Have Hancock’s HFSS rules hurt confectionery? Confectionery category report 2023

Matt Hancock is well-known for telling others to obey the rules. And we’re not just talking about the social distancing rules he broke while juggling his job as health secretary with an extra-marital affair in lockdown.

He also imposed regulations on how, where and when confectionery and other food and drink that’s high in fat, salt and sugar (HFSS) can be sold and marketed.

“I am determined to help parents, children and families in the UK make healthier choices about what they eat,” said Hancock in 2020 on announcing the HFSS regulations.

“We know as children spend more time online, parents want to be reassured they are not being exposed to adverts promoting unhealthy foods, which can affect eating habits for life. This will be a world-leading measure to tackle the obesity challenges we face. It will also address a problem that will only become more prominent in the future.”

At the time of his announcement, those regulations included a ban on featured space and multibuy deals in store, to be followed by the imposition of a 9pm watershed on TV ads and a total ban on online advertising for HFSS products such as chocolate and sweets.

“Parents want to be reassured children are not being exposed to ads for unhealthy food”

When HFSS finally landed last October, we got a watered-down version of what Hancock had promised. Retailers were still banned from putting HFSS lines in prominent locations such as aisle ends and till points, but doubts grew over rules on multibuys, pre-watershed TV and online ads. Those rules will now not come into force until at least October 2025, if the Tories win the next election.

And the rules that have come into force haven’t been backed by any serious cash. The Grocer revealed in May the government was providing less than £35k a year to Trading Standards in England – less than £250 per local authority – to police the rules. The Department for Health & Social Care also had no idea how many enforcement actions had been issued.

So, nearly a year on from the arrival of the HFSS display regulations, what impact have they had on sales of confectionery? Have shoppers really adopted healthier habits? And how have confectioners and retailers had to adapt?

If the intention was to bite a chunk out of confectionery sales, a first glance at the sales figures might suggest HFSS has been a roaring success.

“The total confectionery market has seen a 5.6% unit decrease in the last 12 months, driven by a move from shoppers to buy less units per trip,” says Mars Wrigley category development head Ted Collins, citing Kantar data [52 w/e 6 August 2023].

But Hancock should hold the high-fives for the moment. The impact of the economic decisions made while he was in government may be having a greater impact on confectionery. “Only 25% of the total unit decrease has been influenced by placement and promotional changes in store,” says Collins.

“The majority of the change is driven by the cost of living pressures currently being felt in the UK, driving shoppers to manage their spend more tightly.”

Treat mentality

Most industry commentators agree that soaring prices, rather than HFSS, have been the key driver of confectionery’s downturn over the past year.

And not all areas of the market are suffering. Gifting formats have weathered the storm. And “the core snacking categories are performing relatively well in the post-HFSS world,” says Aslı Özen Turhan, chief marketing officer at McVitie’s and Godiva brand owner Pladis.

“Shoppers have been met with unprecedented rises in costs in all aspects of life and treat-led categories have offered comfort as Brits turn towards them for small, affordable indulgences which provide a little pick-me-up. This means it’s far from doom and gloom for confectionery. It’s bought by 99.1% of UK households [Kantar] and demand isn’t expected to tail off any time soon.”

Research carried out for The Grocer by product intelligence platform Vypr also suggests the impact of HFSS on shopper behaviour has been muted, at best.

“Two thirds (64.8%) of people have noticed no difference in availability of confectionery since HFSS was introduced and 66% are still actively shopping confectionery on promotion,” says Vypr founder Ben Davies.

“Compliance varies a lot. In some retailers it’s terrible in FDSUs and gondola ends”

“This suggests the HFSS guidelines are not going far enough. Sales are down overall, but the squeeze from the rise in cost of living is having a much bigger impact than the HFSS guidelines in reducing sugar consumption. According to our latest Vybe tracker stats looking at how the cost of living is affecting shopping habits, 20% say they are shopping less overall.”

Non-compliance

This may not be entirely down to the rules. There is also a question mark over the extent to which they are being followed. “There’s a lot of non-compliance out there,” says one well-placed grocery industry source.

“Compliance in general is almost 100% in Tesco and Sainsbury’s but it varies a lot in others. In some retailers it’s terrible in terms of free-standing display units (FSDUs) and gondola ends. Some are being wilfully disobedient and selling promotional space.”

It isn’t always intentional. He’s seen one case of a retailer where “it’s clear that they’ve told store managers to f*** it and send people to head office if they complain”.

“But in other cases non-compliance is either down to misunderstanding or because stores are so understaffed people are just acting on force of habit,” explains our source.

There are also operational considerations at play. “At Easter, much of the stock is held on the shop floor because there isn’t the space in warehousing,” the source adds. “Because of HFSS, you couldn’t have pallets of FSDUs of Easter eggs at the front of store so you had people in store calling up and saying ‘send us more stock’ because they couldn’t stock so much in store. A lot of stores sold out.”

Then there are the smaller outlets that are exempt from HFSS regulations. “The HFSS regulations have contributed to reduced availability in multiple grocers which has led to an increased purchase within convenience channels,” says Steven Watt, MD of Rose Marketing, manufacturer and distributor of Candy Castle. “Despite the general downward industry trends, there has been volume growth of 3.6% in impulse channels.”

Still, regardless of exemptions and individual incidences of non-compliance, suppliers have been forced to adapt. “The biggest and most visible difference for confectionery is the lack of eye-catching displays and promotions on fixture ends,” says Watt.

Rose has adapted by mounting point-of-sale displays that pull confectionery lines away from the main fixture, but still comply with the rules. “We have invested in header panels, side fins and shelf wobblers for the Candy Castle novelty range,” he says. That seems to have paid off: Candy Castle is up 24% in value in the past year [NIQ 52 w/e 20 July 2023].

“Retailers are trying to recreate the excitement with promotional space within main fixtures”

Watt believes this also helps out retailers, who are “trying to recreate the excitement with promotional space within the main fixture space in aisle.”

Innovation is also playing a crucial role in keeping consumers engaged. Value sales growth has largely been driven by price rises in chocolate and sweets, as suppliers grapple with rising commodity prices. But Özen Turhan at Pladis says brands have also been adding value through marketing and NPD.

“Introducing attention-grabbing new flavours has been part of the Flipz brand strategy since we first launched it in the UK in 2018,” she says. The brand’s “interesting flavour combinations” include lines that play on its American roots, like Cookies & Cream and White Fudge. “This has helped us secure its spot as one of the biggest snack brands to launch in the past five years,” she adds.

Reformulation

Of course, the most obvious way to get around the rules is to cut the amount of fat, sugar and salt in a product, allowing it to remain in the prime spots that are out of bounds for HFSS products. But suppliers have to be mindful these are treat categories.

“Taste is vital, so we continue to work hard to ensure any innovation we make does not compromise on the world-renowned taste and quality our consumers expect from us,” says a spokeswoman for Cadbury and Maynards Bassetts brand owner Mondelez.

In sweets, it’s been relatively easy to find the balance. Mondelez points to its non-HFSS Juicies range, which comprises Maynards Bassetts Wine Gums Juicies and Maynards Bassetts Sports Mix Juicies.

“Juicies contain fruit juice, natural colours and flavours and as a result, deliver a great taste with 30% less sugar than the standard equivalents, providing shoppers with that great-tasting, lower sugar confectionery option,” says the spokeswoman.

Fruittella brand-owner Perfetti Van Melle (PVM) is also launching more compliant lines. It expanded its Fruittella Curiosities range to include two new variants: Out in Space and On a Safari.

“Chocolate has much fewer options than other treats when it comes to reformulation”

“In keeping with the rest of the Curiosities portfolio, the HFSS-compliant jellies are made with 30% reduced sugar, real fruit juice, and natural colourings and flavours – all the attributes that make the core Fruittella range a must have for parents and youngsters alike,” says trade marketing manager Mark Roberts. “As health concerns remain a priority for all, we also recently refreshed the Fruittella portfolio to include Fruit First – soft gummies made with 35% fruit purée and natural colourings and flavours.”

Lower sugar chocolate

For chocolate, reformulation is easier said than done. That the 30% Less Sugar Dairy Milk line Mondelez launched in 2019 achieved sales of less than £1m last year after sinking by 47.3% is proof of this [NIQ 52 w/e 31 December 31 December 2022]. And even then, it was still classed as HFSS.

The only way Mondelez has managed to duck HFSS is by creating a new type of product: Cadbury Fruitier and Nuttier trail mix, launched in February.

“Pop and crisps brands have been able to capitalise on HFSS because manufacturers have found it easier to reformulate these products than chocolate, which is full of fat and sugar and tastes terrible if you take it out,” says our source. “The sugar tax came in years ago so soft drinks manufacturers have had a headstart. Crisps can be baked rather than fried and you can reduce salt and add things like wholegrain. Chocolate has much fewer options when it comes to reformulation.”

But Mondelez says it has more tricks up its sleeve, announcing in December it had patented technology that will allow it to develop versions of its bestselling chocolates with 75% less sugar.

“This is the latest development in the company’s goal to offer consumers more choice when it comes to snacking mindfully and managing their overall diet,” says the spokeswoman. “It is the first time that we have produced technology that may be able to reduce the sugar, fat and calorie content of chocolate and biscuit fillings to such an extent.”

A launch date is yet to be announced. In the meantime, other HFSS-compliant products are filling the prime spaces vacated by chocolate bars in store. “At a time where regulations and laws have seen HFSS confectionery move away from impulse purchase points, HFSS-compliant gum has had its time to shine, returning to pre-pandemic sales levels,” says Mars Wrigley’s Collins.

“The rise of fruity gum is showing no signs of slowing and provides room for innovation”

That’s helped gum value sales grow at a rate of 16.7% [NIQ 52 w/e 15 July 2023]. “Within this, fruit gum accounts for just under 30% of sales, overindexing on growth with sales up 17.9%,” says Collins. “This rise in popularity of fruity gum is showing no signs of slowing and provides room for innovation to recruit new shoppers into the fruity sub-category.”

PVM is looking to cash in with a summer campaign for the Mentos brand. “We continue to deliver high visibility for our brands in the media, most recently with the ‘Summer of Mentos’, which saw multi-touchpoint campaigns spanning from Mentos Fanta branded buses in Manchester to a collaboration with Capital Xtra that took Mentos Gum as far afield as Ibiza,” says Roberts.

Citing Circana data for the four weeks to 8 July, he says Mentos Pure Fresh Gum is outperforming chewing gum bottle growth by 47%.Plus, its limited-edition collaboration with Fanta on Mentos candy “has just been extended for a third time due to overwhelming popularity”, he says.

Health campaigners

Whether any of this has had any impact on Britain’s weight problem is not yet clear. But health campaigners generally support HFSS and are encouraged by the direction of travel.

“If there has been a decline in confectionery sales, I would say that has to be a good thing from a health perspective,” says Dr Kawther Hashem, co-founder of the Action on Sugar campaign.

“Of course, we were disappointed that the restrictions on multibuy promotions and advertising haven’t yet gone ahead and there has been so little investment local authorities to support enforcement. But from talking to the supermarkets it is clear there has been genuine investment in helping people to make healthier choices.

“End of aisle promotions are very influential, so it makes sense that this is starting to have an impact,” she adds.

Maybe Hancock’s legacy won’t be completely tarnished by his fumbling at the Department of Health (or the I’m a Celebrity… jungle) after all.