Thursday, May 20, 2010

Cereal upstarts II

I am currently examining the attempt of newer companies to break into the crowded cereal marketplace, and have chosen three different ones to gain insights into their thinking and strategies: Carman's, [me]&goji, and Pro-Oats.

The first question I posed to their company representatives is: "What do you see as the future of the cereal industry?"

Not surprisingly they are quite optimistic about the future of the industry, and especially their respective company's place in it. While I only interviewed three upstarts, it is interesting that virtually all the new entrants into the cereal market are brands emphasizing healthier cereals. And, this was evident in their responses. They sincerely believe that people are fed up with mass manufactured cereals with questionable nutritional value.

As Adam Sirois of [me]&goji stated, consumers are increasingly realizing "the big companies could spray extruded flakes with vitamins and offset the bland taste with sugar". It is evident that recent concerns about the nutritional value of some cereals is feeding this perception and big, multi-national companies are an easy target, leaving room for those that offer healthier options.

Maximillian Cascone of Pro Oats put it this way: "Like the rest of the food industry, the cereal industry will continue to move towards all-natural and organic ingredients and processes.  This is not because the food companies are being altruistic, but because consumers are becoming more and more conscious of their food choices ... There appears to be a growing consensus and awareness that food and its ingredients and processes can profoundly affect your well-being and overall health. The consumer as always will vote with their wallet, and the smart money will be on natural and organic foods."

To respond to this trend, innovation will thrive. Carman's founder, Carolyn Creswell, believes that the cereal industry will continue "to grow through a range of new product development", especially in light of new research on the health benefits of certain nutrients and foods, such as oats. Many companies are likely to jump on this bandwagon for the foreseeable future. Sirois is convinced that "the future of the cereal industry will show a kick-up of smaller cereal companies. Though the cereal industry is known for having too many options, 95% of those options come from the same 2 or 3 factories. There is still space for innovation in this industry and it will come from the smaller guys, who will be quicker to meet the needs of consumers".

These three companies, along with a myriad of other new health-oriented cereal manufacturers, are obviously convinced that cereal is a lucrative market with great potential as consumers search for alternatives to the common options available to them. Like with any emerging industry, there are many who will try to gain a foothold in the marketplace, but eventually only a handful will survive and there will be industry consolidations, etc. My next couple of posts will examine how these companies plan to compete and the challenges they face.

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