Last summer, the UK government announced its plans to tackle childhood obesity in England – and reducing sugar is the central aim. Food manufacturers have been tasked with cutting sugar intake by 20%, with the focus initially on nine categories. Dan Finke, the managing director of IRI’s UK arm, explains why suppliers should be looking at their pricing and promotional strategies to meet that target and to market a portfolio that may contain high- and low-sugar products.
While the headlines about the UK government’s plans to reduce sugar consumption in England have centred on the tax on soft drinks, food manufacturers are, through a voluntary target, being tasked with cutting the amount that is eaten.
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The strategy is initially focusing on the nine categories that the Government said “make the largest contributions to children’s sugar intakes” and it is not too early for suppliers to start planning their product, pricing and promotional strategies. Complex analytics will form an essential part of such strategising as manufacturers collaborate with retailers on reformulating the product mix.
Getting the pricing right
Promotions are a key part of the plans since Public Health England (PHE), the Government’s health advisory unit leading the sugar reduction programme, claims they account for 40% of all expenditure on food and drink and increase the amount of food and drink people buy by around one-fifth.
Our own analysis also shows, in the UK, high-sugar products are still a major contributor to new product development despite an increase in demand from shoppers for healthier food alternatives such as gluten-free, non-dairy milk, juices and fortified waters.
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PHE claims promotions increase the amount of sugar purchased from higher sugar foods and drinks by 6% overall and that the offers affect the purchasing by all socioeconomic and demographic groups.
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By GlobalDataIncreasing the price of sugary foods is one lever available to manufacturers. However, they could also take additional measures to make their foods healthier by reducing the size of the product or decrease sugar content.
In some categories, there are already signs of declines in the volume of high-sugar products and an increase in sales of low-sugar alternatives. More than 62% of all yogurts sold in 2016, for example, were labelled as ‘high sugar’, a reduction of 8% on the previous year, while volume sales of low-sugar variants increased by 12%. That is an encouraging sign and may well be driven by retailers who are keen to change the mix of products on shelves than by manufacturers.
Suppliers will need to work closely with retailers to keep their products on the shelf at a price that is right for them. More collaboration on pricing and promotional levels of reformulated ranges will be essential. Manufacturers will have their work cut out to put the best promotional and pricing recommendations to the retailer.
What to analyse now
There will be pressure on food manufacturers as to how, where and when they market their remaining higher sugar products. They will need to get their big data houses in order now if they want to ensure that their products are kept on the supermarket shelves later.
They should consider analysing the pricing of individual product ranges, as well as the influence their brands have on shopping trips and overall shopping basket purchases. If the brand was not available for example, would shoppers simply replace it with another product in the same category, or go to a different supermarket to buy it? Is the overall shopping basket mix healthy? After all, if, on average, a shopper buys a jar of jam once a month, that might overall contain less sugar than pasta sauces that are consumed five nights a week.
And what about promotions? These will likely no longer exist on the products that manufacturers decide to keep in the high sugar category. Instead, manufacturers will likely concentrate offers on low sugar items and smaller pack sizes that fall under the guidelines.
It is also likely they will require an extra layer of measurement to look at how their marketing and advertising spend is helping to achieve balanced sales in a new mix of high- and low-sugar products.
Ultimately, it is most likely PHE will focus on highlighting positive performers rather than naming and shaming individual manufacturers. That presents a vital window of opportunity for food brands. Changes to the way a new mix of high- and low-sugar products are marketed and sold need to begin now. Analytics to predict, measure and then report on progress will be essential.
The benefits of doing this now are not limited to being prepared to reduce sugar intake. Manufacturers can use such complex analytical exercises to improve collaboration with retailers, to maximise pricing and margins and to plan product availability in different store formats. It can also inform product development at a time when the health and wellness trend is gathering momentum.
If the industry responds well, and the actions begin to result in sugar intake reductions towards the 20% target set out by PHE, it’s less likely legislation will be required for the other categories.
The challenge for the industry is to spot these trends, measure their progress and develop products to meet consumer needs.
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