Despite millions of pounds being at risk from the upcoming HFSS restrictions, new analysis highlights some opportunities for retailers and brands in the convenience channel.
The UK Government will introduce new rules for high fat, sugar and salt (HFSS) products in October 2022. They will restrict the advertising of HFSS brands, volume promotions, and the display of HFSS products in-store.
Because smaller stores – below 2,000 sq. ft. – are exempt from the display space restrictions, many assume that convenience stores will escape the new rules. However, new IRI data shows an estimated £583m in annual sales is at risk in the convenience sector.
IRI previously announced that £1.1bn of sales in the major supermarket multiples are at risk due to HFSS restrictions, and now, with an additional £583m in convenience stores, this pushes the overall sales figure close to £1.7bn.
“Despite these figures, retailers and manufacturers should be reassured that there are options to mitigate the risks of HFSS and create opportunities, especially in the larger convenience format,” said Joe Harriman, HFSS Strategic Consultant at IRI.
“High selling HFSS products will be moving from display into the aisles and so the competition for in-aisle space will be tough for manufacturers. They firstly need to understand what impact HFSS restrictions will have on them right across convenience and then create an appropriate response. As a result of the HFSS restrictions retailers will need to make larger than usual range changes, and whilst this will mean that some manufacturers will find themselves needing to justify shelf space, others could be well placed to take advantage of the premium space opportunity that will become available to non-HFSS brands.”
IRI highlights that convenience HFSS risk will depend on store size. Its impact analysis calculates that it is the display space restrictions that will have a far larger sales impact than the volume promotion restrictions. As stores below 2,000 sq. ft receive exemption from display restrictions the impact of the HFSS policy on convenience stores will differ greatly depending on store size.
Stores above 2,000 sq. ft.
An estimated 35.7% of convenience stores (63.9% of convenience £ turnover) are above 2,000 sq. ft. and not exempt from display space restrictions. The impact in these stores is responsible for 94% (£550m) of total convenience sales risk from in-store HFSS restrictions and is where manufacturers and retailers should focus planning efforts.
Stores below 2,000 sq. ft.
An estimated 64.3% of convenience stores (36.1% of convenience £ turnover) are below 2,000 sq. ft. so the impact on these stores is minimal due to being exempt from display space restrictions. Being the only store type not impacted by the display space restrictions may lead to future opportunities for stores of this size.
Meanwhile, IRI highlighted that the shopper mission for convenience retailers differs from larger supermarkets and they rely more heavily on impulse categories.
The analysis shows that the impulse categories of Confectionery, Crisps, Snacks & Nuts, Biscuits and Soft Drinks are the most impacted categories due to having the most reliance on display promotions. However, the impact at a category level will vary across convenience retailers and store types (symbols, independents, convenience multiples, forecourts) and reliance on display sales of HFSS categories.
NAM Implications:
- An obvious opportunity for some suppliers.
- However, many of whom cannot afford to drill down to that level of coverage, post-Lockdown.
- Making it key to enhance supplier-wholesaler relationships…
- Fast…
- Meanwhile, for stores above 2,000 sq. ft., see the detail of the IRI analysis…
