Cereal sales are soggy, but manufacturers remain optimistic
Even though sales declined 2.3% from this time last year, cereal makers remain optimistic that a turnaround is coming soon. “We’ve continued to gain share in kid-oriented brands like Frosted Flakes and Froot Loops, which have brought to market innovation and brand building that have excited consumers, and we’ve continued to improve our profit margins through effective productivity initiatives,” Paul T. Norman, senior vice-president and president of Kellogg North America, told Food Business News.
Among the top cereal makers — General Mills, Kellogg and Post — only Post saw a year-over-year increase in dollar sales — up 0.14% from the same period last year. While cereal makers saw growth in kid-oriented cereals such as General Mills’ Lucky Charms and Reese’s Puffs, adult cereals didn’t enjoy the same success.
Changing consumer behavior, with more people looking at healthier or more convenient alternatives, is affecting cereal sales. To counter this, cereal makers are looking to attract consumers through marketing, grab-and-go packaging and nutritional value-adds.
A bowl of cereal and milk used to be a staple of the American breakfast table, but years of soggy sales show that times have changed. From 2009 to 2016, cereal sales decreased 17%, with little reason to believe things will change anytime soon.
Busy consumers agree that breakfast is the most important meal of the day. That sentiment is reflected in the fact that breakfast occasions are expected to grow 5% through 2019 as more people eat the meal both at home and away. But when they eat at home, they want healthier, traditional breakfast meals, such as eggs. When they take breakfast with them, they want something portable, such as a cereal bar, fruit, protein shake or bottled smoothie.
A recent survey found 25% of people spent fewer than five minutes on breakfast, and 50% about 15 minutes, according to Nutrition Insight. In the survey, 85% of consumers said they eat breakfast daily. Of those who skip breakfast, 39% say it’s because they don’t have time for the meal. In addition, 78% of the respondents said breakfast should be convenient to prepare and eat.
For a growing number of consumers, assembling dry cereal, milk, a bowl and a spoon is viewed as too much hassle in the morning.
One positive outcome from the change of eating habits is that when consumers eat cereal, they no longer primarily eat it during breakfast. Cereal, with or without milk, has become an anytime of the day snack. That gives cereal makers additional options to build consumer interest — cereal can now be eaten as a nutritious second breakfast, a healthier alternative to potato chips in the afternoon or a substitute for a bowl of ice cream at night.
Even as consumer habits have shifted, cereal makers admit they haven’t kept up with this change. Consumers claim they want cereal that tastes good, has more protein, and is healthy. However, consumers don’t necessarily like the lower-sugar versions of popular brands. Cereal makers have struggled to find the right answer, but hope that adding variety to current offerings will help. Kellogg introduced Chocolate Frosted Flakes and Cinnamon Frosted Flakes in November, anticipating that the new, indulgent flavors will appeal to consumers.
“Where we’ve fallen short is on bringing enough excitement to our adult-oriented health and wellness brands. This is the segment that is most holding down the entire cereal category’s sales and especially ours," Kellogg's Norman told Food Business News. "What we have to do is get back to running the playbook that worked well for us before this year, and that is working well for our kid-oriented brands today.”
The cereal makers also have answered the demand for portability by reconfiguring some of their top cereals into bars. Kellogg also ventured into the restaurant business with the Kellogg NYC Café featuring imaginative cereal creations (think Rice Krispies with strawberries and green tea powder). After a successful trial, the store is scheduled to re-open this month in a larger space in Manhattan.
Traditional cereal eating may never be as popular a breakfast activity as it once was, but by answering current consumer demands and introducing new ways to eat the product, manufacturers should be able to keep cereal a relevant part of the consumer's diet.