Bank: Junk food ad ban delay boosts ITV
May 18, 2022
The UK government has postponed its planned advertising restrictions on high fat, sugar-rich and salty products (so called HFSS foods). The products were expected to be prohibited in the near future – but now the government says it will look again at the restrictions in a year.
The news was a boost for ITV; The delay means that the loss of related revenue will now be pushed back by a year, to January 2024, from January 2023. The change could be worth an extra £100 million to ITV with similar benefits for the other UK commercial broadcasters including satellite and cable broadcasters as well as Channels 4 and 5.
While clearly good news for ITV in the short term – it will now enjoy higher HFSS advertising revenues for another 12 months – a report from investment bank Berenberg says it does not think that it changes the fundamental picture for the commercial broadcaster.
“ITV faces stiffening competition for advertising revenues and its belated, more emphatic shift into advertising-funded streaming now faces higher competition from Netflix’s ad-funded tier and Amazon’s Freevee, among other services,” says Berenberg.
The bank explains that the proposed ban on pre-watershed (9pm) and online advertising of foods that are high in fat, sugar or salt, was confirmed by the UK government in the summer of 2021, with a planned implementation date of January 2023. The proposal was prompted by major concerns about childhood obesity. According to the government, analysis from September 2019 showed that almost half of all adverts shown during the month on ITV1, Channel 4, Give and Sky1 were for HFSS products, a figure that rose to 60 per cent during the 6-9pm timeslot (when children’s viewing peaks). The government cited evidence that HFSS food marketing in traditional media, including TV, affects children’s eating and eating-related behaviour; hence the proposal to restrict such advertising during the time when children would generally be watching television.
Berenberg says: “Having spoken to various media buyers, who had suggested that these restrictions could remove circa £200 million in television advertising demand from the market as a whole, of which around half would come from ITV, we previously included the loss of £100 million in advertising revenue in our estimates from 2023. We now update our forecasts to add this back in for 2023, but from 2024 our estimates remain unchanged. This brings our estimates closer to consensus for 2023 – we are now 3 per cent below on revenue and 12 per cent below on EBITA – but we still think that the street is too high given the absence of any major international football championship in 2023, as well as the impact of a tougher economic environment. We reiterate our ‘Sell’ rating, but increase our price target by 66p to reflect the one additional year of HFSS advertising revenues.”