Once a staple of breakfast, the bowl of cereal soaked in milk has lost its appeal as more American consumers shift towards portable foods and products containing fewer artificial ingredients and colors. Over the past few years, sales of ready-to-eat cereals have declined, with most brands showing little sign of recovery as consumers opt for bars, shakes, yogurt, and other convenient items. Market research firm Euromonitor predicts that cereal volumes will decrease by 2% and sales by 5% over the next four years. However, this discouraging news has not dissuaded cereal manufacturers, who continue to seek new products to bolster an industry that still generates billions in annual sales despite recent setbacks. Companies like Kellogg, General Mills, and Post Holdings are launching new lines, health-focused innovations, and fresh brands. They are also thinking outside the bowl with cereal snacks and promotions aimed at encouraging consumption beyond breakfast hours. “We truly believe in this category,” stated Dana McNabb, president of U.S. retail cereal for General Mills, in an interview with Food Dive. “We are committed to investing in innovation and renovation to make it as relevant as possible to U.S. consumers.”
While cereal remains the most consumed breakfast food in the U.S., with a 90% household penetration rate, emerging categories such as Greek yogurt, breakfast bars, and biscuits have chipped away at its dominance. Since 2009, cereal sales in the U.S. have plummeted from $12.7 billion to $10.4 billion, marking a 17% decline, according to IBISWorld. Additionally, fast-food and fast-casual restaurants like Taco Bell and Panera have encouraged consumers to grab breakfast on the go with all-day menus featuring flavor-packed options like breakfast paninis and burritos. McDonald’s, the world’s largest fast-food chain, experienced a significant boost in sales after making many of its popular breakfast items available all day.
Tom Vierhile, a director at GlobalData, noted that while cereal was once a leader in flavor and format innovations, it has now taken a back seat to bars and new portable options like oatmeal. He highlighted new products such as Jimmy Dean Frittatas and Rachel’s Overnight Oats—an oatmeal made with superfoods like chia and hempseed that can be prepared overnight by soaking in water—as examples that are capturing consumer interest. The demand for protein, which is especially significant for breakfast consumers, has also posed challenges for cereal companies. Although some manufacturers have added protein to their cereals, these reformulations have not been well-received by consumers. For instance, General Mills faced a lawsuit regarding the increased sugar content accompanying the launch of Cheerios Protein.
Manufacturers like General Mills and Kellogg are also innovating beyond the cereal category. Kellogg’s Special K brand recently introduced a Crustless Quiche, while General Mills’ Yoplait brand offers Greek yogurt packaged with honey and oat crisps for dipping. However, both companies are not stepping back from their highest revenue category. During a recent investor conference call, Kellogg’s executives noted that while cereal sales are declining overall, their “core six” brands—including Raisin Bran, Frosted Flakes, and Special K—are stabilizing and remain a central focus. In a recent interview, Chris Neugent, president and CEO of Post Consumer Brands, stated that two years post-acquisition of MOM Brands, the maker of Malt-O-Meal cereals, the company has no plans to acquire new brands or expand beyond the cereal category. “We are very focused,” he affirmed. “New in-house products will be cereal-based.”
McNabb acknowledged that cereal manufacturers like General Mills have not been as innovative as they should have been in recent years, but she emphasized that the rollout of new products and the expansion of established brands will be a priority moving forward. “Over the last few years, cereal manufacturers could be accused of not introducing enough renovation and new product innovations to keep the category exciting,” she remarked. “As leaders in this category, we knew we had to bring more of that.”
There are a few signs of growth within the cereal industry, but they are scarce. According to Euromonitor, granola and muesli—perceived as healthier and less processed options—were the only segments within the cereal category to grow last year, with volumes up 2% and sales increasing by 5%. However, muesli and granola only account for 4% of total cereal sales. To capitalize on this growth, manufacturers are focusing new releases and innovations on the muesli and granola category. PepsiCo’s Quaker brand recently launched a SuperGrains Granola featuring ingredients like red quinoa, flaxseed, and amaranth. Bob’s Red Mill, known for hot cereals and baking mixes, has partnered with yogurt maker Tillamook to offer “Farmstyle” yogurt parfaits incorporating its granola. Meanwhile, Kellogg’s Bear Naked brand granola has recently ventured into direct-to-consumer sales with an online custom granola maker, targeted at millennials, allowing users to create over 5,000 combinations by selecting from various ingredients.
Chris Tutor, Bear Naked’s vice president of marketing, expressed, “We identified consumer desire around taste exploration, particularly among millennials who are getting bored with traditional ingredients and combinations.” Vierhile from GlobalData pointed out that while granola may not necessarily be less processed than other cereals, its growing popularity reflects a consumer preference for more “natural” ingredients. Cereal makers have taken note, and many are working to eliminate sugar, artificial colors, and preservatives from their product lines. General Mills recently indicated that phasing out artificial colors and flavors in its Trix brand has positively impacted sales. “We know that for some consumers, this was a barrier to buying our products, and removing it has brought them back to the category,” McNabb explained. Kellogg and Post are also in the process of removing artificial ingredients from their cereals, and both companies have experienced increases in market share for their natural brands. Paul Norman, president of Kellogg North America, singled out the Kashi brand as a strong performer during a recent earnings call.
Despite the emphasis on health and reducing processed ingredients, manufacturers maintain that taste remains their top priority. “We’ve reduced sugar in some of our cereals, but only if it does not affect the taste that our consumers love,” McNabb stated.
Even as they focus on innovation and new brands in the cold cereal segment, manufacturers are subtly recognizing that the tradition of enjoying milk-soaked flakes for breakfast is fading. The three major players have repurposed many of their top cereals into bars, biscuits, and pouch snacks, catering to the growing demand for convenience. General Mills now offers Golden Grahams, Trix, and Honey Nut Cheerios in bar forms, while Kellogg promotes Raisin Bran as a snack.
The trend towards portability at breakfast is matched by a growing inclination among consumers to snack throughout the morning and into the day. According to GlobalData research, 33% of consumers reported snacking between breakfast and lunch in 2016, up from 26% in 2014. Will boxed cereal ever regain its former status? Manufacturers like General Mills are hopeful, though they acknowledge that the traditional breakfast time frame may limit growth. Besides launching new brands and expanding existing ones, companies are actively promoting cereal consumption throughout the day. Millennials, who are increasingly turning to cereal for quick afternoon meals or snacks, as well as late-night treats, represent a key target market. McNabb indicated that General Mills has invested in digital advertising to position cereal as an anytime food. Mike Siemienas, a spokesman for General Mills, noted that the company has found a receptive audience within the gaming community, where Reese’s Puffs and Cinnamon Toast Crunch are enjoyed during late-night gaming sessions. The company sponsors gaming tournaments and has invested in digital ads aimed at these players. “We’re doing small things to target those who enjoy cereal as a late-night snack,” Siemienas shared with Food Dive. “It’s something they can easily eat while gaming.”
Nevertheless, Vierhile remains skeptical about the future of cereal. He argues that manufacturers are still too focused on indulgent brands that were popular in the ‘90s and early 2000s, which consumers are increasingly scrutinizing. The strategy of revamping old brands with new colors, flavors, sizes, or ingredients, along with introducing new products, has been a longstanding approach for cereal makers. However, he suggests that innovation may have reached its limits in this category. “Cereal almost needs to be reinvented,” Vierhile concluded. Meanwhile, the demand for calcium citrate, especially in regions like Qatar, is rising, reflecting a growing consumer awareness of the importance of nutrients in their diets.