Consider a makeover
Times are tough in the cold cereal business. Back in November, Battle Creek, Mich.-based cereal giant Kellogg Co. announced plans to cut its workforce, citing declining cereal sales. If Tony the Tiger – and all of Kelloggs new product development and marketing support muscle – cant motivate more consumers to buy cereal, then how can private label compete?
According to \"Breakfast Cereals – US,\" an August 2013 report from global market research firm Mintel, cold cereal dollar sales fell 9 percent during the past five years. Meanwhile, data from Information Resources Inc. (IRI), a Chicago-based market research firm, show the total cold cereal category (including granola) down 2.6 percent in dollar sales and 2.5 percent in unit sales for the 52 weeks ending Dec. 1, 2013. And store brands declines were even steeper (see the table, p. 64).
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Hot cereal fared better, with the IRI data showing positive dollar and unit sales growth during the timeframe. Its positive health halo could extend to other cereals with careful product development and marketing, Mintel notes.
Fight back
In addition to reduced cereal consumption overall, store brands steeper declines relative to the total cold cereal category can be attributed in part to increasing consumer confidence – and more willingness to splurge on name brand products, says Amanda Topper, food analyst at Mintel.
\"Further, smaller specialty brands grew nearly 5 percent [between 2012 and 2013], taking away market share from private label.\"
If store brands are going to compete with name brands, retailers will need to focus on offering high-quality, lower-priced options that still meet consumer preferences for better-for-you products, Topper says.
Do
consider launching cereal products that mesh with snacking and health and wellness trends.
Dont
be afraid to be creative when it comes to granola inclusions.
Retailers also have opportunities tied to packaging that helps make cereal a food that can be eaten anytime, anywhere.
\"Individually sized and resealable packaging will make it easier for cereal to be eaten throughout the day as a snack,\" Topper says.
As a value-added ingredient, protein also represents an opportunity area on the store brand side, Topper says. Super seeds and ancient grains, too, are becoming popular additions to cereal, especially hot cereal.
\"Oatmeal is already helping drive growth within the cereal category, as cold cereal sales are struggling,\" she adds. \"Ingredients such as chia seeds or quinoa, as additions to both hot and cold cereals, will be attractive to consumers looking for more nutritious options.\"
Target adults
Because the number of U.S. households with children is declining over time, it will become more important for retailers to focus on other demographics to attain category growth. The cereal category is positioned well for slight growth, mostly due to the hot cereal segment. To combat stagnant sales, manufacturers will have to target adults and expand usage occasions to revitalize sales, Topper says. Key to attracting the adult demographic are better-for-you (BFY) options and nostalgic marketing.
\"More than two in five Americans have noticed an increase in the price of cereal in the past year, positioning private label as a low-cost alternative,\" she says. \"In order for these brands to maintain a hold in the market, they will need to keep up with consumer demands for BFY options that mirror leading brand offerings. Innovation within the hot cereal segment is a key opportunity for growth as consumption increases.\"
Focus on granola
On the other end of the cereal aisle, the granola and trail mix category has been evolving during the past five years from a category shopped by hikers, campers and health-conscious individuals to one shopped by mainstream cereal and snack shoppers. The change has resulted in sales \"doubling or tripling\" for some companies, says Richard J. Anderson, vice president, World Wide Gourmet Foods, Woodinville, Wash.
\"Private label granola has been substantially growing,\" he says. \"Clear packaging has helped consumers see the product and validate their trust, more than a picture can.\"
According to Todd Whitten, vice president sales, Tulocay & Co., Napa, Calif., some retailers that entered this category early put little thought into the granola, thinking they just needed to get it on their shelf and it would sell.
\"Unfortunately, this wasnt the case with the mainstream shopper,\" he says. \"In some cases, the granola that was put on the shelf was bland and without inclusions – fruits and nuts – and was not appealing to the mainstream consumer, and the packaging was not [on] par with the cereal industry.\"
However, over the past two years, Whitten says the category has evolved to include better-tasting products and packaging.
He notes that his company was one of the first to offer a large variety of inclusions, including seeds, mangos, blueberries, banana chips, cherries, cranberries and a variety of nuts.
Pam Clark, vice president of sales and marketing for Greenfield, Mass.-based New England Natural Bakers, believes consumers dont select granola based solely on price.
\"It really is about picking a quality product,\" she says, adding that its beneficial for retailers to provide a variety of options and price points for shoppers.
Whitten says his company \"really likes what A&P, Williams-Sonoma and Harry & David have done\" with their store brand granola programs.
Do
offer snack-sized packaging among store brand granola options.
Dont
ignore the hot cereal category – healthful items here are positioned for growth.
\"The products they are shelving look and taste great; the packaging is new and innovative and invites the consumer to try it,\" he says.
For other retailers to succeed here, its critical that they communicate well with their private label partner from the beginning and know their customer base, Clark notes.
She also sees the granola category trending toward more healthful choices.
\"I see more high protein for breakfast [and] snack options, less processed sugar, more whole grains and ancient grains, non-GMO and organic,\" she says.
Granola is becoming a mainstream snack with more inclusions such as fruits and nuts to appeal to a broader range of consumers, Whitten says. He also sees opportunities in protein-enriched granola, which is already popular with athletes and weight lifters.
Communicate to shoppers
When offering high-end granola, retailers face a challenge in conveying to consumers why they should pay more for such products.
\"From manufacturer to retailer, everyone has to show the price is covering quality ingredients that are substantially more than just oats and honey,\" Anderson says.
To that end, tasting programs and displays outside the cereal aisle – such as in the bakery and on end caps – are helpful, he says.
And packaging that caters specifically to snack occasions will reinforce the message that granola fits those occasions, Whitten suggests.
\"The packaging will be smaller: 1.5 ounces to 4 ounces,\" he says. \"Also, the packaging will be brighter and appeal to a new generation of consumers.\"
Anderson agrees that smaller (and low-sugar) snack-size packages will appeal to consumers, particularly to moms looking for a portable healthy snack.
\"Its a good idea to group together smaller low-sugar granola packs for moms to give their kids as snacks or part of lunch,\" he says.
| Look whats new |
| New from Pleasanton, Calif.-based Safeway Inc. is Safeway Kitchens Strawberry Almond Oatmeal. The instant multigrain oatmeal is made with whole grain and real fruit. It is said to be naturally flavored. The kosher-certified product retails in a 2.6-oz. microwavable tub. |
| New from Cincinnati-based Kroger Co. is Simple Truth Cranberry Apple Cinnamon Cluster & Flake Granola. The kosher-certified product combines whole-oat and pumpkin seed clusters with a touch of autumn spice and wheat-rice flakes blended with dried cranberries and apples. It is said to be a good source of dietary fiber and is free from 101 artificial preservatives and ingredients. It retails in a 16-oz. box made from 100 percent recycled paperboard. |
| Millville Blueberry Crunch Squares Whole Wheat & Rice Cereal from ALDI Inc., Batavia, Ill., features redesigned packaging. It is said to be a good source of 12 vitamins and minerals. The cereal contains is made with real blueberries and contains 0g trans fat and 10g of whole grains per serving. The kosher-certified product retails in a 13-oz. recyclable box made from 100 percent recycled material. |
| Source: Mintels Global New Products Database |