The Cereal Bowl Is Half Full

Depending on how you look at the future of the longstanding ready-to-eat cereal category, the bowl could be half full or half empty. But with a bevy of new products in the pipeline that would excite even Tony the Tiger himself, along with ideas on how retailers can better display and promote the category, major cereal manufacturers are decidedly optimistic going into 2018.
A realist would point out that current sales data for the category paints a rather soggy picture: Cereal sales have been on the decline in recent years, and the latest Nielsen figures find that overall sales of ready-to-eat cereal with UPC coded items reached a new low last year—$8.46 billion for the latest 52 weeks ending Oct. 28, 2017. That’s a 3.2% decline from 2016, which contributed to a compound annual growth rate in sales of –2.6% over the past four years (from 2013 to 2017).

But a few trends indicate that the category could soon rebound, as long as suppliers stay focused on their core customers while paying close attention to changing consumer eating habits. Two trends that show the most promise are kids’ love of cereal and all-day snacking.
In fact, sales of kids’ cereals have showed the most resilience in recent years, which isn’t much of a surprise considering cereal has a 97% penetration rate among households with kids. Manufacturers’ efforts to add more excitement to the category via licensed products and fun promotions have certainly helped. Perhaps their greatest challenge is maintaining healthier profiles with less sugar, while not compromising on taste.

Cereal has also fared relatively well in eating occasions outside of breakfast, thanks to an increase in Americans’ preference for eating small bites around the clock.
Scott Baldwin, director of marketing for cereal at Minneapolis-based General Mills, says his company has closely followed this trend. “While cereal is primarily a breakfast food, we are seeing the trend of cereal being consumed at various times outside of breakfast,” he says. “Examples include a great snack at the office or after school, and after dinner as a dessert or late-night snack.”
According to Nielsen, annual household spending on individually packaged snacks increased more than 1.1% over the previous year, with almost every household in the United States purchasing these items at least once for quick and convenient consumption. While consumers weren’t always taking the time to fix a bowl of cereal, individual bars—which include cereal/granola bars—saw the strongest absolute dollar growth with an increase of $633 million.

General Mills and other major suppliers are forging ahead with new products that speak to the latest trends. “We believe we can continue to drive improvements in our cereal business by putting the consumer first and consistently delivering on their needs with innovation and renovation, just as we’ve been doing,” says Baldwin. “Our job is to make cereal people love, and we work very hard to ensure we have a flavor and cereal to fit nearly every need.”
He hints that General Mills will be launching “several exciting new products” this month. Those items follow last year’s release of Apple Cinnamon Toast Crunch and Blueberry Chex in the summer, as well as seasonal favorite Pumpkin Spice Cheerios, Chocolate Peanut Butter Cheerios and a winter seasonal return of a fan favorite, Banana Nut Cheerios.

Over at Kellogg’s in Battle Creek, Mich., innovation has been just as alive. Video gamers are abuzz with excitement after Kellogg’s announced last month that it has joined forces with Nintendo to launch “Super Mario”-themed cereal. The mixed berry cereal features marshmallows that are in the shape of classic Mario images. And limited-edition boxes have Amiibo functionality, which means that when they’re scanned by a Nintendo Switch console, users can unlock bonus hearts and coins in the game “Super Mario Odyssey.”
Meanwhile, Kellogg’s just opened the doors of its new permanent Kellogg’s NYC Cafe in the Union Square neighborhood. This is the second iteration of the cereal cafe (the first location was in Times Square), and it’s five times the size of its former location. Kellogg’s describes it as “a place for foodies and people to chill, and create and explore the endless possibilities of cereal.”

Efforts such as these might provide inspiration for retailers to think out of the box, so to speak, as they take a broader look at cereal trends. Instead of limiting cereal to one center store aisle, grocers would be smart to consider more cross promotions and secondary displays with milk, yogurt and even prepared foods. (Why not take a page from the cereal cafe and experiment with new recipes?)
And just as important is getting the right mix of brands and sizes in the dedicated cereal aisle, especially considering that the average household buys seven cereal brands in a typical year.
Baldwin notes that General Mills advises its grocery customers to combine new products with well-known, established ones on display to maximize sales. “We will continue to work with our customers to find the best display options for our products in their stores,” he says.
As long as retailers and suppliers work together, there’s no reason the bowl can’t be on its way to being full.