A new report claims plans for a crackdown on HFSS promotions will cost suppliers £700m a year, quadruple the figure given in official government estimates.
Research by independent consultant Aldwych Partners, commissioned by the FDF, claims the impact on retailers’ profits could be even bigger and warns of “massive” repercussions in the form of higher prices for consumers.
The report found a series of “significant flaws” in the data used to underpin the proposals, which it says vastly underestimated the impact on the industry.
The government consultation on its plans, which closed this month, set out proposals such as a ban on volume and multibuy promotions, as well as consulting on plans to end HFSS promotions at checkouts and on the end of aisles.
Opinion: Why is the HFSS promotions ban moving forward despite flawed – or missing – evidence?
Aldwych Partners founder Andrew Taylor’s report claims the impact assessment published by the government in January is full of errors, including relying on net profit margin rates instead of gross profit margin as the basis for its calculations, which ignored major fixed costs for manufacturers.
He claims that had the correct figures been used, the annual impact of banning end-of-aisle HFSS promotions for retailers would be a £500m profits loss, compared with the government’s £27m estimate.
For suppliers, the total lost profits at stake from the proposals was around £700m, rather than the £175m estimated.
Taylor’s report goes on to accuse the government of ignoring losses in consumer surplus, the impact on upstream suppliers and the costs for manufacturers adjusting production. The government figures “lack any real effort to think through these issues,” he said. “They are clearly a part of the case for the restrictions, not a balanced assessment of their likely impact.”
FDF chief operating officer Tim Rycroft added: “The government’s figures seem to have been plucked out of thin air and based on an appalling lack of evidence and wafer-thin assertions.”
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