Industry TalkRegular Industry Development Updates, Opinions and Talking Points relating to Manufacturing, the Supply Chain and Logistics.
HFSS rules may officially be delayed, but they’re not going away
Jamie Oliver may have grabbed the headlines recently with his opposition to the delay in legislation restricting HFSS (high fat salt and sugar) products and multi-buy deals, but this wasn’t the full story. Several supermarkets are ploughing on with the proposed multi-buy ban, nevertheless. And a key part of the legislation – where HFSS products are placed in stores – will still come into force as planned in October.
The changes being implemented will leave big gaps to fill; IRI research suggests that an estimated £1.1 billion of sales are at risk across supermarkets. It’s crucial therefore that retailers not only come up to speed quickly on the changes they need to make in order to remain compliant in the years to come, but that they understand how best to adapt their existing pricing and promotion strategies.
With foods such as chocolates, crisps and confectionery to be banned from aisle end promotions in October, retailers need to urgently consider how they can reorganise their store and floor planning accordingly.
Between now and Halloween, retailers need to re-think how they will achieve the sales boosts that usually come from trick-or-treating sweets and are followed closely by Christmas chocolates and then Valentine’s Day gifts.
It’s a tough act to follow. These seasonal promotions are often found in prominent locations in stores, such as aisle ends, checkouts and store entrances, so typically prove to be a big draw for shoppers and drive revenue up for retailers. Seasonal promotions will also run for months at a time – Easter chocolates can usually first be seen on the shelves in January, for example.
So how can retailers best fill the gaps left at these key points around their stores? Are there any other categories that they could be promoting as a replacement to the usual Halloween treats, that are still tied into seasonal celebrations? How to make a good margin on the remaining HFSS products on shelves without the benefit of promotions?
Technology can help. Using analysis and predictive modelling, and by focusing on promotion planning, loyalty data and planograms, retailers will have the tools they need to turn the new HFSS regulations into an opportunity instead of a threat.
A new look at promotions
By drawing on historic data and applying predictive models with the help of AI, retailers can see which products have responded well to promotions in the past and also predict how they are likely to respond in the future. This analysis can include factors such as how profitable a particular product was, or whether it attracted new shoppers or additional spending within a store. By analysing the dynamics between categories, retailers can spot the relationships between past performance and promotional activity and identify trends that translate into actions to drive sales, margins and customer loyalty. This will be key to filling the gaps on the Easter Egg shelf or the Halloween treats when HFSS foods can no longer be promoted.
Drawing on customer loyalty data
For those retailers implementing the changes to promotions now, they can turn to the wealth of data provided by loyalty schemes as they seek alternatives to tempt customers with. At a granular level, they can view individual transactions and follow a customer’s sales history to understand which items customers turn to if their normal purchases aren’t available or are not on promotion. Segmenting the customers into groups that display common behaviour is the key to making the right decisions at a store level and to decide how to best target these shoppers in alternative ways. That might include strategies such as reducing the number of high-salt crisps they stock and instead focusing on alternatives that are purchased by the most important customer groups, with one of these options always on sale.
Planning the right layout
Finally, retailers need to address the question of how best to use promotional shelf space. What to stock in those aisle ends and checkouts now that sweet treats can no longer occupy them? Once again, decisions about store and floor planning should be led by the data. Which healthier alternatives are likely to work well in a promotional space and tempt customers into a purchase? How can categories be rearranged to ensure that lost HFSS sales may be recouped elsewhere?
The grocery store of the future will look very different by the time we get to next Valentine’s Day and Easter. But the retail sector is creative. With the right use of data, stores will still be tempting customers through their doors and helping them to make purchases. We may well see that HFSS regulations will drive innovation as well as improving our health. So change won’t simply consist of the Easter Bunny offering you a carrot.