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By Adrian Sidaway, Director (RI) Head of Corporate Audit & Accounts
The advertising restrictions on less healthy food and drink products, those classified as high in fat, salt or sugar (HFSS) and falling within one of thirteen specified food and drink categories, came fully into force on 5 January 2026. Paid online advertising for HFSS products is banned outright across social media, search, display and influencer channels, and on Ofcom-regulated broadcast and on-demand services the ban runs through to the 9pm watershed. Brand advertising and product range advertising that does not feature an identifiable HFSS product remain permitted, as do unpaid channels and outdoor media. Seven months in, the marketing conversation has settled into a fairly predictable shape, focused on creative workarounds, brand-led storytelling, organic reach, and the relative usefulness of the small business exemption for producers under 250 employees. That conversation is necessary but it is not the whole picture, and the part that has gone largely unwritten so far is the one that tends to matter most to an owner thinking about the longer term value of their business.
The financial reality is that on the 5th of January, one of the key drivers underpinning the value of many food and drink brands was materially constrained. For any owner-managed producer with HFSS products in the portfolio, the question now is not how to keep advertising the way they used to. It is what the change does to the value of the brand assets, to any goodwill carried on the balance sheet, and to the implicit growth assumptions sitting inside the rest of the business.
"For any owner with HFSS products in the portfolio, the policy has quietly repriced the growth case. The numbers in the model have not changed, but the assumptions behind them have."
What has actually changed in financial terms?
A brand asset, in financial terms, is worth the future cash flows it can reasonably be expected to generate. For a fast-moving consumer goods business those cash flows are supported by a stack of activities: shelf presence, distribution, promotion, sponsorship, and paid advertising in its various forms. Paid advertising has historically been the most variable and the most measurable lever, and for HFSS-heavy portfolios it has carried a disproportionate share of brand-building work. Take that lever away from product-level promotion, and the cash-flow case for the brand has to be rebuilt around the levers that remain. The brand may still be a good brand. The growth trajectory it is plausibly capable of generating, on the basis of the channels still available to it, is a different question.
That matters for three groups of numbers inside an owner-managed food and drink business. The first is goodwill and brand intangibles on the balance sheet, where these exist. Acquisitive groups that have absorbed HFSS-weighted businesses in the last few years may now have impairment indicators that did not exist twelve months ago. An indicator of impairment under the relevant accounting standards triggers a review, not a write-down by itself, but it does mean the question has to be asked at the next year-end and the answer has to be properly supported.
The second is internally generated brand value, which does not sit on the balance sheet but does sit at the centre of every conversation about what the business is worth in a sale. Buyers in this market are well advised on regulatory exposure. One of the first questions a serious acquirer is likely to ask of an HFSS-weighted portfolio in 2026 is what the growth case looks like without paid product advertising, and the seller who has not already answered that question is at an immediate disadvantage in the negotiation.
The third is the forecast itself. Many multi-year financial plans written before January 2026 are likely to assume a level of marketing-supported volume growth on HFSS lines that the rules now make difficult to deliver. The forecast may still be the right one in shape, but it needs to be re-tested with marketing assumptions that reflect the channels actually available. A board signing off a plan in its old form is signing off something that no longer reflects the environment the business is operating in.
Enforcement is already active. The Advertising Standards Authority has upheld complaints against two supermarkets over paid online adverts featuring identifiable HFSS products, and has confirmed that a single identifiable less healthy product in an advert is sufficient to constitute a breach. This is not a theoretical exposure, and the treatment of the risk in a set of accounts, or in the disclosures around a transaction, has to reflect that.
So how should an owner-managed producer be responding?
The starting point is honest categorisation, and it involves two questions, not one. The first is whether the product is classified as HFSS under the current 2004/05 Nutrient Profiling Model, with the numbers showing why. The second is whether the product falls within one of the thirteen food and drink categories in scope of the regulations. A product only faces the advertising restrictions if the answer to both is yes. That is straightforward enough, but across much of the sector the position appears to have been treated as broadly understood rather than formally documented. It needs to be formal, because every subsequent decision flows from it.
Once the categorisation is settled, the portfolio splits into three groups. Products that sit clearly outside the restrictions, whether because they are not classified as HFSS or because they fall outside the thirteen categories in scope, carry on broadly unaffected and become, in valuation terms, the strongest assets in the business. Products that sit clearly inside the restrictions need a deliberate plan, which will be some combination of reformulation, repositioning behind a permitted brand or range advertising strategy, or, in some cases, managed decline. Products that sit close to the HFSS threshold within an in-scope category are the most interesting, because a modest reformulation can move a SKU from one side of the threshold to the other, and the financial value of doing so is now considerable. A piece of work that previously sat in the new product development budget as a marginal nutritional improvement is now a brand-protection exercise with a quantifiable return.
The reformulation question itself has accounting consequences worth flagging. The development costs associated with reformulation may in some cases qualify for R&D tax relief where the relevant conditions are met and scientific or technological uncertainties are being addressed, and for some owner-managed producers can be capitalised under the relevant standards where the recognition tests are met. The investment is not free, but it is often more tax-efficient than many owners realise.
One caution worth building into any categorisation exercise carried out now is that the underlying nutrient profiling model is itself under review. The Department of Health and Social Care has accepted the recommendations of the expert group that followed the 2018 consultation, and a public consultation on applying the updated model to the advertising and promotions restrictions was launched on 26 March 2026. The direction of travel is towards a slightly stricter test, which means some products that sit comfortably on the right side of the current line may be re-categorised in future. A portfolio exercise done properly today should carry a note of the SKUs most exposed to that change.
A point worth making in closing is that the advertising restrictions themselves are very unlikely to be the end of the regulatory cycle in this area. The Health and Social Care Committee has recommended expanding the ban to brand advertising and out-of-home media, and has suggested a further consultation on extending the restrictions to sport sponsorship, online gaming and social media. That is a parliamentary committee recommendation rather than settled policy, but the overall direction of travel in this area has been consistently towards more rather than less. A producer who treats January 2026 as a one-off shock and rebuilds the marketing plan accordingly is solving for the wrong problem. The portfolio that is robust to the rules as they currently stand, and that has been rationalised on a basis that recognises where the regulatory direction is heading, is the portfolio that holds its value through the next round.
None of this means HFSS-weighted businesses are not viable. Plenty of them are excellent businesses with strong brands and loyal customers, and they will continue to be. It does mean that the value of those businesses, expressed honestly in a set of accounts or a sale negotiation, now reflects a different growth case from the one most plans were built on. Reflecting that change in the numbers, before the next external party does it for you, is the position to aim for.
If you would like to think through how the HFSS rules are likely to affect the financial position and the valuation of your business, the food and beverage team works with owner-managed producers across the UK on exactly these questions.
This article has been prepared for information purposes only. Formal professional advice is strongly recommended before making decisions on the topics discussed in this release. No responsibility for any loss to any person acting, or not acting, as a result of this release can be accepted by us, or any person affiliated with us.
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