prohibits the marketing of HFSS products on TV (pre-9pm) and online

Preparing for HFSS

Products targeted by the restrictions are important to convenience retailers – namely, crisps, confectionery, soft drinks and ice cream.

Many retailers are used to featuring a lot of these categories in gondola ends and around the till area, and are unsure how to prepare.

“It’s a huge fundamental change to our business, but we can’t sit down and work it out because we haven’t been given enough detail,” says John Stevenson, who runs three Nisa forecourts across Teesside and North Yorkshire.

“Traditionally, the runup to the till has been confectionery for the past 30- plus years.”

Gilroy says suppliers and wholesalers have an “education job” on their hands to help retailers. “Most of them have joint business plans with key suppliers and biannual supplier meetings. They will know what’s planned, and that should be giving signals and clues as to how the market’s going to be adjusted, and in so doing there’s an education job for the wholesalers to give the retailers.”

Steps are being made in this direction: the Association of Convenience Stores has released a guide for retailers to navigate the upcoming regulations, while Unitas Wholesale has confirmed it will launch an online tool later this year that will allow its customers to identify non-HFSS products. Unitas is following in the footsteps of fellow wholesaler Pricecheck, which launched its own guide last November.

Any retailers who think they will be affected should be in touch with their wholesalers and business development managers to see how they can best prepare.

Ranging and reformulations

Between now and October, changes to supplier ranges and wholesaler promotions will evolve. Some retailers are taking a reactive view as a result.

“We’ll wait until the eleventh hour before we make any moves, purely because of the amount of legislation in the past that has been delayed, and from a trade perspective we want to keep selling chocolate bars at the till for as long as we’re allowed,” says Jack Matthews, of Bradley’s Supermarkets in Quorn, Leicestershire. “I’ve never seen anybody sell apples at the same speed as chocolate bars, so, from a retail perspective, it’s a massive challenge.”

In some categories, retailers may not have to work too hard to remove HFSS products from affected areas. Lucozade Energy, Lucozade Sport, Ribena, Orangina and Lucozade Alert ranges are all HFSS-compliant and exempt from the new rules, says Matt Gouldsmith, channel director, wholesale, at Suntory Beverage & Food GB&I.

Similarly, Britvic has announced a cut in sugar content in six of its Rockstar energy drink lines to make them non- HFSS. Retailers should look out for similar reformulations in coming months.

Retailer view on HFSS

“We don’t have enough detail to commit to these decisions because they will inevitably involve new shelving, getting rid of gondola ends and turning them into aisle ends – it’s very difficult. Hopefully, in the next two-to-three months we should have something definitive to go from.

“In my mind, provided we know before July, that gives us enough time to make a bit of a plan. If we need to order new shelving and fixtures after July with the rest of the country doing it at the same time, that’s going to be a bit of a problem.

“There is an opportunity for naked food at the counter. We could have croissants or hot dogs, as long as they’re not prepacked, or a Costa-style cake counter at the front, or scooped ice cream.

“I was in Norway late last year, and in the 7-Elevens there, their counters are all food-to-go based, so maybe we need to look at Europe for a bit of a different counter. In the UK, we’ve always steered away from the fresh counter, we like stuff with a bit of a date on it, but we have to change our mindset with this change in the law.”

An opportunity for change

Amid rising energy bills, an unreliable supply chain and a precarious global geopolitical situation, the HFSS legislation can all too easily feel like an unnecessary means of making retailers’ lives harder.

One retailer Retail Express spoke to has made plans to reduce their shop floor size to less than 2,000sq ft to avoid having to adjust their gondola ends and till space. But for those who are unable to make that sort of change, there are ways to look at the legislation as an opportunity to evolve their store.

For example, Jeet Bansi, at Londis Meon Vale near Stratford- upon-Avon, sold 30 trays of eggs from a local supplier in the area near the till where he usually stocked jam doughnuts, making successful sales and a 40% margin. Meanwhile, Scott Annan, retail consultant at Blue Ananta, believes the legislation gives retailers more of an opportunity to carve out their own identity through proprietary fresh products – he cites Northern Irish convenience stores as being ahead of the curve in this regard.

“I was in Moran’s Centra Strand Road in Derry- Londonderry, and you don’t find HFSS products on promotional ends,” he says.

“All you find is fresh products, rolls, salads and sandwiches, and soups in the winter. It’s healthier, it’s proprietary and you can’t buy it anywhere else. With proprietary fresh, you can have margins from 80-100%.”

Inspiration

Some supermarkets have already begun trialling layouts for a post-HFSS landscape. Sainsbury’s opened a 2,293sq ft store with large signs featuring recipe ideas where gondola ends would normally be, giving the store a more spacious feel and encouraging more grocery spend. Meanwhile, in Tesco Extra stores in Leicester and Royston, gondola ends are now devoted to canned fruit and veg, fruit juice and even household categories such as toilet roll and detergent.

“We anticipate aisle ends and gondola fixtures being used in many different ways going forward, with 30% of convenience shoppers saying they would like to see their store using such space to place healthier products together, and 18% suggesting products on end of aisles and banner adverts being limited to only healthier products,” says Lucy Ingram, retail analyst at IGD.

Another key convenience category that will be untouched by the legislation is alcohol. Bryan Roberts, retail analyst at Shopfloor Insights, advises that retailers could follow in the footsteps of continental European stores and increase the alcohol representation on their gondola ends.

Additionally, products made on-site that are HFSS may be exempt, such as pick ’n’ mix (technically not pre-packaged) and freshly baked goods, although there will be more clarity on these products as the October deadline nears.

Who is affected by HFSS?

• Stores over 2,000sq ft will be affected by promotional and location HFSS restrictions
• Stores under 2,000sq ft but with 50+ employees will be affected by promotional restrictions, but exempt from location restrictions
• Unaffiliated stores under 2,000sq ft will be exempt. Symbol or franchise stores should get in touch with their symbol to confirm whether or not they will be affected

Expert view

John Dolman, shop design manager, SPEC Retail

“Our store designs all have to incorporate HFSS legislation, which is definitely changing the way we’re doing things. Ice cream freezers used to have an obvious place by the front door, but we’re kind of doing away with those, because when you start putting them on their own in gondolas, they take up a ton of space and it doesn’t justify it at all.

“I haven’t known a store design in the past 12 months I’ve done that’s incorporated a maxivision freezer. We’re now going back to putting ice creams into the regular ice cream display in freezer sections.

“We’re looking at the idea of ‘nesting’ products. A dedicated impulse or seasonal section that’s easy for shoppers to find in an area that is compliant with the new rules could be a way to mitigate the loss of sales.”

Read more HFSS news and advice for retailers