Crunch Time: Kellogg’s takes the Government to court over new health promotion regulations

May 10, 2022

3 min read

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What's going on here?

US food multinational Kellogg’s is taking legal action against the UK Government’s Department of Health and Social Care. This comes following the announcement of new regulations preventing food and drinks that are high in fat, salt, or sugar from being overtly displayed in stores and online.

What does this mean?

The new rules, deemed to be part of the UK’s levelling-up agenda, come into force from 1 October  2022. They affect products which are defined by the nutrient profiling model (NPM) 2004-2005 as ‘HFSS’ – that is, high in fat, salt, or sugar. There are three key elements to the restrictions. The first stipulates that HFSS products will not be allowed to be displayed front and centre at store entrances, aisle ends and checkouts, as well as online on homepages. The second will see a ban on TV advertisements promoting unhealthy products before 9pm. Finally, restrictions will be placed on volume price promotions like “3 for 2” or “buy-one-get-one-free”.

 So, what is Kellogg’s arguing? The company has reportedly turned to the courts for judicial review of the regulations with the company’s UK Managing Director, Chris Silcock, claiming unlawful implementation. More specifically, it wants the formula for how HFSS products are calculated to be changed. The formula currently does not take account of the nutritional value of milk or yoghurt added to 92% of cereals. However, an unlawful formula is unlikely to be the only point of concern for Kellogg’s. The new measures are undoubtedly set to harm sales as cereal boxes get pushed to the back of many stores. Kellogg’s currently dominates the cereal aisle with a reported 38% market share and 10 of the top 15 cereal brands, such as Crunchy Nut, Coco Pops, and Special K.

What's the big picture effect?

This isn’t the first time the company has stepped foot in court to challenge health and advertising rules. In 2018, Kellogg’s confronted an advertising regulator and managed to reverse a ban on their Coco Pops TV advert which supposedly targeted children. This case garnered large amounts of criticism from health campaigners, the same ones now condemning Kellogg’s recent move. Caroline Cerny from Obesity Health Alliance describes the case as an attempt to avoid profit limits on “marketing their unhealthy products”.

The Department of Health and Social Care cites rising childhood obesity rates as the drive for the new rules. With breakfast cereals contributing 7% to the average daily sugar intake of children, how will this strategy help? The Government is relying on evidence which links food retail price promotions to influencing food preference and purchasing habits. The report claims that the bombardment of unhealthy promotions makes it difficult for families to make healthy choices.

On top of this, the statistics don’t look promising. Reports from NHS digital suggest that almost two thirds of adults in the UK are deemed overweight and over a quarter are classed as obese. Globally in 2020, the UK was ranked tenth in the world for the percentage of the population with obesity. These figures reportedly cost the NHS over £6bn per year, set to rise to £10bn by 2050. According to the National Child Measurement Programme, one in three primary school children are obese or overweight. The situation is so concerning that the Royal College of Paediatrics and Child Health considers it “one of the greatest threats” to children.

Whilst the Government hopes to halve childhood obesity by 2030, let’s consider how the market is already changing. A good way to predict market trends is by looking at investor activity. Perhaps it’s the pandemic that has made investors more aware of public health. Perhaps it’s the frightening statistics mentioned above. What remains certain is a growing trend of investors putting pressure on food giants – including Kellogg’s, Nestlé and Heinz – to deliver higher degrees of disclosure when it comes to nutrition.

Kellogg’s may have another success like it did in 2018, but what are the options if its challenge is unsuccessful? One option is to take the inevitable hit to sales whilst honing its marketing formulas to keep products catching the eyes of consumers. Or it can hone cereal formulas to line up with new regulations. Yet, the latter option may be another risk for sales if kids turn up their noses to sugarless, saltless, and fatless cereals.

Report written by James Evans

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