Are cereal companies waving the white flag?

We all know that breakfast cereal is gradually losing its appeal among consumers. Sure, a large proportion of the population still enjoy a bowl most mornings, but increasingly, consumers are turning to other options. This is not new, and the big cereal companies, mainly General Mills and Kellogg, have long felt the trend first-hand, prompting them to diversify their brand portfolios to include a wide range of other food products, ranging from yogurt to cookies to meat alternatives.

Last week, during Kellogg's quarterly earnings call, we not only saw further evidence of this diversification, but a blatant admission that the future might not be centered around cereal. According to Food Industry News, CEO Stephen A. Cahillane said, "you shouldn’t look at U.S. Morning Foods and say this is going to be the growth engine for the Kellogg Co." Despite all their efforts, net sales for breakfast foods fell another 5%. Cahillane did state that they have to do more. In fact, he owned up to the fact that "getting people excited about it is our job to do. And we can do better in brand building in the United States."

Again, these trends are no surprise, but stating outright that breakfast foods (i.e. mainly cereal) are not the growth engine for Kellogg is evidence that the company is already looking past cereal, to greater opportunities in other food sectors. Callihane confessed that they are moving "from primarily a cereal business to much more of an innovative snacking business." Certainly, this does not mean they are abandoning cereal at this time, as it still is their core, but it does suggest they may be resigned to allow it to shrink while focusing on areas which they believe have greater potential.

It appears that the white flags may be reluctantly coming up, and that in the process the big cereal companies will no longer drive true cereal innovation.