On 1st October, legislation came into force in one of the biggest shake ups to the food retail industry in recent years. Rules banning multibuy deals on foods and drinks high in fat, salt, or sugar (HFSS) will come into force next year, but in the interim restrictions on the placement of less healthy products are now in full effect.

Retailers and wholesalers have been preparing for this date since the measures were first announced back in December 2020. And, while it may feel like the introduction of the regulations signals the end of this period of change, the reality is that it’s just the beginning.

Here, Lauren Whittaker, regulatory lawyer at Pannone Corporate explores the industry impact of the rules so far, what more is to come and how retailers can get ahead of further changes on the horizon.

What do the new rules say?

HFSS foods are those that are defined as less healthy in accordance with the Government’s Nutrient Profiling Technical Guidance. From 1 October 2022, stores are limited as to where they display HFSS foods and drinks, with the new restrictions preventing any such items from being displayed within two metres of checkouts or queuing facilities.

HFSS items are also banned from promotional locations such as at the end of aisles and store entrances. The purpose of the rules is to limit impulse purchases of these items, which will be largely confined to in-aisle displays.

Who’s affected?

The restriction on placement of HFSS food items only applies to stores with a floor area of greater than 185.8 square meters. Whether a wholesaler falls within scope of the new regulations depends on whether they are deemed to be a ‘qualifying business,’ which is defined as those businesses having more than 50 employees and which offer any pre-packaged food item for sale to consumers.

‘Consumer’ is defined in the Consumer Rights Act 2015 as, “an individual acting for purposes that are wholly or mainly outside that individual’s trade, business, craft or profession.”

However, this definition only serves to catch retailers selling to consumers and does not extend so far as B2B retailers, to whom the new restrictions do not apply.

The new requirements not only apply to physical stores, but also catch ‘online marketplaces’ which are defined to include software (including a website, part of a website, or an application) that is used to offer the qualifying business’s products for sale to consumers.

However, as above, providing that the retailer is supplying to businesses – and not consumers – it will not fall under the regulations. Whilst B2B wholesale retailers can continue to offer promotional offers to other businesses and symbol groups, those downstream businesses cannot relay the same offer to their consumers.

Are there any exemptions?

All retail businesses selling food and drink will be subject to the HFSS rules but there are some exceptions. For example, the government has exempted ‘micro or small businesses’ – those with under 50 employees – from the restrictions.

Stores that sell products that fall in to the HFSS definitions and who have 50 or more employees but are under 2,000sq ft, will also be exempt from location restrictions which includes things such as prohibiting the placement of HFSS products by areas such as the till. However, they will be included in the promotional restrictions as they supply to consumers. Therefore, they are not able to promote the offer in store or on any online platform to a consumer. However, this does not restrict the ability to promote offers on a business-to-business basis.

In terms of assessing how the legislation affects convenience store franchises, these businesses still fall under the product placement restrictions as long as they satisfy the store size and employee numbers requirements. This has prompted debate over the position of small stores that belong to a symbol group.

The new regulations do not serve to catch all retailers regardless of size or customer base. In addition to the above, specialist stores such as confectionary shops will not be subject to the new rules.

What further rules are on the horizon?

After many months of preparing for this year’s introduction of regulations, many retailers believe their job is done. However, whilst some restrictions are already in motion, additional measures will come into force within the next 12 months.

Additional restrictions are due to come into effect in October 2023 which will prohibit the sale of volume promotions to include a ban on multibuy and volume deals, such as 50% extra free or BOGOF, in categories that will be impacted by regulations. Pre-watershed television and online adverts for HFSS items will also be banned.

What steps can businesses take to prepare themselves for additional rules?

It would be prudent for any stores that consider they may be or currently are affected to start to make arrangements in preparation for the further rules once they come into force.

For example, retailers who produce own brand items may want to start considering reformulation of their recipes, to ensure that their products do not fall into the category of HFSS food items. We also recommend that stores abandon their volume promotions, despite that aspect of the regulations not yet being in force, in preparation for these changes when they do come into effect. New marketing strategies will also need to ensure they stand up to rules around TV and online advertising.

Correctly siting new promotional plans within the category space on the shop floor will also be critical for retailers over the coming months. Historically, a huge amount of the sale of these HFSS products has been through ‘impulse purchase’, so retailers are going to have to be creative in the category space they have, as they will no longer be allowed to promote their products in prime locations such as end of aisle and till areas. These changes give retailers the opportunity to be creative with the movement of space that they have in store and the opportunity to utilise this to promote those reformulated recipes and healthier multi-buy offers.

Shoppers will have to put up with a period of changing store layouts as retailers are exploring new display options but the new regulations offer stores the opportunity to break away from the norm and fill space in new and exciting ways.

Of course, current political unrest does pose a question as to whether there could be delays to further restrictions, but it is sensible for those affected to take preparatory steps now and well in advance of the changes to ensure that they are fully compliant.

 

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