Adapting to HFSS: What can manufacturers do to respond?
Updated: Oct 22, 2021
As part of our 2021 UK & Ireland virtual revenue management forum, Ben Simpson – Revenue & Channel Director at Kellogg UK – presented a 5- principles strategy for successful RGM leadership through adapting to the new HFSS legislation. He emphasised on the importance of a number of tactics to manage the significant changes coming for the consumer goods industry over the next few years.
HFSS stands for high fat, sugar & salt, and the new regulations aim to clamp down on these.
Restrictions will be put in place in 2022 and 2023 for certain products classified within this category as a part of a government initiative to respond to the rising obesity rates in the UK. It involves a ban on volume-based promotions, certain product locations such as front of store and check out, and restricted advertising online and on TV. Although some businesses are not included - those with less than 50 employees or specialist retailers - the ban is still set to have a massive impact on many FMCG categories and their relationship with retailers, inherently their RGM strategy going forward.To tackle and adjust to the new legislative reality, Ben Simpson shared some of the strategies utilised within Kelloggs:
Accountability through cross functional leadership
Adapting to the new legislative changes requires an initiative to split the team across the company to look at the relative impact on each business division and to analyse it from a food, portfolio, commercial, marketing, customer and lobbying perspective. By utilizing this method of cross functional oversight, the leaders become more aware of the changes required based on the scale of impact on each aspect of the business. The company thus becomes more aware of whether it needs to alter its marketing plan, seek out new proactive partnerships ahead of the legislative change and enhance its relations with policy markets through constructive contribution. This ultimately creates opportunities through renovation, innovation, and a more precise focus on customer experience in the retail space in the new HFSS market landscape.
Driving penetration through E2E (End-to-end) brand objectives
Deciding on and maintaining an alignment within the business on how to deal with the newest legislative regulations is crucial for success. In Kellogg’s case, objectives are divided by consumption occasion, but can also be divided by brand or market, as long as there is a consistent strategy and mutual understanding throughout all departments from the manufacturing stage all the way through to the sales process, guaranteeing consistency from end-to-end.
Using analytics to create shared visibility
The rich analytics available in RGM must be utilised in a way that creates a shared visibility and a common understanding in the organisation. Analytics are crucial for navigating the changes associated with the new HFSS legislation. EPOS data, shopper research, case studies and a deep understanding of volume are all essential for making predictions about working under the new market conditions. The data can show the potential risks of losing the banned displays and how much each of them drives the percentage uplift compared to the mechanic alone. Along with that, a shared visibility allows everyone to understand consumer buying habits and keep an eye on the competitors and their innovation strategy. Viewing the data as a team and aligning on the assumptions on how the near future looks, prevents miscommunication and leads to a more successful plan for the upcoming changes.
The importance of the agreement structure and governance
All the principles outlined above contribute to the creation of a well thought out agreement structure that will effectively deliver the results agreed upon within the business. To create a successful structure, companies need to decide on consistent agreement principles for all of their retailers. To ensure clarity, clear definitions and a seamless reviewing progress are essential to track the entire development process so that any mistakes are recorded and analysed for the upcoming projects. Lastly, the agreement must be signed off by the right people in the organisation so that its legitimacy and relevancy to the newest legislation are confirmed.
In such a volatile period, where massive legislative changes are occurring, the principles outlined above are crucial for driving the best actions across all business functions. By applying them to the organisational strategy, companies can ensure that there is alignment in the overall brand objectives, while also leveraging analytics and structuring an agreement that delivers the required results and can be managed on an ongoing basis.
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