The HFSS legislation looms: How can revenue management help?
FMCGs are facing one of the biggest UK diet legislation interventions since World War II – the HFSS advertising ban. The aim of this legislation is to restrict the promotion of HFSS (High Fat, Sugar and Salt) products by volume and location, both online and in-store, with a scope that includes volume-based promotions, specific in-store and online locations, as well as online and TV advertising.
With the HFSS ban set to come into play by October 2022, manufacturers have a short period of time to prepare for a new approach to production, promotions, innovation and retailer discussions. By pulling the right revenue management levers, FMCGs can view the legislation challenges as an opportunity to evolve and innovate to grow. Of all the ways to tackle this challenge, revenue management has proven to be one of the most secure and the most impactful when it comes to delivering value in times of change. Here is how RGM can help to navigate the restrictions:
Harness your data to make informed decisions about your HFSS products
Data and analytics are crucial tools you need to harness in order to overcome the HFSS legislation. Data on consumer behaviour, market changes and your own business is necessary to understand the impact of the legislation on your HFSS products. First, teams must gain absolute clarity, and find a way to work from a single source of truth. The right revenue management tools are essential to provide this. Then, teams can discuss areas of potential risk, and make informed decisions around range rationalization, price changes and pack formats.
Revisit promotional strategy
To overcome the ban on volume-driven promotions, manufacturers have to radically change their approach. This is especially true for those selling products as parts of the impulse category, such as your typical ‘grab & go’ snacks. Many manufacturers have looked to reformulate their products, or shifted the focus to LFSS (low fat, sugar & salt) instead. The other option is to de-escalate on promo and hold on price.
With the right trade promotion management tool, promotional analysis and forecasting becomes a lot easier, as all data and predictions are mapped out and visible to the whole business. A clear picture of your promotions and ability to forecast them quickly will help teams to adapt in times of change and make more profitable decisions.
Create a compelling argument when negotiating with retailers
You may conclude that the quickest way to success will be implementing a cost price increase (CPI) and reducing the volume sold on promotions. In this case, this will involve important conversations with your customers to negotiate the price change. It’s crucial to do your research on how your new promotional strategy can fit within and benefit the retailer and create a story that presents the value for both sides. Negotiating successfully is an evergreen skill required to implement any new changes with customers – see our other content on negotiation here.
Innovate & reformulate
As an alternative, a number of UK brands are looking to reformulate their products in order to be HFSS-compliant. Many have already come out with new versions of cereals, crisps and others with less salt and sugar content to fit with the guidelines and secure that physical and online promotional space.
This strategy, although challenging, has the least impact on loss of sales according to recent research and can result in profitability growth over the years when unaffected by the ban. Reformulation will likely also increase customer satisfaction, as we see the consumer focus on health continue to grow as we emerge from the pandemic. Therefore, now is the right time to do the research, find out if reformulation is an option and consider investing into creating new non-HFSS products to add to your existing range.
Continue to build your revenue management capability. Find more resources for revenue management teams here with more articles, webinar replays and upcoming events.
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