Changing the rules of the game
In the affected categories, on average, 22% of brands’ total sales are on display or multibuy. The ‘do nothing’ scenario is not a viable option for manufacturers. Our initial simulations confirm that depending on their promotional dependency, brands will show losses between 5% and 20%, which can result in millions of pounds.
Manufacturers that are directly affected by the U.K. HFSS regulation must be reactive and rethink their strategies. Those who are not directly impacted will look to see how they can gain some of that promotional space as retailers look to reallocate it.
So, what are the possible strategies and which one is the right one for your brand and category?
Making the right decisions
Reformulation is the first thing that comes to mind, but not everyone will be able to reformulate their products below the legislation threshold. In this case, do you look to move your display investments to temporary price reduction or everyday low-price strategy? Do you rework your pricing and packaging strategy? Or do you focus on innovation?
As we know, innovation is key for growth, and the new legislation calls for more health-focused innovations. But will health-oriented innovations help grow sales and market share? Moreover, how do you make sure they are good enough to justify the shelf space crunch and the rebalancing retail assortment and promotional display?
Regardless of which strategy you opt for, you need to make sure that your price and packaging structure is optimized, so you know which SKUs to prioritize and which innovations to launch.
Want to know more?
Book some time with one of our line and price specialists to take you through your options to tackle the U.K. HFSS legislation.
You need the right analytics to win the redistribution game
How do you know what pricing, promotion, and innovation strategy to apply when these new regulations go outside the historical data that you have available? A change as big as the U.K.’s HFSS will require a different approach. Traditional conjoint models are not good enough to tackle a regulation as big as HFSS, as they don’t handle the promotion aspect well. Econometric modelling misses innovative strategies and disruptive architecture changes that are implied with the U.K. HFSS legislation.
Using a simulated test market solution that combines the benefits of different modelling techniques allows for future price, promotion, and product architecture that provides a winning formula and is a perfect first step in determining your strategy to tackle HFSS.
The right strategy can realize substantial share gains, as manufacturers that are the most prepared and most able to anticipate their competitor’s moves will come out as winners in the new volume redistribution game.