- Last week, Post Consumer Brands filed a lawsuit against General Mills for patent infringement for both its new bagged cereals and the way the cereal giant is displaying the product on grocery shelves, reports Food Business News. Post claims that General Mills’ plastic merchandising system design is virtually the same as the one it introduced to retailers in 2016.
- According to information filed in the lawsuit, the Post Merchandising System has “improved the ‘shopability’ and appearance of bagged cereals for consumers and, in turn, has attracted new consumers and broadened Post’s customer base.” Post also claims that the system drives visual impact at the shelf to combat consumer perceptions that bagged cereals are inferior to boxed cereals.
- Post has been selling bagged cereals since its 2015 acquisition of MOM Brands, maker of Malt-O-Meal hot wheat cereal and ready-to-eat bagged cereals. General Mills, on the other hand, more recently launched its own line of bagged cereals at some retailers, including Walmart and Iowa-based Hy-Vee.
The clash between these two breakfast titans reflects the competitive and beleaguered state of the cereal segment. As both consumer demand and sales wane, manufacturers are racing to find innovations and marketing tactics that lure consumers back to the classic breakfast product — which is why Post is fiercely defending its retail merchandising system.
Linda Fisher, director of corporate communications for Post, told the Star Tribune that the company believes its new display system is a big reason why its sales of bagged cereal have risen 6% over the last year. “Because the Post Merchandising System optimizes the shelf space and functions well with shorter stacks of cereal bags, Post is able to add a fifth shelf to the bagged cereal section and stock 25% more bagged cereals on shelves than with the old wire merchandising system,” the company said in the lawsuit.
General Mills is the leader of the ready-to-eat cereal market, according to IRI data, capturing just over 30% of category sales. Kellogg follows in second place with a 29% share, while Post comes in third with 19%. But unlike sales growth seen at Post, General Mills’ cereal sales have fallen 3% in the last fiscal year. Post claims in the lawsuit that “[General Mills] has now sought to capitalize on Post's bagged cereal success by rushing to enter the bag cereal market with a copycat merchandising system that imitates Post's innovative divider and merchandising system for bagged cereals."
Lawsuits are nothing new in the food manufacturing world. Manufacturers are familiar with food labeling litigation, food recall issues and slack-fill suits that challenge the extra space in food packaging. Breakfast cereals with added sugar have been targeted, with attorneys arguing consumers mistakenly believe Froot Loops and Cap'n Crunch contain fruit. Courts have been known to throw out some of the most questionable cases, but litigation surrounding merchandise display systems isn’t that commonplace, so it will be interesting to see how this case unfolds.
This particular dispute is also interesting because it puts retailers in the middle of CPG marketing chaos. Retailers have both merchandising display systems at their disposal. Both units can and probably should be used in-store — especially if it results in greater consumer awareness and interest in the product, and a sales lift for the respective brands and category as a whole. Still, it’s up to the retailer whether or not they choose to use one system over another. More than likely, they’d opt for the market share leader or category captain, which is likely to be General Mills.
So, it seems Post may indeed have a fight on its hands. The company has more at stake in the cereal display battle than does General Mills. Ready-to-eat cereal is Post’s largest segment, accounting for 34% of company sales and contributing the biggest chunk of the company’s profits. For General Mills, cereal is the second-biggest contributor to the company’s U.S. retail sales (23%) just behind meals (24%). It will be interesting to see how this dispute settles, and if other cereal makers try to shoulder their way into the bagged cereal game.