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. 

Cereal by the numbers

I came across an interesting article this week on the website, data-driven thoughts, the work of data analyst, Erik Rood. He explores a wide-range of topics, all centered around looking deeper into the numbers.

A few months ago Rood tackled the issue of our favorite breakfast food in his article, "The golden age of cereal." The most fascinating insight from this analysis is that "nearly half of all cereals last less than 5 years before being discontinued." In other words, manufacturers are trying all kinds of recipes and ideas, but most do not succeed. In fact, the pace of new cereals introduced is increasing, illustrated by the fact that "the majority of cereals have been launched in the past ~10 years (over 1/3 of all cereals."

The article is brief, without too many more great discoveries, although his table of cereals and the time that they have been on the market, is a great resource. Rood also offers a few reflections based on this data as to how cereal companies might reverse declining trends.

Check it out. It's a short, interesting read!

Millenials and Cereal

Stepping aside for a moment from the ongoing March Cereal Madness competition, I want to comment on a story that's been getting lots of press the last few weeks.

The New York Times recently reported the results of a study that said: "Almost 40 percent of the millennials surveyed by Mintel for its 2015 report said cereal was an inconvenient breakfast choice because they had to clean up after eating it." In other words, those born in the 80's and 90's are too lazy to eat cereal.

Apart from the fact that survey responses do not always correlate with how people really behave, there is a grain of truth (pun intended) to this. While I doubt that millennials avoid cereal just because of dirty dishes, convenience is a factor that this younger generation definitely gravitates toward, and this is something that cereal companies cannot ignore. We see evidence of this in the increase of convenient breakfast foods like yogurt, bars, and take-out. Some cereal companies have experimented with things like single-serving cereal containers, but so far nothing has really stuck.

This is a challenge waiting for a true innovation, probably in terms of packaging and marketing. Whoever can succeed in this space will set the future for the cereal industry.

Cereal turnaround?

Things have been looking bleak for the cereal industry. For example, last month Kellogg revealed sales decline, and many other industry signs are likewise not hopeful.

Yet, despite the negative trends, some are much more optimistic. Packaged Facts marketing research recently issued a report predicting a 10% growth in the U.S. breakfast cereal market between 2014 and 2018. Here a couple of noteworthy trends they noted:

First, there is growth in the sales of hot cereals, a trend previously noted here.

Second, much of the growth that will occur is likely to come from Hispanics, who generally consume much more cereal than non-Hispanics. We've already seen a few cereals targeted to Latinos. Expect more.

Packaged Facts also see positive signs in innovation and marketing from major companies. This, combined with some of the other innovations we are seeing from upstarts, might mean some brighter days ahead for the cereal industry.

We can only hope.

(Source: BakeryandSnacks.com)

2013 Cereal Year in Review

As we come to the end of the year it is a good time to look back on the major developments in the world of cereal. Like always there are new cereals that hit the market, interesting marketing tactics, and the occasional controversy, but the big story for 2013 is the realization that, in North America at least, the cereal industry is facing some major challenges. In fact, someday we may look back on this year as a critical point in the history of breakfast cereal.

Certainly purchasing and eating trends have been changing for quite some time, but this is the year that the big players were forced to make some big adjustments. This summer there were a number of commentaries on analysis suggesting that cereal has gone soggy. Cereal consumption is not as ubiquitous as it once was as consumers have so many other options available to them. And, despite a proliferation of new brands and varieties, very little innovation has taken hold. The result is that at least two of the big three cereal companies are feeling the pressure. Kellogg recently announced a sales decline and closure of some plants, and Post posted a loss.

The 2013 bright spot was definitely General Mills, indicative of the disproportionate amount of coverage they have received on this blog. They have actually had sales growth, and this is due to taking on the shifting cereal market aggressively. As I've already pointed out Big G leads the industry in use of social media, and gained attention with such things as provocative advertising and their popular monster cereal re-launch. They appear to be the company to beat right now.

In light of the challenges facing the industry 2014 should be an exciting one to watch. The Breakfast Bowl will be there to bring you the latest developments! (And, be sure to follow us on Facebook for even more cereal information and tidbits!)

Final word...

CEREAL PICK OF THE YEAR: There weren't any earth shattering cereal introductions this year, but the new one that stood out to me was Post's Grape Nuts Fit.

Has cereal gone soggy?

Earlier this month a story in Bloomberg Businessweek caused a stir when it pointed out that "On-the-Go Americans Are Ditching Their Cereal Bowls". The story highlighted recent financial results from Kellogg and General Mills revealing a decline in cereal sales. To counter the gradual shift way from breakfast cereal companies are experimenting with other breakfast foods, such as drinks and bars. Long-standing alternatives like Pop-Tarts are still doing very well.

There are likely many reasons for this shift. The most likely culprit, as the article suggests, is that our lifestyle is squeezing out cereal. Quicker options are definitely more appealing to many. But, that is not the whole story. The sales results of the big cereal companies may also be partly due to the move away from the big brands to smaller, niche brands that focus on health and innovation, and to more generic cereals sold in bulk or under store-labels.

Whatever the reason, there are some major changes happening around us in cereal. Even the fact that manufacturers are reformulating recipes and changing marketing approaches is an indication that cereal itself is not only changing, but its role within our culture is shifting as well. That's not all bad, but for cereal companies to strengthen their position they can no longer rely on the same old tired strategies. True innovation is necessary, and will be the difference for those who succeed in the future.

What do you think? Is cereal still an important part of your daily routine and life? What would you like to see?

Cereal Party

Celebrity news (i.e. gossip) holds no interest for me, but one story caught a little attention. A few days ago Taylor Swift won big at the Country Music Awards, but instead of a typical night out celebrating she had a "cereal party" at home with her parents.

Does that mean cereal is the new cool?

(Source: omg)

Technorati Tags: cereal, Taylor+Swift, breakfastbowl

The challenges for cereal

As I've pointed out before, the cereal industry is facing many challenges. Major companies are facing tough competition and decreasing profits. and cereal consumption is declining in North America.

A recent article in Food Navigator-USA provides an interesting review of these challenges based on a recent market research report. Mintel identifies the challenges as "low brand loyalty, market saturation and increasing competition from other channels". The biggest challenge is increased competition from the foodservice industry. At least once a week 34% of consumers eat breakfast from a fast food restaurant. In other words, cereal is not as attractive of a convenience food as it once was. It may not be convenient enough. Obviously cereal manufacturers have been trying to address this through the introduction of cereal bars, etc. but even these do not appear to be reversing the current trends.

Another study from Research and Markets indicates only 52% of survey respondents cited cereal as their top breakfast choice. The suggestion is that "many consumers are simply 'bored' with the segment".

More reason why the future of breakfast cereal must step out of the ordinary and into the truly innovative.

Technorati Tags: cereal, marketing, breakfastbowl

Caffeinated Cereal?

It seems the fad this year is chocolate versions of existing cereals.

Could caffeine be next?

A Colorado inventor, Dr. Robert Bohannon, has come up with a caffeine additive that can be easily added to virtually any food. It will be marketed under the brand name, Encaff. Obviously adding caffeine to cereal would be natural fit since many people depend on the stimulant to get going in the morning.

Caffeinated Corn Flakes anyone?

PRESS RELEASE

Technorati Tags: cereal, caffeine, breakfastbowl

Fortune article on Kellogg

In recent weeks I have made several references to the possible trend in decreased cereal consumption, especially as it relates to Kellogg. Fortune magazine has picked up on this with a brief article, highlighting how Kellogg and other cereal manufacturers are finding it necessary to expand into other foods to see growth in sales and profits. The article quotes an analyst who estimates that only 47% of Kellogg's revenues now come from cereal.

The trend watch continues.

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Technorati Tags: cereal, Kellogg, breakfastbowl

Cereal not as convenient anymore?

A recent study by Impulse Research Service (for Heinz) reveals that consumers are increasingly missing out on breakfast. This despite the fact that 85% of Americans believe that eating breakfast is important.

Very few people anymore go to great lengths to prepare a full breakfast. The advent of cereal over the last century has fit perfectly with our busy lifestyles, but it seems that even cereal isn't convenient enough for more and more people. The recent growth of cereal bars can be explained by this observation.

Some experts believe that the breakfast food industry will experience healthy growth in coming years, but it will be interesting to see if cereal as we know it continues to be a staple for our morning fare.

LINK to the article at Nutraingredients-USA.

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Technorati Tags: cereal, trends, breakfast, breakfastbowl, BreakfastBowl, The Breakfast Bowl