Cereal has long been a breakfast favorite, but the category has stalled of late.
According to Schaumburg, Ill.-based Nielsen, overall cereal sales were down 2.2 percent for the 52 weeks ended Nov. 21, 2015, with the ready-to-eat segment seeing a 3 percent sales decline.
Even though “we all know that cereal has had a tough couple [of] years … the reality is this: Cold-cereal penetration in the U.S. still is hovering at about 90 percent,” said Craig Bahner, president, U.S. morning foods at Battle Creek, Mich.-based Kellogg Co., during an analyst day presentation last November. “Those 90 percent of households buy on average nearly 21 boxes of cereal per year.… Think about what can happen if we can get that consumer to buy just one more box of cereal.”
Bahner noted that the company’s core cereal business — comprising Special K, Frosted Mini-Wheats, Raisin Bran, Rice Krispies, Frosted Flakes and Froot Loops — was up, thanks to Kellogg’s efforts to drive category growth.
This strategy includes product innovation, particularly in relation to Special K, which he described as “our biggest and most important cereal brand.” Special K Red Berries — which Bahner quipped now has “you guessed it, more red berries” — has proved a success. “It’s stabilizing and driving our Special K business back to growth,” he affirmed. This year, Kellogg will launch Special K Nourish, which Bahner described as containing “ingredients like quinoa and almonds and real fruit and coconut,” going on to note that “we’re investing to drive high levels of awareness and trial behind this initiative and drive our Special K business.”
Additional Kellogg cereal innovations include Mini-Wheats Harvest Delights, which, in Bahner’s words, “starts with a very basic shredded wheat biscuit” topped with “real fruit bits [and] an amazingly sweet glaze”; Raisin Bran Crunch, now with more of the product’s signature crunchy clusters; and, perhaps most intriguingly, Kellogg’s To Go Breakfast Mix resealable single-serve pouches, a product made to be eaten without milk and featuring pieces larger than those of traditional cereal for what the company calls “optimal finger-to-mouth munching,” in a package designed to fit in a car’s cup holder.
Kellogg isn’t the only cold-cereal giant that’s busy innovating. Nature Valley, a brand of Minneapolis-based General Mills, has launched three new cereals — Baked Oat Bites, Honey Oat Clusters and Chocolate Oat Clusters — each containing at least 10 grams of protein when eaten with milk, and all touted as good sources of whole grain and fiber.
The company has also undertaken to remove all artificial colors and flavors from its cereals by 2017, and recently issued an update on its goal to reduce sodium by 20 percent across 10 key retail product categories by the end of 2015. As of December, it had reduced sodium in its cereals by 18 percent, which although falling slightly short of the goal, still represented “significant progress,” according to General Mills.
Further product moves from the company include introducing five gluten-free varieties of its iconic Cheerios brand, to take advantage of the burgeoning free-from market. Although oats, from which Cheerios is made, are naturally gluten-free, “General Mills made big investments to remove the traces of wheat, rye and barley that typically came in contact with the brand’s whole-oat supply,” according to Rockville, Md.-based Packaged Facts. In late 2015, David Sprinkle, research director for the market intelligence firm, observed, “Even excluding sales of [the first mainstream gluten-free cereal] General Mills’ Chex, we estimate that sales of gluten-free cereal increased 18 percent between 2013 and 2014, to reach $38 million last year.”
Also catering to the gluten-free crowd is East Hartford, Conn.-based Bakery On Main, whose Bunches of Crunches is described by founder and President Michael Smulders as “a chocolate superfood ‘grain-ola’ cereal that is packed with amazing flavor and superfoods like cacao and chia.” The ready-to-eat cereal line comes in Dark Chocolate Sea Salt with Chia and Coconut Cacao varieties.
According to Smulders, Bakery On Main’s gluten-free cereals “address the consumer’s desire for great taste, clean ingredients and trusted products.”
Some Like it Hot
The hot-cereal segment, which has enjoyed a recent upsurge in popularity, saw its sales dip by 0.7 percent, according to Nielsen for the 52 weeks ended Nov. 21, 2015, most likely as a result of so many new products flooding the market.
Smulders notes that “the increased interest in hot cereal and portable breakfast options has created a decline in traditional boxed cereal.”
Meeting both of those needs is the company’s instant-oatmeal line, which “combines certified gluten-free oats with ancient grains chia, flax, quinoa and amaranth, making it a good source of protein, fiber and omega-3,” he notes. “The new Variety Pack offers two packets each of our Maple Multigrain Muffin, Strawberry Shortcake and Apple Pie Instant Oatmeal flavors.”
Additionally, for those who like their oatmeal old-school — that is, without ancient grains or other trendy added ingredients—the company offers the Happy Oats line, which comes in Steel Cut, Rolled and Quick Oats varieties, all packaged in 24-ounce vertical bags with “an ‘inno-lok’ seal that provides a high level of convenience to the consumer while displaying the product’s information in a clear yet engaging manner,” says Smulders. “These oats are monitored by a third-party certifier from farm to table, showing that they can be trusted while also providing the perfect texture and taste.”
On the mainstream oatmeal front, Quaker Oats, a Chicago-based unit of PepsiCo, not only recently marked the 100th anniversary of its familiar canister, but also continues to launch new products. Last month saw the nationwide rollout of Quaker Gluten Free Oatmeal in three varieties: Quaker Quick 1-Minute Standard Oats and single-serve pouches of Quaker Instant Oatmeal in Original and Maple & Brown Sugar flavors.
While hot- and cold-cereal sales saw sales decreases for the 52 weeks ended Nov. 21, 2015, Nielsen found that granolas and natural-type products experienced a substantial 8.3 percent uptick in sales during the same period.
Noting that “most of the [cereal] category is overly processed, and it has a lot of sugar and minimal nutrition,” Aaron Anker, “chief granola officer” and co-owner of Brownfield, Maine-based organic granola and hot-cereal maker GrandyOats, asserts: “Consumers are looking for cleaner, less sugary foods. Granola fits that bill, and often offers fiber and protein, too. Nuts and antioxidants remain in demand and are added components consumers look for.”
The company’s newest products are Family Value Size Honey Nut Granola and Vegan Vanilla Almond varieties in 48-ounce packages, and 13-ounce Coconut + Fruit and Wild Blueberry SKUs. “Partnering with like-minded farmers and producers in product development … helps maintain a commitment to shared values, with emphasis on a short, clean list of ingredients,” observes Anker. “Sourcing locally whenever possible and making small batches by hand also make a huge difference.”
For its part, General Mills has bolstered its presence in the segment with Cascadian Farm’s Farm Stand Harvest granola in four flavors, including Cranberry Maple Wild Rice, which is available exclusively at Target, and Nature Valley Granola Crunch in Oats & Honey and Cinnamon varieties.
Fundamentals of Selling
When it comes to marketing, Kellogg focuses on the “need to create shopping experiences that inspire consumers to go down that aisle and pick up that cereal and put it in their basket,” as Bahner noted at the company’s analyst day last November. “That starts with getting the fundamentals right. The three fundamentals … are perfect shelf, account plan effectiveness and win at retail.”
According to Bahner, “Perfect shelf is about having the right brands, the right products, the right foods, in the right spot on the shelf, when the consumer wants it, and when the shopper goes down that aisle, so they can find exactly what they’re looking for. Through some very strong category management work and through managing our assortment, we’re seeing our base SKU velocities grow, meaning our shelf assortment is being much more productive and generating more sales.”
He explained account plan effectiveness as “a measure of both the efficiency and the effectiveness of the trade spending that we put out in the marketplace. We’ve done a lot of work to make sure we’re getting the best bang for our buck, the best ROIs.”
The third fundamental involves “getting those Kellogg sales reps back in the stores at the point of sale, and winning in each and every retail location,” explained Bahner, adding that the company was “up to 57 percent of our volume being covered by Kellogg sales reps. [As a result,] we’re seeing our share of display up 5 percent in 2015 versus 2014.”
Further, “we believe it’s our responsibility as the market leaders to help our customers, our retail partners, think about better ways to drive growth in the category,” he asserted. “So we set our aisle up in an age flow with kids, all family, adults. We’ve got this now in 40 percent of our ACV, and we’re seeing a 200-basis-point increase in category sales growth in stores that have the age flow set versus stores that have the traditional manufacturer set.… We’ve [also] created a dedicated on-the-go set that is now in 54 percent of ACV, and we’re seeing that drive our cereal-in-a-cup line up 10.5 percent, indicating that we’re better meeting the shopper’s need for that portable occasion and that immediate-consumption need.”
Over at Bakery On Main, “[w]e focus our promotional efforts on getting people to taste our products, because when they do, they become fans,” says Smulders, adding: “We know that whether a person lives a gluten-free lifestyle or not, they still eat and enjoy our products because they love the taste. So our products need to be visible in a location that makes sense to the natural products consumer. Whether in a shipper or off-the-shelf display, the merchandising that works best for [our] cereal is located in the natural cereal set, where the consumer expects to find us.”
Another alternative is to take your product on a trip — or several. “2015 was a big year on the road for GrandyOats,” observes Anker. “The GrandyOats team drove the OatsWagon, an Oatified Ford Transit Eco Boost, up and down the Northeast on more than 40 granola tours.… The OatsWagon stopped at a wide variety of demos, events and trade shows that support small businesses and handmade products. From Montreal to Baltimore, the GrandyOats team threw out peace signs and free high-fives along the way. There was true consumer engagement, with plenty of smiles and social media from the road.”
Grocers can also do their bit to raise the profile of better-for-you cereal offerings like GrandyOats. As Anker put it, “Retailers can help by calling out cleaner products and emphasizing education and encouraging label reading.”
“Consumers are looking for cleaner, less sugary foods. Granola fits that bill.”
—Aaron Anker, GrandyOats
“We believe it’s our responsibility as the market leaders to help our retail partners think about better ways to drive growth in the category.”
—Craig Bahner, Kellogg Co.
“Whether a person lives a gluten-free lifestyle or not, they still eat and enjoy our products because they love the taste.”
—Michael Smulders, Bakery On Main