Pricing Is Another Key Lever In The Sugar Reduction Battle, Says IRI

England’s health watchdog yesterday published new guidelines for the food industry aimed at significantly reducing the amount of sugar in a host of popular products. The report by Public Health England (PHE) focused on three levers for change – lowering sugar levels, reducing portion size and pushing healthier products. However, FMCG data and predictive analytics firm IRI believes that pricing is a key fourth lever that food and drink manufacturers need to address in the battle to reduce childhood obesity.

“We’ve known that the PHE’s sugar reduction programme has been coming for a while. Eventually all sectors of the food and drinks industry will be challenged to reduce overall sugar across a range of products that contribute to children’s sugar intakes by at least 20% by 2020,” said Dan Finke, Managing Director at IRI UK.

“While PHE has made it clear that lowering sugar levels, reducing product size or pushing healthier products are three key options for manufacturers, it is clear to us that there’s fourth spoke in the wheel: pricing. Promotions in the UK currently account for 40% of all expenditure on food and drink. Even though Government stopped short of legislating against the use of promotions, it is clear that use of promotions will need to reduce as they increase the amount of food and drink people buy by around one-fifth. Food and drink suppliers need to behave responsibly, which likely means a change in the pricing and promotional regime.”

Finke added: “Many suppliers have already been cutting the depth of promotions on offer to shoppers to help offset rising cost pressures. However, basic product pricing (on average across all supermarkets) has not risen in three years. As #Marmitegate highlighted, manufacturers can recommend pricing for their products to retailers but can’t control how much the retailers sell for. Retailers need to play their part too.”

Finke also said that innovation is important. IRI analysis shows that, in the UK, high sugar products are still a major contributor to new product development despite an increase in demand from shoppers for healthier food alternatives such as gluten free, non-dairy milk, juices and fortified waters.

Finke commented: “Suppliers need to work harder to respond to changing consumer trends. Changes to the way that a new mix of high and low sugar products are marketed and sold need to begin now. Analytics to predict, measure and then report on progress will be essential.”