Carl Carter, Marketing Strategy & Effectiveness Director at IRI
Last year the UK government revealed plans to restrict the advertising of products high in fat, salt and sugar (HFSS) both online and on TV (before 9pm when most children are likely to see them). This followed an earlier announcement to ban off-shelf promotions in-store of the same type of products, all of which will come into effect at the end of next year.
Since then advertising groups and brands have criticised the measures, saying the impact to child obesity, which is the main driver for this, will be minimal, but the impact to the industry will be huge. On the other side, we have health and children’s charities and campaigners, including Cancer Research UK and the British Heart Foundation, urging the government to push ahead and to “put health first and not be weakened by vested interests”.
This now looks set to happen with the ad ban plan revealed this week during the Queen’s Speech in Parliament.
Given that the measures will affect a huge number of foods, anything from frozen sausages to cupcakes, the impact is likely to hit food manufacturers hard. According to our data, we estimate that half of the total HFSS media spend (£384 million) in the UK will be affected – that’s worth £192 million to food manufacturers and retailers – and a 27% drop in ROI among impacted HFSS brands.
We know that advertising can be effective at driving sales for food brands. Well-executed and optimised advertising spend can nudge consumers towards one brand over another in the category, rather than into the category itself. So as a shopper, if you’re in the mood for something sweet and in the confectionery aisle, there’s plenty of evidence that having recently been exposed to advertising will increase your chances of adding that brand into your shopping basket rather than drawing you into a completely new category you’ve not shopped before.
So, now with plans afoot, what are the options for manufacturers?
The first option is simple; to accept the ban, which would mean manufacturers and retailers absorbing a potential loss of £192 million. More likely is the second option of brands moving TV advertising spend to post-watershed positions, but with a predicted loss of £112 million on sales. At this point, they must think about how much budget they can re-allocate to post-watershed TV and the risks of increasing competition for these slots.
The next option is to reallocate advertising spend to other channels, with a predicted impact (loss) on sales of £96 million. In order to do this effectively, brands need to know what their best performing channels are so they can increase investment in them as they reduce TV and digital spend. Spreading TV and online investment across other proven channels can be effective especially for smaller brands with smaller budgets that can look to OOH, print and radio opportunities.
But TV is a strong ROI driver particularly for larger brands and value sales will be lost. This is particularly true when launching new products, so with NPD high on food manufacturers’ agenda right now, without the power of TV and online, what media channels are going to deliver the most bang for their buck?
Advertising an alternative low fat, sugar, salt (LFSS) product is also an option since 78% of manufacturers have a non-HFSS product. This way, they can continue to advertise products online and on TV before 9pm and continue to build brand recognition. But there are risks of shifting advertising to newer products and those with lower recognition and penetration. We would expect to see lower returns and a lower halo impact across these brands.
Finally there is perhaps the most extreme option for manufacturers. This is to re-formulate HFSS products in order to be compliant. We have seen this before, of course when the so-called ‘sugar tax’ came into effect back in 2018 and well-known soft drinks brands reformulated their recipes to avoid the levy.
This could be the best option for manufacturers, with a lower impact on sales of -£30-75 million, but also the most difficult and perhaps the most controversial. While this would allow for a continuation of advertising of core products with the highest penetration, it is incredibly complex and could face consumer pushback, while some products simply cannot be reformulated.
Next year may seem like a long way away, but food brands and advertisers need to look at their options now and test channels and tactics to optimise new media strategies ahead of the regulations coming into effect.