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08/16/2021

How Can the Cereal Aisle Reclaim Breakfast?

Sales drivers evolve to include mix of health, taste, indulgence and sentimentality
Barbara Sax
Contributing Editor
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How Can the Cereal Aisle Reclaim Breakfast?
Consumers want better-for-you options that are still yummy — think functional indulgence.

While the cereal category continues to face increased competition from other breakfast options, new products, particularly better-for-you items, are expected to provide upside for the mature category in 2022.

“Consumers are eating cereal more than pre-pandemic, but not as much as 2020,” says Sally Lyons Wyatt, EVP & Practice Leader, Client Insights, at IRI. Wyatt says that while growth of other breakfast categories, such as frozen breakfast food, refrigerated breakfast entrees, bagels and pastry/doughnuts, frozen breakfast, are outpacing the growth of cereal, the cost-effectiveness aspect of the cereal category could fuel growth during an economically-challenged year.

To provide true category growth, “cereal manufacturers and retailers will need to leverage digital and social media to discuss the positive points about their products including fun and exciting experiences,” says Wyatt. They will also “need to continue to innovate, renovate and move quickly to capitalize on trends and opportunities that meet consumers’ ever-evolving wants and needs,” says Tom Dixon, chief growth officer at Post Consumer Brands.

Experts believe the more healthful side of the category will be a primary driver going forward. “The hot cereal segment experienced stronger year-over-year percent growth in dollar sales in 2021 than the cold cereal segment,” says Kaitlin Kamp, US food and drink reports analyst, at Chicago-based market research firm Mintel. “As consumers emerge from the pandemic, health will be on their minds and products with health improvements will stand out.”

Kamp says healthful innovation is more likely to spark trial. Mintel’s research shows that consumers are more motivated to try a new cereal with claims of reduced sugar, added protein or added fiber than by products boasting indulgent mix-ins, co-branded flavors or limited-time flavors.

A number of new launches focus on nutrient-dense ingredients and less sugar, including Clif’s recently-launched ready-to-eat cereal and Kashi’s recent Simply Raisin product launch, the first in the brand’s portfolio to exclude added sugars. Purely Elizabeth is including seven grams of plant protein in its 5 Grain & Seed oatmeal products and Good to Go, maker of keto-friendly snack bars, recently introduced Grain-Free Granola, that is vegan and keto certified by the Paleo Foundation and has a low net carb and low sugar profile.

“We’re seeing demand from consumers wanting functional benefits beyond just good taste. Consumers are actively seeking better-for-you and clean label options that support their diet/lifestyle choices​ placing the bar higher for companies to not just deliver on health but taste as well,” says Alexandria Mottley, brand manager, Good to Go. Good to Go’s grain-free granola has as no added sugar, low net carb, organic ingredients, is gluten-free, keto certified and packaged in a resealable, recyclable pouch.

While healthier products are having a moment, there’s still room for permissible indulgence in the category.

“Product launches such as the Little Debbies Cosmic Brownies cereal and Post’s Dunkin-inspired cereals have generated strong sales in 2021,” says Kamp. General Mills added a number of indulgent cereals, including Dunkaroos Cereal, Chocolate Strawberry Cheerios and Cinnamon Toast Crunch Chocolate Churros, to its lineup at the end of 2020 and Kellogg’s recently launched a chocolate-coated cereal, Kellogg’s Special K Dipped Chocolatey Almond.

Familiarity is a strong flavor driver for the category; Mintel research shows that 58% of consumers say that cereal flavors they enjoyed as a child are still their favorites. “We’re seeing that consumers are drawn to tastes that remind them of their childhood and help elicit feelings of nostalgia and comfort,” says Dixon.

In honor of Pebble’s 50th birthday this year, Post launched a limited-time Birthday Cake Pebbles. “We’re also collaborating with other brands to give fans new ways to enjoy PEBBLES outside of the bowl,” says Dixon. Post has extended the Pebbles brand into other categories through collaborations with International Delight coffee creamers, Duncan Hines cake mixes and Frankford candy bars. Dixon expects product collaborations to be an opportunity for growth moving forward.

To capitalize on the appeal of fan faves, product mashups have become a new trend in the category. Kellogg's Mashups Cereal launched last year, added a new combo in May: Kellogg's Frosted Flakes and Apple Jacks.

Licensing tie-ins are also a key factor in the indulgence segment. Ahead of the theatrical release of MGM's animated sequel "The Addams Family 2" in October, Kellogg Company will launch a limited-edition spooky cereal collection that will transform Froot Loops, Chocolate Frosted Flakes and Apple Jacks for Halloween with marshmallow-shaped monsters, ghosts and bats.

Fruit combinations are perennial flavor favorites and IRI’s Wyatt sees increased interest in maple, chocolate combinations and cinnamon combinations.

food on a table
General Mills is among the U.S. cereal manufacturers relying on fun, familiar brands to spur sales in the mature category.

Snackability Is Bigger Focus

As consumers begin to learn, work and eat away-from-home once again, positioning cereal as a snack will help brands offset some migration to other breakfast options. Resealable stand-up packages and snack-size packages are helping to spark all-day snacking.

“Smaller packages actually calling out snack-size is a difference in current positioning,” says Wyatt. “Since indulgent snacking continues to see strong growth, snack positioning for cereal could be a growth driver.”

Mintel data shows that 35% of cereal consumers eat cereal as a morning snack and 33% consume it as an evening snack. But brands will need to adjust packaging to make snacking on cereal more convenient as well as target specific snacking occasions, such as evening snacking, to communicate the versatility of cereal.

“Knowing that people are increasingly eating more small snacks throughout the day, including cereal, we saw an opportunity to create more snackable and packable versions of two of our iconic cereals,” says Dixon. “We knew that portability would be key our new Honeycomb Big Bites and Pebbles Crisps come in larger, more snackable, no-mess forms and in portable packages to provide flexibility.”

Post Consumer Brands recently rolled out Post Pebbles Crisps and Post Honeycomb Big Bites cereal snacks in large snackable forms and sizes that make them ideal to dip, dunk, pop and pack. Competitor Kellogg’s recently extended its Froot Loops and Frosted Flakes brands into grab-and-go cereal bars and General Mills debuted Remix Snacking Mixes, which blend different cereals in one package.

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