Supermarket GROCERY Business: Breakfast champions

Silly category managers, Trix are for kids. So why are you merchandising them on the top shelf? To maximize the sales and profit potential of your breakfast cereal category, know your audience. That means placing children's boxes at small-fry eye level and keeping abreast of the latest movie, cartoon, and hit toy trends, not to mention manufacturer-sponsored Web sites.

Now more than ever, retailers have to keep on top of the breakfast cereal aisle. According to ACNielsen in Schaumburg, Ill., supermarket sales of ready-to-eat cereals, of which children's cereals are a key component, were $6.17 billion for the 52 weeks ended Dec. 28, a decline of 0.8 percent from the $6.21 billion sold in 2001. But things are getting better. In 2001, sales declined 2.3 percent, and they dropped 4.9 percent in 2000.

The declines can be attributed to several factors. For starters, there are far more breakfast options available. In addition to government-sponsored school breakfast programs, a stop at McDonald's on the way to school for a quick Egg McMuffin, orange juice, cinnamon roll, and hash browns constitutes the idea of a well-balanced breakfast in many households. At home, offerings from sister supermarket aisles, including Aunt Jemima pancakes, Pillsbury Scramblers, Toaster Strudels, and Swanson Great Starts meals in the frozen foods case are fighting for share of stomach. Plus, supermarkets are getting competition from the cereal aisles of supercenters, warehouse clubs, and drug stores. And some kids are so time pressed they don't have time for any breakfast at all.

Appeals to kids and moms

In an effort to make sure kids find the time, manufacturers keep reinventing their cereal offerings, continuously rolling out new products and remaking old ones through new flavors, line extensions, premiums, Web sites, and flavor and nutritional enhancements that appeal to both kids and their moms.

"Making our brands even more relevant to consumers through effective advertising, breakthrough packaging, exciting promotions, and—most importantly—strong product offerings will continue to help us build powerful brands," says Shelly Dvorak, a spokeswoman for General Mills in Minneapolis.

"The first thing we've got to do is make sure we are giving moms an option to give their kids a good breakfast to start their day," says Thano Chaltas, senior category business director at the Post Cereals division of Kraft Foods in Rye Brook, N.Y. "We know that breakfast is the most important meal for kids, and it is the most frequently skipped. That is why at Post we always fortify our kids cereals with 10 essential vitamins and minerals so that mom can feel really good about serving them to her children."

"Taste is still one of the key drivers to a successful kids' brand," says Jenny Enochson, director of communications, at Kellogg Co. in Battle Creek, Mich. "Successful kids' brands need to taste good while providing fun and excitement at the breakfast table."

One of the ways Kellogg makes excitement is through product development. New offerings making their way to store shelves this year include Kellogg's Mud and Bugs, a joint venture with Disney featuring a rock-shaped cereal fortified with 11 vitamins and minerals that creates a chocolate milk "mud" filled with colorful marshmallow bugs that kids can dig up just like Pumbaa and Timon do in The Lion King.

Targeting kids ages six to 11, Kellogg's Smorz cereal combines chocolate, graham, and marshmallow to create a s'mores flavor.

Kellogg's Cinnamon Krunchers is a crispy, crunchy, cinnamon rice cereal targeting kids ages eight to 12, and the first non-flake line extension for Tony the Tiger. Kellogg chose him because he is trusted, has an 88 percent awareness rating, and is ranked as one of the top three cartoon characters in terms of coolness.

Enochson notes that while the amount of merchandising for the ready-to-eat cereal category has increased by approximately 4.2 percent over the last four years, merchandising around kid brands has outpaced the category with a 5.9 percent increase, while Kellogg's kids' brands have increased by approximately 7.4 percent over the last four years.

"We believe that our promotions allow consumers to get closer to the characters they know and love, like Mickey Mouse, Winnie the Pooh, Spider-Man, and Scooby Doo," Enochson says. "We prefer promotions and premiums that appeal to the entire family and that have a strong kid appeal. Premiums add value to a product and serve as a bonus to our loyal consumers and as an incentive to encourage trial by new consumers."

That is exactly what Quaker Oats is accomplishing with its Cap'n Crunch Airheads Berries limited edition cereal that is flavored with "berries" in four flavors and colors of the popular Airheads candy, and includes a Blue Raspberry Airheads bar as a premium. "Our challenge—and the industry's challenge—is to remind consumers of the fundamental attributes of this category," says Susan Wolfe, manager, p.r., at Quaker Foods and Beverages in Chicago. "We must continuously innovate in ways that keep them coming or, in some cases, bring them back to this category." Regarding the current Airheads promotion, Wolfe says, "Kids love Airheads candy and they love Cap'n Crunch cereal, and they're going to be excited about the combination. Quaker has produced a television commercial to support the promotion airing on several networks, including Nickelodeon and Cartoon Network."

"When kids go into a supermarket they love to run to the cereal aisle and the candy aisle," notes Bob Howard, v.p. of marketing at Perfetti Van Melle USA, the Erlanger, Ky.-based manufacturer of Airheads and Mentos candies. "When you have the opportunity to bring together two strong brands who share a common consumer and a common strong local target, it makes a lot of sense from our side. This is a great sampling opportunity. The retailers win as well because there is a lot of vitality and interest brought to the category."

With its literally smashing graphics and bright colors, Post's new Hulk cereal is almost certainly guaranteed to be a top seller this summer. Tied in to this summer's Incredible Hulk movie, the limited edition "in-and-out" product contains sweetened corn puffs with marshmallows in the shape of a green Hulk, red bricks, two-color beakers, and yellow "explosions."

"Everything we hear tells us this is going to be one of the blockbuster movies of the summer," says Post's Chaltas. "Post is creating excitement in the cereal aisle, and leveraging that excitement around the movie."

Post's other new cereal, which launched in January, is Strawberry Blasted Honeycomb, in which half of the honeycombs are "blasted" with strawberry flavor and color. "This demonstrates our commitment to building upon our strong and established businesses," Chaltas says.

Over the years, the children's cereal business has changed to include a broader use of promotional vehicles. "There are impact premiums, instant wins, on-pack games, sweepstakes, high-value self-liquidating offers, and a broader and deeper use of promotional partners," Chaltas says. "For Post that includes things like Cartoon Network, Nickelodeon, and Major League Baseball. We look at how we can build upon the promotion that those partners have with kids, and bring to them the power and excitement that our brands provide in order to build a really exciting and compelling promotion that is going to get kids excited when mom buys that product and brings it home."

Bags versus boxes

Moms on a budget have been known to bring home bags of Malt-O-Meal cereals and secretly pour them into boxes of their name brand counterparts. Malt-O-Meal's sales have been on the upswing since it instituted its Profit Plus Program last year. Since Malt-O-Meal comes in plain bags instead of colorful boxes, the Profit Plus Program includes a display featuring a product image panel so consumers can compare Malt-O-Meal to the name brands.

"If a consumer buys our Tootie Fruities, they get a product that tastes every bit as good as Froot Loops because we use the same technology to produce it, but they get 50 percent more product and the retailer gets more money," says Chris Neugent, v.p., sales and marketing, at Malt-O-Meal Co. in Minneapolis.

Organic cereals are fighting a different battle against the majors, since their lines are not sugar-laden and don't offer plastic toys as a premium. "We probably have 40 to 60 percent of the total sugars compared to the mass market alternatives," says Cynthia C. Davis, e.v.p. at U.S. Mills, Inc., in Needham, Mass. "We use evaporated cane juice to sweeten our cereals. It isn't refined like cane sugar, but it is a cane sweetener."

U.S. Mills manufactures the New Morning line of "all family" cereals that include Cocoa Krispy Rice, Frosted Corn Flakes, and Apple Cinnamon Oatios.

Barbara's Bakery also considers its Puffin line of cereals to be all-family, but the line—available in Original, Cinnamon, Peanut Butter, and Honey Rice—was recently re-launched with new packaging showing a large Puffin bird on the box. "I think children will look at the box and go, 'Oh look a bird,'" says Jennifer Ramstad, marketing manager at Barbara's in Petaluma, Calif. "The new packaging has some really bright colors that pop out, and I think kids are attracted to that as well."

They also like the brand's "Adopt a Puffin" program. Children can collect box tops, and for every 250 they get to adopt a Puffin for a year. "We're encouraging groups such as schools and after-school programs to pool together the box tops and send them in," says Ramstad. "For each class that submits 250 box tops we'll put their name on our Web site, let them name their own puffin, and they receive a certificate courtesy of the Audubon Society's Project Puffin."

Organics and causes

With its EnviroKidz line, Nature's Path Foods is also finding that many kids are more interested in helping the environment than in getting a free prize. "As a leader in the organic cereal category, we wanted to make an organic cereal that tastes good," says David Neuman, v.p., sales and marketing, global business, at Nature's Path Foods in Delta, B.C. "We did some market research and tied it in to cause marketing, which has a special place in children's hearts, especially with animals." Nature's Path works with the World Wildlife Trust, World Wildlife Fund, and the Diane Fossi Foundation, giving 1 percent of its gross sales to charity.

EnviroKidz uses evaporated cane juice and coats its new Cheetah Chomps cereal with inulin. "Inulin is a natural sweetener, adds fiber, and is a probiotic, stimulating the growth of good bacteria in the gut. It also helps with calcium absorption," Neuman says. However, most EnviroKidz cereals are not vitamin-fortified, partly because in Canada fortified cereals have to be marketed as a meal replacement.

"We did a survey, and parents tell us that they give their kids a multivitamin and fortified orange juice, so they don't want to pack the cereal with too much stuff. But children definitely do not get enough fiber in their diet, and that is a key selling point," he says.

So is the fact that EnviroKidz does not change the color of the milk. "We did four focus groups with different kids, and overwhelmingly they said they really don't care about the milk turning color. They've been there and done that, and it doesn't impress them," Neuman says. Luckily, bold flavors, catchy packaging, free in-pack premiums, environmental causes, and exciting Web sites still do impress.
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