How much would you pay?

There was furor recently in Bakersfield California when a convenience store was spotted charging $12.00 for an 18-ounce box of Honey Bunches of Oats. (The normal price at most stores is less than half that). Despite the negative media attention, high prices at convenience stores is not a big surprise and certainly not illegal. But, it does raise the question: Especially in light of the current state of the economy, what is the most you'd pay for a box of cereal?

(Source BakersfieldNOW.com)

Technorati Tags: cereal, price, breakfastbowl

Raise prices in a recession?

Reports are that Kellogg is about to hike prices on most of its cereal brands, the second increase in less than one year.

I understand that costs do tend to increase (although oil has dropped significantly), but I wonder (as I have before) how much consumers will be willing to spend on high-priced, name-brand cereal during a recession. Are short-term profits really that important at this time?

Innovation is still the long-term answer, but right now the big cereal companies need to find ways to express value in their brands, and they need to do this in a way that it is convincing to consumers. How will they respond?

Technorati Tags: cereal, Kellogg, breakfastbowl

Cereal cost

Food prices have been rising lately, and cereal has been no exception. Obviously, the high cost of fuel has certainly been a major factor. Some also blame the increased production of ethanol from corn which is driving up food prices.

A chart produced by the Toronto Star provides an interesting look into what costs go into a box of cereal. Most significant is that the actual cost of the grains comprise only 2% of the cost, and transportation accounts for 4.5% (but that could be rising). If these numbers are close to being accurate, it corrects some misconceptions we might have as to why cereal prices are really rising. Which prompts one to ask: Are the cereal companies completely honest when they communicate the reasons for higher prices and shrinking boxes? It's too easy to blame fuel prices, etc.

It also shows: Processed foods have little to do with the actual ingredients.

Worth thinking about.

(See larger version of chart here)

Technorati Tags: cereal, price, food+processing, breakfastbowl

Kellogg shrinks again

The high cost of fuel is impacting all facets of our economy. Cereal companies are no exception. Certainly rising prices have an impact on sales, but the one practice I find deplorable is tricking consumers by shrinking the box sizes. While not the first time that has been done, Kellogg appears to be doing it again with certain cereal (see mlive.com)

How small can they get?

Technorati Tags: cereal, Kellogg, breakfastbowl

Shrinking boxes, growing profits

As previously reported, cereal companies have been shrinking cereal boxes in an effort to increase profits.

The strategy appears to be working, at least for now. General Mills latest financial results reveals that this strategy has increased profits during the last quarter. (See article at the StarTribune.com)

Corporations that short-sightedly look for short-term profits at the expense of long-term sustainability are playing a dangerous game. What will they do next time profits fall flat? You can only shrink the boxes so far. Eventually consumers will balk at the price of cereal, especially if there is not perceived value. Innovation could turn that around, but it doesn't appear that the big cereal companies are catching on to that.

Technorati Tags: cereal, General+Mills, marketing, breakfastbowl

More shrinking boxes

Last fall I reported the trend toward cereal companies decreasing the size of their boxes in order to cut costs and maintain profits. Kellogg was the first one out of the gate. Now, there are reports that General Mills is using the same trick to camouflage price increases.

Sneaky? Yes.

Harmful? Maybe not this one time. But, big cereal companies cannot believe that they continue to play these games without some affect on consumers. Many are already turning to generic brands and specialty cereals. If Kellogg, Generals Mills are not careful they will be minor players in a marketplace that could easily continue to dominate if they focused more on innovation.

Technorati Tags: cereal, General+Mills, marketing, breakfastbowl

Beware the shrinking box

A Consumer Reports article reveals that cereal manufacturers will be shrinking boxes on some cereals as a tactic to deal with increasing costs. Kellogg is leading the way with Frosted Flakes, Rice Krispies and Frosted Mini-Wheats, and it is expected that other brands and manufacturers may follow suit.

Sneaky? Yes. Necessary? Probably, if they want to maintain profits, etc. Good for business? Over the long term, probably not. I know the cereal industry is facing many challenges, including increased competition and possible lower consumption trends, but they must find more ways to bring value to consumers. Only in this way will they survive over the long haul.

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Technorati Tags: cereal, Kellogg, marketing, breakfastbowl