The recent downturn in the economy seems to be affecting almost every industry, not just banks and auto companies. Although food in general is a staple, a prolonged recession will have an impact on consumers' choices and buying habits. This will include cereal.
Recently the big three cereal companies (
Kellogg,
General Mills, and
Ralcorp [Post]) have shown positive financial results. But this reflects the past, not necessarily the present or the future. The question is: Will consumers continue to purchase cereal as in the past when their personal finances are squeezed?
It appears that even the big companies question this. For example, Kellogg recently launched a
campaign on their website promoting the "value of a Kellogg breakfast", which costs less than 50 cents a bowl, including the milk. Obviously they wan to prevent any changes in perception.
Nevertheless, the big winners in the coming months could be low-cost manufacturers like
Malt-O-Meal, whose sales continue to rise. In the end people will likely to continue eating cereal, but will find their satisfaction in bulk sizes, knock-off recipes, or generic brands. This will also be an opportunity for innovators, but not on the high-end. Companies that can bring new value to the cereal aisle have much to gain.
We'll keep watching these developments.
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