HFSS cometh: here is what you need to know

Kirsten Reid, Impulse Category Management Channel Lead for PepsiCo talks HFSS, BNI and the future of snacks – with many tips along the way

Kirsten Reid

What is the general outlook for Crisps & Snacks?

Snacking remains a huge part of day-to-day UK life, with the average consumer snacking five times per day1. Within the convenience channel, Crisps & Snacks have continued to be a critical sales driver for retailers. Over the last five years, savoury snacks have delivered consistent value growth of +2.4 per cent2, with Crisps & Snacks being the second biggest segment at 44 per cent of snacking occasions3.

The savoury snacking category also performed well throughout the pandemic, with one in 12 baskets4 containing some type of savoury snack. Trips to convenience stores for savoury snacks are in growth year on year at 6.4 per cent5 and performing ahead of other Food & Beverages & Sweet Snacking6. Post pandemic, Convenience has also performed well: +6.8 per cent vs year ago, +3.4 per cent vs 2020 and +5.1 per cent vs 20197.

For retailers, this means the category is well positioned for growth. There is a real opportunity for retailers to capitalise on this and to see greater returns from savoury snacking, and our HERO 25 range of bestselling SKUs is perfectly positioned to help retailers maximise their Crisps & Snacks sales.

PepsiCo’s brands are iconic favourites for flavour and fun – but they were also in the crosshairs of HFSS. What has PepsiCo done to deal with the new rules and what advice does it offer?

There has been a lot of confusion concerning the upcoming HFSS rules, particularly regarding which regulations will be in force in 2022 and the impact upon retailers. Due to the legislation rules around number of employees and store size, our estimates show that the Convenience channel won’t be affected as much as Grocery. The majority of Convenience stores will likely be unaffected at this stage, especially since the government has delayed the promotional restrictions until Oct 2023.

There are a relatively small number of C-stores >2000sq ft and >50 employees (we estimate 20 per cent if looking at total convenience channel (excluding Tesco Express, Sainsbury’s Local, Little Waitrose & Coop) or 10 per cent if looking at Symbols & Indies, who will have to make changes to the location of Crisps & Snacks (outside of the main fixture) from October 2022. This represents a great opportunity for retailers to continue providing a balanced choice of savoury snacking options, catering to shopper demand for great-tasting products while also making gradual changes to meet rising needs for health.

The good news is that the Savoury Snacks Category is well positioned to adapt to the changing requirements through reformulation, and we are well prepared to support retailers through this transition. As part of our commitment to encourage shoppers towards healthier snacking choices, we will also be reformulating and innovating across our portfolio. The key to encouraging shoppers towards healthier choices will be providing a strong range of HFSS compliant savoury snacks that can complement existing core bestsellers, helping retailers to offer Taste and Health in order to deliver great returns for store owners.

What are your HFSS recommendations for retailers?

The key thing to remember for stores impacted by locations restrictions is that non-HFSS products can be placed anywhere in-store and can be merchandised where HFSS products were previously located.

For example, if you previously had a stand of Walkers Cheese & Onion this could be replaced with Walkers Oven Baked Cheese & Onion. The Walkers Oven Baked range is an ideal option for retailers, with the brand well-established and already popular amongst consumers, as proven by brand growth of +26.4 per cent vs year ago8. The range includes 2 of the top 3 SKUs within the ‘Better For You’ segment; Walker Walkers Oven Baked Cheese & Onion 37.5g, which is the number 1 SKU and Walkers Oven Baked Ready Salted 37.5g, the number 3 SKU.

It’s worth all retailers remembering that it is still permitted to stock core bestsellers and locate these in the main fixture. For affected stores, it is only the location of HFSS products in the restricted “off-shelf” location zones that is forbidden and instead would be replaced by non-HFSS alternatives. As a result, best-selling savoury snacks are still the priority for Main Fixture. In fact, 75 per cent of sales come from Main Fixture so this area remains a great sales driver for retailers looking to maximise category sales9.

How does HFSS address consumer health needs?

Our latest consumer research shows that enjoyment and health are both primary needs present across all occasions10. As we build towards HFSS regulations coming into force, we’re expecting there to be a growing demand from consumers and further requirements for healthier snacking choices. Retailers should therefore continue to stock their best-selling Crisps & Snacks, while starting to gradually introduce new products that offer health, flavour and enjoyment without any compromise. As part of our wider ambition to encourage consumers towards healthier choices, we’re set to add a number of reformulated products to our core range in this channel, with taste-led launches across some of the UK’s most loved brands.

We have a long track record of bringing lower-calorie, lower-fat and lower-salt options to our products. Having been leaders for such a long time in this space, we welcome the new HFSS regulations and the spirit in which they were created. With a portfolio that includes some of the biggest brands within the savoury snacks category, we are excited to embrace this opportunity and drive scale growth for the category.

As part of part of PepsiCo Positive (PEP), our strategic end-to-end transformation plan with health and sustainability at the centre, we have announced an ambitious 50 per cent sales target for healthier or lower-calorie products. With 30 per cent of sales coming from non-HFSS snacks and an additional 20 per cent for snacks that are 100 kcal or less, this will shift our portfolio in a way that gives consumers the chance to continue making smart snacking choices.

Can you explain the PEP Strategies for Growth?

We do expect the overall demand for snacking products that meet expectations of both enjoyment and health will only grow over the next five years and beyond. Coupled with brand as the number-three product choice driver11, we’re excited about the chance to work alongside the retailing community to drive sales of products that tick all of these boxes. Overall, though, the strategy for growth in Crisps & Snacks has to be by using a balance of HFSS (core range) and non-HFSS offerings. To balance this transition carefully, and avoid sacrificing sales of core best-sellers and overall sales, retailers should look to follow this advice:

  1. Drive availability & space of best-sellers in the main fixture

Looking at value sales rankings over the year, 250 SKUs deliver 80 per cent of sales12, out of approx. 3000 live SKUs available, so it is important to list SKUs that will sell through quickly and deliver the biggest cash return (with a combination of high POR and high rate of Sale).

We know from our Convenience path to purchase research that 75 per cent of Crisps & Snacks Conversion13 (purchases) comes from main fixture so this is the most critical selling space to get right because it is the destination in-store.

Tip: The majority of space in main fixture should be dedicated to best-selling core range. Continue to rationalise low rate-of-sale products or duplicates, and replace with additional facings to core best-sellers or taste-led HFSS-compliant innovation.

  1. Drive impulse purchases from the high traffic locations in-store e.g. Front of Store, Aisle Ends, Queue Systems, Till Points

Our path to purchase convenience research shows that 25 per cent of Crisps & Snacks conversions14 (purchases) come from other touchpoints in-store and shoppers are twice as likely to buy on impulse vs planned in Convenience vs total channel. In addition six out of 10 purchase decisions15 take place in-store and are influenced by seeing the product on display.

Top Up & Distress missions performed particularly well in this channel (+7 per cent 2021 vs 2019)16 during lockdown and there could be further opportunity for Impulse to take a greater share of these missions in the future by making sharing and multipacks more visible.

Tip: Existing core range can still be displayed in all parts of the store for the majority of retailers in this channel. It is only in a small number of stores where HFSS compliant Crisps & Snacks (those with an NPM score of less than four) need to be displayed.

  1. Taste-led healthier innovation is critical for long-term growth

Products that do not deliver against taste are unlikely to last the distance in this channel and may not deliver a competitive rate of sale. This is because enjoyment and taste is the biggest consumer need in 32 per cent of Impulse snacking occasions17 and even more important in Convenience than large grocery stores. Taste is the #1 product choice driver18.

Tip: When HFSS legislation goes live, retailers should make considered choices about whether all HFSS compliant products deliver against taste needs and assess the rate of sale the same as they would any new product.

We recommend starting with brands that are well-known to shoppers with a proven track record of delivering great taste. New products should ideally supplement core best-sellers and we recommend retailers replace tail products that deliver the lowest returns.

How can independent retailers best prepare their ranges and merchandising for BNI sales and attract more customers? What would your ideal store look like?

With shopper missions continuing to evolve, it’s never been more important for retailers to follow the needs of their shoppers and merchandise their ranges accordingly. Our research finds that 20 per cent of retailers intend to re-merchandise their savoury snacks fixture19, with one third planning to maintain a wide range of multipacks and large sharing bags20 and another third planning to increase the number of single packs21.

We can clearly see that retailers are taking the lead in adapting their ranges based on the needs of their shoppers. Through our portfolio of leading brands, we offer retailers savoury snacking options in a range of formats to help cater to their shoppers’ needs. Our Walkers DRIVE 25 range was created with medium and larger stores in mind that have the capacity to offer their shoppers a broader range of savoury snacks, featuring a mix of formats which can be adapted to suit individual retailers’ requirements.

1 PepsiCo Consumer Landscape study 2021 (Bolt) – All macro Snacking UK

2 AC Nielsen Total Impulse 5 Year CAGR MAT 23/4/2022 – Total Savoury Snacks

3 PepsiCo Consumer Landscape study 2021 (Bolt) – All macro Snacking UK

4 Kantar – Aggregated On the Go and Take Home Panel – MAT to 22/3/2022

5 Kantar – Aggregated On the Go and Take Home Panel – MAT to 22/3/2022

6 Kantar – Aggregated On the Go and Take Home Panel – MAT to 22/3/2022

7 AC Nielsen Total Impulse Crisps, Snacks, Nuts MAT to 23/4/2022 – CSN

8 AC Nielsen Crisps, Snacks and Nuts – MAT 23/4/2022 Total Impulse Value Sales Walkers Oven Baked brand

9 PepsiCo internal image recognition data Indies & Symbols 350 stores – P8 2021/P3 2022

10 PepsiCo Consumer Landscape study 2021 (Bolt) – All Snacking UK

11 PepsiCo Convenience Path to Purchase study 2020 – All Snacking UK

12 AC Nielsen Crisps, Snacks and Nuts – MAT 23/4/2022 Total Impulse Value Sales

13 PepsiCo Convenience Path to Purchase study 2020 – All Snacking UK

14 PepsiCo Convenience Path to Purchase study 2020 – All Snacking UK

15 PepsiCo Convenience Path to Purchase study 2020 – All Snacking UK

16 Kantar Missions – Total Food & Beverages Value Full Year 2021/2020/2019

17 PepsiCo Consumer Landscape study 2021 (Bolt) – All Snacking UK

18 PepsiCo Convenience Path to Purchase study 2020 – All Snacking UK

19 PepsiCo Bespoke Research commissioned in partnership with KAM Media | June 2021

20 PepsiCo Bespoke Research commissioned in partnership with KAM Media | June 2021

21 PepsiCo Bespoke Research commissioned in partnership with KAM Media | June 2021