Food (Promotion and Placement) (Scotland) Regulations 2025: business and regulatory impact assessment

Annex A: Methodology and Background Analysis

Introduction

The analysis in this impact assessment is intended to provide an indication of the potential scale and scope of impacts from the preferred policy. It should be treated as illustrative rather than predictive. The analytical approach utilities core modelling undertaken by SRUC and the University of Aberdeen estimating the impact of restricting price promotions of discretionary foods on sales and on total calories purchased, with valued benefits estimated using the Department of Health and Social Care’s ‘calorie model.’

This core analysis provides a robust foundation for assessing potential impacts. However, some elements require assumptions and adjustments to extend the base modelling to different and more complex options, such as the inclusion in the regulations of additional food categories used in the original modelling. These assumptions have been applied consistently and transparently to ensure the analysis remains a useful tool for understanding the potential direction and scale of the relative impacts.

The food and drink industry is a dynamic market, and it is not possible to predict with certainty how businesses and consumers will respond to the introduction of the regulations. For example, reformulation has not been included in the modelling, although there is emerging evidence that this has been deployed by manufacturers in response to similar regulations in England, as set out in conclusions from an evaluation by the University of Leeds. This evidence is relatively limited as far as behaviour change in consumers and businesses. These factors underline the need to interpret the results as indicative, while recognising that the assumptions used are reasonable and grounded in available evidence.

Sectors and Groups Affected

This section presents background data for the sectoral impacts presented in section 12. The primary impacts of the policy proposals are on subsets of the following sectors: Retailers (SIC 47); and Manufacturers (SIC 10).

It also includes the impacts on health (direct health benefits to individuals, impacts on NHS and Social Care costs); and government (costs of enforcement).

The following sections outline the scope of the sectors affected. Throughout, it makes reference to enterprise and unit level. Enterprises are the number of businesses operating in a sector, and units are the number of premises operated by enterprises, i.e. individual stores.

Retail Sector

It is assumed that the following retailer enterprise types will fall within the scope of the restrictions, based on their Standard of Industry Classification 5-digit code – Table 1. It is assumed that other than exemptions by size, the same businesses would be in scope irrespective of the products targeted or types of restrictions imposed.

(Table 1) Retailers within scope of restrictions by 5 digit SIC code

Food and Drink Retail

47110 : Retail sale in non-specialised stores with food, beverages or tobacco predominating

47210 : Retail sale of fruit and vegetables in specialised stores

47220 : Retail sale of meat and meat products in specialised stores

47230 : Retail sale of fish, crustaceans and molluscs in specialised stores

47240 : Retail sale of bread, cakes, flour confectionery and sugar confectionery in specialised stores

47250 : Retail sale of beverages in specialised stores

47290 : Other retail sale of food in specialised stores

47810 : Retail sale via stalls and markets of food, beverages and tobacco products

Non-food retailers

47190 : Other retail sale in non-specialised stores

47300 : Retail sale of automotive fuel in specialised stores

47620 : Retail sale of newspapers and stationery in specialised stores

Table 2 summarises the number of enterprises, by number of employees, from the Inter Departmental Business Register^[57] in these categories. Based on this we estimate that 5,500 Scottish retail sector businesses will be affected by this policy. There are 4,580 food-related enterprises and 920 non-food enterprises that will also be in-scope due to selling low volume of food items as part of their business. It should be noted that each business which operates under a franchise agreement as part of symbol group would still count as an individual businesses in these statistics.

Table 2: Number of registered retail private sector businesses in Scotland by sector, division, employee sizeband (by total number of employees in UK), 2024

Business Size	Micro (0-9)	Small (10-49)	Medium (50-249)	Large (250+)	Total Businesses
Food and Drink Retail	4,015	505	35	25	4,580
Non-food retailers	780	100	15	25	920
Retailers total	4,795	605	50	50	5,500

The costs to businesses of these restrictions will fall at both the enterprise level (the business) and the unit level (individual stores). Table 3 presents the number of units in scope for the policy based on the number of employees at each local unit. 9,185 local units are expected to be in scope for this policy. There are 7,120 food-related units, and 2,065 non-food units in scope.

Table 3: Number of retail business sites of registered private sector businesses in Scotland by number of employees at the local unit, 2024

Number of business sites in Scotland (split by number of employees at business site)	Micro (0-9)	Small (10-49)	Medium (50-249)	Large (250+)	Total number of business sites
Food and Drink Retail	4,885	1,925	255	55	7,120
Non-food retailers	1,320	690	55	0	2,065
Retailers total	6,205	2,615	310	55	9,185

The number of units for businesses of different sizes is presented in Table 4. This highlights that while there are only a small number of large businesses, those large businesses have a significant number of different units (i.e. individual stores) across their business. This is important when considering potential exemptions from restrictions if these are applied at the enterprise level rather than individual unit level.

Table 4: Number of retail business sites of registered private sector businesses in Scotland by number of employees in business in UK, 2024

Number of business sites in Scotland (split by number of employees in businesses in UK)	Micro (0-9)	Small (10-49)	Medium (50-249)	Large (250+)	Total number of business sites
Food and Drink Retail	4,045	680	225	2,160	7,110
Non-food retailers	785	160	95	1,025	2,065
Retailers total	4,830	840	320	3,185	9,175

Take home grocery sales

The proposed policy measures will have an impact on retailers’ sales and therefore profits. To calculate these impacts, we use reported data from Kantar that estimated the total value of take-home grocery purchases in Scotland at £11.8 billion in 2024.^[58]

Manufacturers

The impact of the policy on manufacturers in Scotland is also modelled. It is anticipated that restrictions will lead to a net reduction in sales of food, with the fall in sales of restricted foods being larger than the compensatory increase in sales of non-HFSS foods. This reduction will feed back to manufacturers.

There is limited evidence of the impact of the UK Government restrictions on location promotions of HFSS foods in England since their introduction in October 2022. However, early descriptive analysis from Kantar following the first six months of restrictions being in place in England noted apparent changes in consumer behaviour in the categories impacted by the legislation. For instance, in the 12 weeks to 19 March 2023, they observed a movement of £82 million away from HFSS products within the legislation categories, with £34.4 million of this moving to healthier non-HFSS alternatives. However, no assessment was provided on the impact on total food and drink expenditure.^[59]

Recent research led by the University of Leeds,^[60] using supermarket sales data from 480 stores, suggests that England’s HFSS product placement restrictions may have contributed to a reduction in purchases of in-scope products by 0.63 percentage points by weight and 1.19 percentage points by unit volume. Two of the three participating retailers showed a significant decline in HFSS sales, while one did not. The study did not assess changes in out-of-scope products, so potential compensatory purchasing effects could not be determined.

Again, following the structure above, Standard Industry Classification codes are used to define the manufacturers in scope that are likely to be most affected by the policy proposals.

Table 5: Manufacturers number of Enterprises, Scotland 2024^[61] (due to NOMIS data rounding some small values to zero, totals may not match sum of columns)

Industry	Total	Micro (0 - 9)	Small (10 - 49)	Medium (50 - 249)	Large (250+)
10520 : Manufacture of ice cream	30	20	15	0	0
10821 : Manufacture of cocoa, and chocolate confectionery	30	20	5	0	0
10822 : Manufacture of sugar confectionery	20	10	10	5	0
10310 : Processing and preserving of potatoes	0	0	0	0	0
10612 : Manufacture of breakfast cereals and cereals-based foods	5	5	0	0	0
10720 : Manufacture of rusks and biscuits; manufacture of preserved pastry goods and cakes	35	15	10	5	0
10850 : Manufacture of prepared meals and dishes	25	20	5	0	0
10519 : Manufacture of milk products (other than liquid milk and cream, butter, cheese)	10	10	0	0	0
10710 : Manufacture of bread; manufacture of fresh pastry goods and cakes	260	165	75	15	5
11070 : Manufacture of soft drinks; production of mineral waters and other bottled waters	30	25	0	0	0
Manufacturers in scope	450	290	120	30	5

Local government

To enforce the policy, there are direct costs to Scotland’s 32 local authorities in terms of familiarising their staff with regulations, and in terms of using time during visits to businesses to establish whether regulations are being followed. To help inform estimates and costing implication to local authorities the Scottish Government has worked with the Financial and Delivery Considerations Group to facilitate engagement between Scottish Government, Food Standards Scotland, local government and enforcement professionals to support effective enforcement of the policy. This Group was reconvened following a decision on the scope of the policy to help finalise costing estimates to support enforcement of the policy.

Health

The policy aims to reduce the public health harms associated with the excess consumption of calories, fat, sugar and salt by creating a food environment that supports healthier choices.

This will have direct health benefits to individuals, and reduce spending in the NHS and Social Care sectors by reducing the likelihood of individuals developing obesity and other diet-related health conditions. While the transition costs to businesses and the expected reduction in sales of HFSS foods as a result of restricting promotions will be immediate, the health benefits from reduced calorie intake and improved nutritional intake will take longer to feed through into reduced disease prevalence, and therefore the economic and social benefits associated with the policy. As such, the costs and benefits are considered over a 25 year policy period to allow time for the beneficial impacts to materialise. The further into the future a benefit arises the less weight it carries in the overall estimation of the Net Present Value due to the discounting of costs and benefits by 3.5% each year into the future.

Where the health effects of the policy are realised, it is expected to lead to an improvement in economic productivity due to reduced absence, and potentially reduce the impact that ill health has on labour market participation.

Affected Employees

A number of assumptions have been made about how businesses will respond to the policies. In particular this analysis estimates the one-off costs transition costs of familiarisation and implementation by using illustrative costs of different workers’ time. Data is used from the Annual Survey of Hours and Earnings,^[62] taking the average (mean) 2022 wage cost to estimate the resource costs after the addition of non-labour employment costs (assumed as a 30% increase over wage costs). The job definitions, and hourly wages, are summarised in Table 6.

Table 6: Hourly pay - Excluding overtime (£) - For all employee jobs: United Kingdom, 2022^[63]

Year	Region	Description	Code	Median pay	Mean pay
2024	UK	Shopkeepers and proprietors – wholesale and retail	7131	15.36	17.04
2024	UK	Managers and directors in retail and wholesale	1150	16.65	20.93
2024	UK	Sales assistants and retail cashiers	711	12	13.16
2024	UK	Purchasing managers and directors	1134	28.29	29.39
2024	UK	Programmers and software development professionals	2134	27.89	29.92
2024	UK	Stock control clerks and assistants	4133	14.05	15.03
2024	UK	Restaurant and catering establishment managers and proprietors	1222	14.45	15.39
2024	UK	Catering and bar managers	5436	13.73	14.71
2024	UK	Food preparation and hospitality trades	543	13.02	14.05
Uprated wage to account for non-wage labour costs			Adjustment	Median pay	Mean pay
2024	UK	Shopkeepers and proprietors – wholesale and retail	30%	19.97	22.15
2024	UK	Managers and directors in retail and wholesale	30%	21.65	27.21
2024	UK	Sales assistants and retail cashiers	30%	15.60	17.11
2024	UK	Purchasing managers and directors	30%	36.78	38.21
2024	UK	Programmers and software development professionals	30%	36.26	38.90
2024	UK	Stock control clerks and assistants	30%	18.27	19.54
2024	UK	Restaurant and catering establishment managers and proprietors	30%	18.79	20.01
2024	UK	Catering and bar managers	30%	17.85	19.12
2024	UK	Food preparation and hospitality trades	30%	16.93	18.27

Exemptions by business size

To consider the potential impact on sales the share of sales (revenue) which come from micro and small businesses is shown. The revenue in the sectors by business size is shown in Table 7.

Table 7: Total Scottish turnover of registered private sector businesses for selected SIC codes by employee sizeband (number of employees in business in UK), Scotland, March 2024

£m Turnover by employee sizeband (split by number of employees in businesses in UK)	Micro (0-9)	Small (10-49)	Medium (50-249)	Large (250+)	Total turnover
Food and Drink Retail	1,618	717	227	13,987	16,549
Non-food retailers	433	493	539	4,060	5,525
Total	2,051	1,210	766	18,047	22,074

There is insufficient data on sales across shops by floor space to consider the potential impact of exemptions by the physical size of stores however the limited evidence available suggests that, exempting retail stores below 2000 sq. ft. in Scotland does not present particular concerns in relation to total population health impact.

Modelling methods

The next subsections outline the high-level approach to modelling. It begins by describing the approach within each sector: retailers, manufacturers, government and health. The following section then presents the costs and benefits of each option, along with summaries of Net Present Values over the full policy appraisal period (25 years) of the options.

To estimate labour costs in the Retail sectors, this analysis uses job description data from the ASHE dataset and take the average (mean) 2024 hourly wage. All wage costs are up-rated by 30% to reflect non-wage labour costs such as overheads.

Retailers – food and non-food

These businesses include supermarkets and other grocery retailers, as well as non-food retailers. Costs are modelled as one-off costs (Familiarisation, Product Assessment, Store Planning & Implementation) and recurring costs (Profit reductions).

Familiarisation, product assessment, and store planning & implementation: Costs are differentiated in these areas by business size (Micro, 0-9 employees; Small, 10-49 employees; Medium, 50-249 employees; Large, 250+ employees). The primary difference in between the food and non-food retailers is the number of products it is assumed they need to assess, and the complexity of the process to do it.

Micro businesses are assumed to operate at the unit level and receive no back office support with their familiarisation. It is therefore assumed it will require one shopkeeper per unit, needing time to familiarise themselves with regulations on volume promotion and placement restrictions, carrying out product assessment, and working with a sales assistant to plan and implement any changes to the store layout.

Small businesses are also assumed to have no back office support, however analysis assumes that two managers per unit need to familiarise themselves with the regulations on promotion and placement restrictions. These same two managers then assess products. One manager then works with one retail assistant to plan and reorganise the store.

Medium sized businesses are likely to use more managerial support in understanding product regulations. The analysis assumes that 2 directors at enterprise level will distribute information to 2 workers per unit. For product assessment, assumptions are made on the ability of medium sized businesses to record product attributes using software. Therefore, analysis assumes that the need for director time, a set number of days programming time, stock assessments carried out by staff, and the time taken to disseminate this information to two managers per unit. The analysis also assumes that store planning is conducted at both enterprise and unit level, with managers at enterprise level distributing store plans to unit level.

Large businesses, due to the scale of operations, make more use of enterprise (rather than unit level) staff to approach the policy. Analysis assumes that in addition to director and purchasing manager time, programming time is also required in the familiarisation stage to prepare stock management software for updates on which products are restricted. Analysis then assumes that some time is taken to distribute this information to a limited number of staff at unit level. At the product assessment stage, analysis includes time spent by directors, programmers and stock checkers assessing products. Analysis reduces the time taken to assess a given product as large retailers are likely to already store product nutrition information in their databases so can more quickly flag products that are restricted. This information is then distributed to a small number of staff members per store. For store planning and implementation, it is assumed that the majority of work is carried out at enterprise level and then distributed to units.

The analysis assumes that there are no capital costs involved with reorganisation as the process is primarily around moving different products into the locations currently occupied by restricted products, rather than having to make physical changes to the locations themselves. Business engagement has highlighted that there may be costs involved in reconfiguration of store layouts, although the extent to which this would go beyond resource costs (i.e. capital costs of new shelving etc) is unclear. Business is encouraged to provide evidence to support costs associated with store reconfiguration resulting from location restrictions.

These transition costs resource assumptions are summarised in the tables below.

Retailers Transition Costs – Price Promotions

Familiarisation

(Table 8) Retail familiarisation costs for price promotions resource assumptions

Enterprise Size: Micro

Resource Assumptions

(Retail – Food and non-food)

No back office process.

90 mins of time for 1 shopkeeper at unit level

Enterprise Size: Small

Resource Assumptions

(Retail – Food and non-food)

No back office process.

90 mins of time for 2 shopkeepers at unit level.

Enterprise Size: Medium

Resource Assumptions

(Retail – Food and non-food)

Back office of 2 directors, distributing info to 2 sales assistants per unit.

90 mins of time for 2 directors at enterprise level, 45 mins of time for 2 sales assistants at unit level.

Enterprise Size: Large

Resource Assumptions

(Retail – Food and non-food)

Back office of half day of directors time, 2 hours of time for 3 purchasing managers, 1 day of programming for two programmers, distributing info to 2 sales assistants per unit with 45 mins of time each.

Product assessment

(Table 9) Retail product assessment costs for price promotions resource assumptions

Enterprise Size: Micro

Resource Assumptions

(Retail – Food and non-food)

No back office process, cost at unit level.

5 mins per product, assessed by shopkeeper with no computer system.

500 SKUs (individuals products) as mid-point.

Enterprise Size: Small

Resource Assumptions

(Retail – Food and non-food)

No back office process, cost at unit level.

5 mins per product, assessed by shopkeeper with no computer system.

500 SKU (individuals products) as mid-point for food, 200 SKU for non-food.

Enterprise Size: Medium

Resource Assumptions

(Retail – Food and non-food)

Back office of 1 director (half-day), distributing info to 2 sales assistants per unit (1 hour each). 2 stock control clerks checking at enterprise level, 3 mins per product.

5 Days of programming time for food retail, no programming in non-food due to small number of products.

1000 SKUs (individual products) as mid-point for food, 200 SKU for non-food.

Enterprise Size: Large

Resource Assumptions

(Retail – Food and non-food)

Back office of 2 directors (half-day), distributing info to 2 sales assistants per unit (1 hour each). 2 stock control clerks checking at enterprise level, 2 mins per product.

10 Days of programming time – pre-existing system with full nutritional information which needs development for regulations for food retail, no programming in non-food due to small number of products.

1700 SKUs (individual products) as mid-point for food, 200 SKU for non-food.

Retailers transition costs - Location promotions

Familiarisation costs

Familiarisation costs for retail location promotion restrictions are assumed to be equal (but additional) to those of price promotions, with the exception of programming costs for which there are none assumed.

Store planning and implantation costs

(Table 10) Retail product assessment costs for location promotions resource assumptions

Enterprise Size: Micro

Resource Assumptions

(Retail – Food and non-food)

No back office process, cost at unit level.

Full day of work for proprietor and 1 cashier.

Enterprise Size: Small

Resource Assumptions

(Retail – Food and non-food)

No back office process, cost at unit level.

Full day of work for proprietor and 1 cashier.

Enterprise Size: Medium

Resource Assumptions

(Retail – Food and non-food)

Back office of 1 manager at enterprise level, 4 days of work.

Half day of work for one manager and 1 cashier at unit level.

Enterprise Size: Large

Resource Assumptions

(Retail – Food and non-food)

Back office of 1 manager at enterprise level, 4 days of work.

Half day of work for 1 manager and 2 cashiers at unit level.

The one-off familiarisation costs are made up of the time taken for members of staff to acquaint themselves with the new regulations. The total cost for price and location promotion restrictions combined is shown in Table 11 for both food and non-food retailers. The same staff time requirements are used to estimate the costs for both price and location restrictions, with the exception of programmer costs which are excluded from location promotions.

This analysis does not include a discount for reduced costs due to alignment, given limited evidence on the level that intra-UK retailers have processes and systems in place following implementation of restrictions in England to be able to deliver in Scotland. It is likely that this analysis is an over-estimate for this reason.

Table 11: Retail familiarisation costs of price and location promotion restrictions, non-recurring (£2024)

Scenario	Lower		Central		Upper
Costs	Total Costs	Per Business	Total Costs	Per Business	Total Costs	Per Business
Retail - Food	316,884	69	475,326	104	629,818	138
Micro	161,541	40	242,312	60	323,082	80
Small	54,313	108	81,469	161	108,626	215
Medium	10,050	287	15,075	431	20,101	574
Large	90,980	3,639	136,469	5,459	178,009	7,120
Retail - Non food	103,960	113	155,939	169	205,682	224
Micro	31,350	40	47,025	60	62,700	80
Small	12,780	128	19,169	192	25,559	256
Medium	4,263	284	6,394	426	8,525	568
Large	55,568	2,223	83,351	3,334	108,898	4,356
Retail - Total	420,844	77	631,265	115	835,500	152

Overall costs are skewed towards micro and small businesses, reflecting that there are significantly more businesses in these size categories. However, costs are significantly higher for large business on average.

The one-off costs of product assessment are shown in Table 12. As the products under the regulations are the same for price and location restrictions, we estimate only one set of costs across both promotion restrictions.

Table 12: Retail product assessment costs of price and location promotion restrictions, non-recurring (£2024)

Scenario	Lower		Central		Upper
Costs	Total Costs	Per Business	Total Costs	Per Business	Total Costs	Per Business
Retail - Food	2,783,762	608	4,458,927	974	6,179,628	1,349
Micro	2,019,264	503	3,365,440	838	4,711,616	1,174
Small	339,456	672	565,760	1,120	792,064	1,568
Medium	98,157	2,804	124,738	3,564	151,192	4,320
Large	326,885	13,075	402,989	16,120	524,756	20,990
Retail - Non food	282,042	307	363,253	395	444,465	483
Micro	195,936	251	261,248	335	326,560	419
Small	39,936	399	53,248	532	66,560	666
Medium	6,318	421	7,002	467	7,687	512
Large	39,852	1,594	41,755	1,670	43,658	1,746
Retail - Total	3,065,803	557	4,822,180	877	6,624,093	1,204

Product assessment costs are estimated to be significantly higher than familiarisation costs overall, reflecting the time required for retailers to consider each product they stock and whether it is meets the criteria as a restricted product.

For food retailers, we assume that micro and small businesses will be required to assess between 300 and 700 products across the scenarios, while medium size businesses will assess between 600 and 1,400 products and large companies between 12,000 and 25,000 products.

While larger food retailers will stock a larger range of products and therefore have a higher product assessment cost on average, the overall costs again reflect the much larger share of micro and small businesses.

The lower product assessment costs for non-food retailers compared to food retailers, relative to familiarisation costs, reflects that on average they will have a smaller range of targeted products for sale and the time taken to assess the products will therefore be lower. We assume a range of between 150 and 250 products requiring assessment across all business sizes.

The restriction of location promotions will also require the one-off adjustment of store layouts as stock is moved to meet the regulations. Given the lack of information on potential capital costs involved, this again is estimated through staff time required to undertake the required tasks. See Table 13.

Table 13: Retail store planning and implementation costs for location promotion restrictions, non-recurring (£2024)

Scenario	Lower		Central		Upper
Costs	Total Costs	Per Business	Total Costs	Per Business	Total Costs	Per Business
Retail - Food	938,065	205	1,876,130	410	2,814,195	614
Micro	575,490	143	1,150,980	287	1,726,471	430
Small	96,745	192	193,490	383	290,235	575
Medium	28,881	825	57,763	1,650	86,644	2,476
Large	236,948	9,478	473,897	18,956	710,845	28,434
Retail - Non food	262,773	286	525,545	571	788,318	857
Micro	111,684	143	223,367	286	335,051	430
Small	21,828	218	43,655	437	65,483	655
Medium	12,271	818	24,543	1,636	36,814	2,454
Large	116,990	4,680	233,981	9,359	350,971	14,039
Retail - Total	1,200,838	218	2,401,675	437	3,602,513	655

Table 14 combines the familiarisation, product assessment and planning and implementation costs to present the overall transition costs for retail businesses. This is presented for both overall costs and on an average cost per business split by business size.

Table 14: Retail overall transition costs for price and location promotion restrictions, non-recurring (£2024)

Scenario	Lower		Central		Upper
Costs	Total Costs	Per Business	Total Costs	Per Business	Total Costs	Per Business
Retail - Food	4,038,711	882	6,810,383	1,487	9,623,641	2,101
Micro	2,756,295	686	4,758,732	1,185	6,761,169	1,684
Small	490,514	971	840,719	1,665	1,190,925	2,358
Medium	137,088	3,917	197,576	5,645	257,937	7,370
Large	654,813	26,193	1,013,355	40,534	1,413,610	56,544
Retail - Non food	648,774	705	1,044,738	1,136	1,438,465	1,564
Micro	338,969	435	531,640	682	724,310	929
Small	74,543	745	116,072	1,161	157,602	1,576
Medium	22,852	1,523	37,939	2,529	53,027	3,535
Large	212,410	8,496	359,087	14,363	503,526	20,141
Retail - Total	4,687,485	852	7,855,121	1,428	11,062,106	2,011

Retailers profit reductions - Price promotions

Expenditure change of targeted food groups from price promotions

The economic modelling carried out by the SRUC/University of Aberdeen models the change in expenditure by food categories as a result of the removal of promotions on discretionary goods.^[64] These figures are presented per capita and using 2018 prices for take-home food and drink expenditure. The per capita figures are updated into 2024 prices using the latest available estimate of total take-home food and drink expenditure, £11.8 billion in 2024.^[65] Using the latest estimate of Scotland’s population of 5.5 million^[66] we can estimate the total fall in expenditure across the different take-home food categories. See Table 15.

Table 15: Modelled expenditure change on discretionary take-home food and drink (uprated into 2024 prices)

Impact of restricting price promotions on sales (£m)	2024 estimated expenditure (£m)	Multi-buy	All price promotions
Take Home Confectionary	£66.4	-£17.01	-£93.32
Biscuits	£259.6	-£17.22	-£64.87
Take home savouries	£342.2	-£18.12	-£48.32
Cakes, pastries and sugar morning goods	£354.0	-£13.33	-£46.03
Total puddings and desserts	£141.6	-£10.79	-£30.48
Take home sugary drinks	£708.0	-£28.57	-£70.71
Edible ices and ice cream	£129.8	-£12.26	-£37.33

The economic modelling undertaken by SRUC/University of Aberdeen for the Scottish Government was based on the removal of price promotions from discretionary foods. It did not model the impacts on removing promotions from the additional foods now under consideration, such as ready meals.

Potential impacts are therefore estimates on the additional foods under consideration based on other available information, but it is recognised that figures are subject to greater uncertainties due to this.

Table 16: Share of food categories spend on promotion and share failing NPM

Food category	% spend on promotion (2022)[67]	% spend on multibuy and Y for £X (2022)	% of total grocery spend (2022)	% NPM test fail[68]
Sweet biscuits	26.7	2.1	2.2	99
Total confectionery	29.5	3.9	4.8	99[69]
Cakes & pastries + higher fat/sugar morning goods	20.2	5	3	100
Crisps & savoury snacks	30.7	4.7	2.9	95
Puddings & desserts	27	4.9	1.2	66
Ice cream & edible ices (excl. frozen dairy desserts)	40	7.6	1.1	98
Regular soft drinks (excl. water)	32	9.2	6	78.3[70]
Breakfast cereals	30.1	8.5	1.4	59[71]
Ready meals	31.1	17.5	3.6	18
Yoghurt & fromage frais	37.4	8.5	1.5	18
Pizza	30.2	3.9	1.2	73
Roast and processed potatoes	25.1	4.2	0.9	4

Estimates of the change in expenditure on additional foods under consideration (i.e. ready meals, cereals, pizza, etc) are based on the changes in discretionary food and the share of discretionary and additional foods which are sold via promotion. In more detail:

1. The average modelled change in expenditure on discretionary foods is calculated from the economic modelling (i.e. change as a share of the total expenditure for each category).

2. The share of additional foods which are sold on promotion (average of ready meals, cereals, pizza and roast and processed potatoes sold under multi-buy and TPRs), which fail a NPM test is calculated.

3. Similarly, the average share of discretionary foods on promotion and fail a NPM test is calculated.

4. Finally, the ratio of (2) and (3) above is calculated, and applied to the average change in discretionary foods (from (1)), to give the estimated percentage change in additional foods under multi-buy and all price promotions.

5. This figure is then applied to the estimated total expenditure on additional food categories to give the estimated changed resulting from the restrictions on promotions for multi-buys and all price promotions.

Table 17: Estimated expenditure change on take-home additional foods - i.e. ready meals (uprated into 2024 prices)

Impact of restricting price promotions (£m)	Expenditure (£m)	Multi-buy	All price promotions
Additional foods (i.e. ready meals)	£1,014.8	£35.3	£64.4

Expenditure change in non-targeted food and drink as a result of price promotions restrictions (substitution)

Restricting price promotions will reduce spending on HFSS foods which fall under the regulations. However, it is assumed that this will be accompanied by a substitution towards spending on other foods which are not targeted. In the SRUC economic modelling, the ratio of expenditure falls on discretionary foods to increases in other non-targeted foods is -1.064 to 0.973, or 91%. While this was modelling based on discretionary foods only, it is assumed that this expenditure substitution ratio also holds for the additional foods.

Change in retailer profits from price promotion restrictions (recurring costs)

The net change in retail expenditure is estimated using the estimated reduction in expenditure on targeted foods netted against the gains in expenditure from substitution of non-targeted food, using the 91% substitution ratio. The change in annual retailer profits is then estimated using an assumed profit margin of 4% in the central scenario (2% in lower, 6% in upper).

The results for discretionary foods only are shown in Table 18 for the case in which only multi-buy price promotions are restricted. These are recurring costs which are assumed to be incurred annually.

Table 18: Change in retailer profits from price promotions (multi-buy only) on discretionary foods, £2024 (recurring costs)

Category	Revenues	Change in expenditure	Change in profits(Lower)	Change in profits(Central)	Change in profits (Upper)
Biscuits	259,600,000	(17,222,343)	(344,447)	(688,894)	(1,033,341)
Confectionery	566,400,000	(17,013,490)	(340,270)	(680,540)	(1,020,809)
Cakes	354,000,000	(13,329,226)	(266,585)	(533,169)	(799,754)
Savoury snacks	342,200,000	(18,122,228)	(362,445)	(724,889)	(1,087,334)
Pudding	141,600,000	(10,788,213)	(215,764)	(431,529)	(647,293)
Ice cream	129,800,000	(12,257,654)	(245,153)	(490,306)	(735,459)
Soft drinks	708,000,000	(28,566,967)	(571,339)	(1,142,679)	(1,714,018)
Total targeted products	2,501,600,000	(117,300,122)	(2,346,002)	(4,692,005)	(7,038,007)
Gains from substitution	-	107,267,874	2,145,357	4,290,715	6,436,072
Profit net change	-	(10,032,247)	(200,645)	(401,290)	(601,935)

Including additional foods such as ready meals in the price promotion (multi-buy only) regulations increases the estimated decrease in annual retail profits, but not by the same share as expenditure on additional products due to the lower share of these products failing NPM test. However, the option of only including discretionary foods is not preferred or being taken forward. See Table 19.

Table 19: Change in retailer profits from price promotions (multi-buy only) on discretionary and additional foods, £2024 (recurring costs)

Category	Revenues	Change in expenditure	Change in profits(Lower)	Change in profits(Central)	Change in profits(Upper)
Biscuits	259,600,000	(17,222,343)	(344,447)	(688,894)	(1,033,341)
Confectionery	566,400,000	(17,013,490)	(340,270)	(680,540)	(1,020,809)
Cakes	354,000,000	(13,329,226)	(266,585)	(533,169)	(799,754)
Savoury snacks	342,200,000	(18,122,228)	(362,445)	(724,889)	(1,087,334)
Pudding	141,600,000	(10,788,213)	(215,764)	(431,529)	(647,293)
Ice cream	129,800,000	(12,257,654)	(245,153)	(490,306)	(735,459)
Soft drinks	708,000,000	(28,566,967)	(571,339)	(1,142,679)	(1,714,018)
Additional foods (i.e. ready meals)	1,014,800,000	(35,257,584)	(705,152)	(1,410,303)	(2,115,455)
Total targeted products	3,516,400,000	(152,557,705)	(3,051,154)	(6,102,308)	(9,153,462)
Gains from substitution	-	139,510,007	2,790,200	5,580,400	8,370,600
Profit net change	-	(13,047,698)	(260,954)	(521,908)	(782,862)

Extending the price promotion restrictions to cover all price promotions (e.g. Temporary Price Reductions) leads to a significant increase in estimated annual lost profits to retailers. See Table 20. As set out above and in the Scottish Government response to the consultation analysis, the Scottish Government will not proceed to restrict Temporary Price Reductions at this time.

Table 20: Change in retailer profits from price promotions (all price promotions) on discretionary and additional foods, £2024 (recurring costs)

Category	Revenues	Change in expenditure	Change in profits (Lower)	Change in profits (Central)	Change in profits(Upper)
Biscuits	259,600,000	(64,871,564)	(1,297,431)	(2,594,863)	(3,892,294)
Confectionery	566,400,000	(93,316,737)	(1,866,335)	(3,732,669)	(5,599,004)
Cakes	354,000,000	(46,027,837)	(920,557)	(1,841,113)	(2,761,670)
Savoury snacks	342,200,000	(48,321,184)	(966,424)	(1,932,847)	(2,899,271)
Pudding	141,600,000	(30,478,201)	(609,564)	(1,219,128)	(1,828,692)
Ice cream	129,800,000	(37,331,481)	(746,630)	(1,493,259)	(2,239,889)
Soft drinks	708,000,000	(70,714,663)	(1,414,293)	(2,828,587)	(4,242,880)
Ready meals	1,014,800,000	(64,445,625)	(1,288,913)	(2,577,825)	(3,866,738)
Total targeted products	3,516,400,000	(455,507,292)	(9,110,146)	(18,220,292)	(27,330,438)
Gains from substitution	-	416,549,432	8,330,989	16,661,977	24,992,966
Profit net change	-	(38,957,861)	(779,157)	(1,558,314)	(2,337,472)

Retailers profit reductions - Location promotions

Lastly, this analysis estimates the change in sales from location promotions by assigning targeted products categories to those that are sold from either: i) checkouts; ii) the end-of-aisle; or iii) both.

The share of sales which are currently via checkout locations is assumed to be 7.1%, and 20% of sales are assumed to come from other promotional locations.^[72] The estimates for aisle promotion locations are used as a proxy for all non-checkout locations, such as display bins and store entrances for which there is limited specific estimates.

Table 21: Assessment of potential location of HFSS foods

	Promotion location
Category	Aisle: front / end	Checkout
Biscuits	Yes	No
Confectionery	Yes	Yes
Cakes	Yes	Yes
Savoury snack	Yes	Yes
Pudding	Yes	No
Ice cream	Yes	Yes
Soft drinks	Yes	No
Ready meals	Yes	No

For checkout promotions, a number of large retailers have committed to voluntary restrictions on the placement of HFSS foods at checkouts. This is estimated to be 15.7% of total potential checkout sales of HFSS foods based on a search of public statements from retailers on voluntary actions and their accompanying market share (of all groceries). To note, this was carried out prior to restrictions on location promotions being implemented in England, and as such the figure may have increased if shops complying with English regulations apply any updated placement strategies to all UK stores.

Applying these estimates to the total expenditure on each food category provides an estimate of the total revenue of products in scope (i.e. sales from checkout or aisle locations not already voluntary restricted).

An assessment is then made of the impact on retail sales and profits of moving restricted products out of targeted locations, and them being replaced by non-targeted products. There are a number of studies which examine the impact of product location on sales.^{[73] [74] [75]} These studies follow different methodology, food types and geography, and as such arrive at a range of results on the impact of location. The range of results is used to estimate the potential impact of location restrictions on sales uplifts across our different scenarios. See Table 22.

Table 22: Estimated uplift in sales from product location

Store Location	Estimated Sales Uplift (Lower)	Estimated Sales Uplift (Central)	Estimated Sales Uplift (Upper)
Aisle: Front / end	20%	30%	53%
Checkout	0%	18%	25%

Profit margins of 2%, 4%, and 6% are assumed for the lower, central and upper scenarios respectively. This is assumed to be the same across all types of foods and location placement. As discussed in the UK Government impact assessment on location promotion restrictions,^[76] it may be the case that profit margins are higher for confectionary products etc. However, to avoid potential double counting our approach is restricted to considering the total lost uplift in sales, with the overall impact factoring in the substitution to non-HFSS products which move into the restricted locations.

The total estimated reduction on annual retailer profits is shown in Table 23. This is split between discretionary foods only, and also discretionary and additional foods, as well as estimating the impacts of exempting businesses with less than 50 employees.

Table 23: Estimated reduction in retailer profits from location promotion restrictions, £2024 (recurring costs)

Description (Discretionary only)	Lower	Central	Upper
Products in scope	468,866,581	468,866,581	468,866,581
Lost uplift	75,728,467	107,066,021	160,295,577
Net of compensatory behaviour	6,476,777	9,156,962	13,709,490
Lost profit	129,536	366,278	822,569
Lost profit (micro/small exempt)	110,399	305,803	688,533
Description (Discretionary & Additional)	Lower	Central	Upper
Products in scope	538,684,821	538,684,821	538,684,821
Lost uplift	87,364,840	123,177,922	184,480,981
Net of compensatory behaviour	7,471,993	10,534,954	15,777,979
Lost profit	149,440	421,398	946,679
Lost profit (micro/small exempt)	127,363	352,780	794,307

Recent research led by the University of Leeds,^[77] using supermarket sales data from 480 stores, suggests that England’s HFSS product placement restrictions may have contributed to a reduction in purchases of in-scope products by 0.63 percentage points by weight and 1.19 percentage points by unit volume. Two of the three participating retailers showed a significant decline in HFSS sales, while one did not. The study did not assess changes in out-of-scope products, so potential compensatory purchasing effects could not be determined.

Manufacturing

To estimate the impact on Scottish manufacturers, this analysis takes estimated lost sales from retailers as a result of the promotion restriction as an input. By applying an assumed retailer mark-up to sales lost, this analysis estimates lost sales to manufacturers. This is done separately for location and price promotion restrictions. The analysis assumes a profit margin to manufacturers, and what proportion of manufacturer profits are retained in the UK.

It is assumed that there are no product reformulation costs from manufacturers. This is on the basis that manufacturers would only decide to undertake a reformulation if it was more profitable for them to do so than not. Therefore, any costs in reformulation would be offset by increased profits – or in the context of this assessment lower recurring lost profits.

The central case estimates for the main combinations of restrictions is shown in Table 24 along with the key assumptions used around mark-up rates, profit margins, and profit retention.

Table 24: Estimated change in manufacturer profits from promotion restrictions (central case estimates for different combinations of targeted foods and price promotion), 2024 prices

Promotions	Discretionary Food, Multi-buy & Location	Discretionary Plus additional food, Multi-buy & Location	All Price Promotions & Locations[78]
Change in sales in retail, HFSS	-224,366,142	-275,735,628	-578,685,215
Change in sales in retail, Non-HFSS	205,176,933	252,152,975	529,192,400
53% UK supermarket mark-up	-	-	-
Value of manufacturer sales, HFSS	-147,125,339	-180,810,248	-379,465,715
Value of manufacturer sales, Non-HFSS	121,741,845	150,619,530	332,284,727
6% Food and drink producers profit margin	-	-	-
Change in manufacturing profits, HFSS	-6,679,179	-8,376,979	-20,296,307
Change in manufacturing profits, Non-HFSS	5,731,602	7,227,563	18,127,474
49% of profits retained in UK	-	-	-
Manufacturer profits retained in UK, HFSS	-4,325,485	-5,315,821	-11,156,292
Manufacturer profits retained in UK, Non-HFSS	3,579,210	4,428,214	9,769,171
Net change in manufacturer profits	-746,275	-887,607	-1,387,121

Health

Section 2.3 sets out the health harms of poor diet and obesity as set out under the rationale for taking action.

Health benefits from the proposed policy are modelled using the Department of Health and Social Care Calorie model (v3). The model is calibrated to the English population although the results are adjusted for the size of the Scottish population.

This is a cohort-based Markov model that uses calorie reductions to estimate the benefits to health, and the associated changes in: NHS spending, Social Care spending, and Economic output. These are estimated over a 25-year horizon and use different discount rates for health benefits compared to costs, in keeping with Green Book guidance. See Annex A of the partial BRIA for more details.

Input to the model is taken from the reduction in calories^[79] estimated by the SRUC economic modelling work from the introduction of promotion restrictions.^[80] The calorie reductions from the modelling work were produced for discretionary foods for all price promotions and for multi-buy promotions only.

The calorie reductions are adjusted for the other options in line with either the share of reduced targeted foods (i.e. share of sales which are discretionary to discretionary plus additional) and for exemptions by using the turnover of exempt businesses.

The model estimates the impact of reduced calories through the effect on the BMI distribution and therefore the incidence of type 2 diabetes, coronary heart disease, stroke, colorectal cancer, breast cancer and liver disease in the cohort. Mortality and incidence are age-adjusted.

Benefits from weight loss in the healthy and underweight BMI categories are also included to capture other benefits beyond the reductions in incidence of disease.

Health benefits to individuals are valued using Quality Adjusted Life Years (QALYs). QALY changes are calculated from the reduced number of deaths and the reduction of people living with the diseases. These are then converted into monetised QALYs using the value of a QALY given in the Green Book (which was £60,000 at the time of modelling).

People who fall ill with an obesity-related illness in later life may already be in less than perfect health. Accordingly, the model does not assume a QALY value of one for individuals in the “healthy” state (which in model terms means they are free of obesity-related illness). Instead, an age detriment is applied to all QALY values. This is done to allow for the increased prevalence of diseases not explicitly included in the model at older ages. The model uses a QALY disease detriment to calculate the QALY value for an individual in the disease state.

Savings to the NHS are calculated from the reduced treatment requirements for each disease.

Social care cost changes are calculated due to a reduced proportion of overweight, obese, and morbidly obese individuals and hence fewer people needing social care in the treatment scenario. This assumes that the probability of requiring social care increases with BMI.

Economic productivity effects are assessed in two categories. First, reductions in mortality are used to calculate the impact of mortality on economic output from an increased workforce. This is done by considering everyone within a cohort to earn the median wage of a person of that age and gender, with a larger workforce present in the treatment scenario.

Secondly, the model calculates the impact of morbidity on economic output using an employment rate that varies with disease state. This change has been made to reflect the lower productivity and rates of employment seen for individuals with one of the six modelled diseases (type 2 diabetes, coronary heart disease, stroke, colorectal cancer, breast cancer and liver disease).

The results from the baseline SRUC modelling inputted into the DHSC calorie model is shown in Table 25. These results are presented for the full policy appraisal period and have been uprated into 2024 prices.

Table 25: Estimated monetary value of benefits from reduced calorie consumption (as estimated from SRUC economic modelling) over 25 year policy period (discounted), results from DHSC calorie model, £2024

Scenario (Multi-buy only)	Lower	Central	Upper
QALYs	36,400	40,100	43,700
Economic Output (£m)	262	288	314
NHS Costs (£m)	171	189	206
QALY (£m)	1,726	1,998	2,070
Social Care Costs (£m)	210	231	251
Total (£m)	2,370	2,705	2,841

The results from DHSC calorie model are provided in 2013 prices. These have been uprated into 2024 prices using the GDP deflators,^[81] with the exception of QALY value which have not been uprated as per guidance from DHSC.

The monetary value of the health benefits has been modelled based on the SRUC economic modelling for multi-buy only price promotions and based on discretionary foods only. To consider the potential impacts across the wider range of options (i.e. including additional foods within the restrictions, exemptions based on business size), we weight these core results by the estimated reduction in retail profits in each option compared to the core SRUC modelling scenario.

Summary of methodology section

To model the impacts of the policy propositions on Scotland, we have identified sectors affected: retailer, out of home, manufacturers, government, and health. We have identified how proposed regulations will affect costs, revenues and profits to businesses; the additional burden on local government; and the impacts on consumers’ health and spending in the health sector.

In order to address the uncertainty in this modelling exercise, we implement a range of values on some assumptions to present the estimate impacts under a lower and upper scenario alongside the central estimates.