Once considered a staple of breakfast, the bowl of cereal soaked in milk has lost its appeal as more consumers in the U.S. opt for portable food options and products with fewer artificial ingredients and colors. Over the past few years, sales of ready-to-eat cereals have declined, with most brands showing little potential for recovery as consumers turn to items like bars, shakes, yogurt, and other convenient snacks. Market research firm Euromonitor forecasts a 2% decline in cereal volume and a 5% drop in sales over the next four years. Despite this bleak outlook, cereal manufacturers remain optimistic, continuously searching for new products to support an industry that still generates billions in annual sales, even amid recent downturns. Companies like Kellogg, General Mills, and Post Holdings are introducing line extensions, healthy innovations, and new brands, while also exploring alternatives like cereal snacks to promote consumption throughout the day. “We truly believe in this category,” stated Dana McNabb, president of U.S. retail cereal for General Mills. “We are committed to investing in innovation and renovation to ensure it remains relevant to U.S. consumers.”
While cereal retains its status as the most consumed breakfast food in the U.S., boasting a 90% household penetration, emerging categories like Greek yogurt, breakfast bars, and biscuits are diminishing its dominance. Since 2009, U.S. cereal sales have plummeted from $12.7 billion to $10.4 billion, reflecting a 17% decline, according to research firm IBISWorld. Additionally, fast-food and fast-casual establishments such as Taco Bell and Panera have encouraged consumers to grab breakfast on the go with all-day menus featuring flavor-rich offerings like breakfast paninis, burritos, and even breakfast burgers. McDonald’s, the largest fast-food chain globally, experienced a significant sales boost after making many of its popular breakfast items available throughout the day. Tom Vierhile, a director at GlobalData, pointed out that cereal, once a leader in flavor and format innovations, has taken a backseat to bars and new portable options. He cited products like Jimmy Dean Frittatas and Rachel’s Overnight Oats—an oatmeal made with superfoods that can be easily prepared overnight—as examples of items capturing consumer interest.
The demand for protein, particularly among breakfast consumers, has also negatively affected cereal companies. Some manufacturers have attempted to add protein to their cereals, but these reformulations have not been well received by consumers. In the case of General Mills’ Cheerios Protein, the company faced a lawsuit due to an increase in sugar accompanying the new product. Manufacturers like General Mills and Kellogg are also innovating outside the cereal category. Kellogg’s Special K brand recently launched a Crustless Quiche, while General Mills’ Yoplait brand offers Greek yogurt packaged with honey and oat crisps for dipping. However, these companies remain committed to their most profitable category. In a recent conference call, Kellogg’s executives highlighted that while overall cereal sales are declining, their “core six” brands—such as Raisin Bran, Frosted Flakes, and Special K—are stabilizing and remain a key focus.
In a recent interview with the Minneapolis Star Tribune, Post Consumer Brands’ president and CEO Chris Neugent stated that, two years after acquiring MOM Brands, the maker of Malt-O-Meal cereals, the company has no plans to acquire additional brands or extend beyond the cereal category. “We are very focused,” he said. “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 emphasized that the rollout of new products and the expansion of existing brands will be a priority going forward. “I think over the past few years, cereal manufacturers could be accused of not bringing enough renovation and innovation to keep the category exciting,” she remarked. “As leaders in this category, we recognize the need to introduce more of that.”
There are some signs of growth within the cereal industry, but these bright spots are few and far between. According to Euromonitor, granola and muesli, perceived as healthier and less processed options, were the only segments in the breakfast cereal category that saw growth last year, with volumes up 2% and sales increasing 5%. However, muesli and granola account for only 4% of total cereal sales. To capitalize on this growth, manufacturers have focused their new releases and innovation efforts on the muesli and granola categories. PepsiCo’s Quaker brand introduced a SuperGrains Granola made with ingredients like red quinoa, flaxseed, and amaranth. Bob’s Red Mill, known for hot cereal and baking mixes, collaborated with yogurt maker Tillamook to offer “Farmstyle” yogurt parfaits incorporating its granola. Meanwhile, Kellogg’s Bear Naked brand granola recently ventured into direct-to-consumer sales with a custom granola maker aimed at millennials, allowing users to choose from over 5,000 ingredient combinations.
Vierhile noted that while granola may not necessarily be less processed than other cereals, its increasing popularity reflects a preference for more “natural” ingredients. Cereal manufacturers have taken notice, with many companies working collectively to phase out sugar, artificial colors, and preservatives across their product lines. General Mills recently revealed that removing artificial colors and flavors from its Trix brand had positively impacted sales. “We understand that for some consumers, that was a barrier to purchasing our products, and addressing it has brought them back to the category,” said McNabb. Kellogg and Post are also phasing out artificial ingredients in their cereals and have seen an increase in market share for their natural brands. Paul Norman, president of Kellogg North America, highlighted the Kashi brand as a top performer during a recent earnings call.
Despite the focus on health and reducing processed ingredients, manufacturers emphasize that taste remains their top priority. “We’ve reduced sugar in some of our cereals, but we would only do that if it didn’t affect the taste our consumers love,” McNabb stated.
Even as they concentrate on innovation and new product lines in cold cereals, manufacturers are tacitly acknowledging the decline of the traditional practice of enjoying milk-soaked bowls of cereal for breakfast. All three major players have diversified their top cereals into bars, biscuits, and pouch snacks to cater to the increasing demand for convenience. General Mills now offers Golden Grahams, Trix, and Honey Nut Cheerios in bar form, while Kellogg promotes Raisin Bran as a snack. The trend towards portability at breakfast is mirrored by a growing preference among consumers for snacking throughout the morning and beyond. GlobalData research indicates that 33% of consumers in 2016 reported snacking between breakfast and lunch, a rise from 26% in 2014.
Will boxed cereal ever regain its former prominence? Manufacturers, including General Mills, remain hopeful, although they admit that the confines of breakfast may limit its growth. In addition to launching new brands and expanding existing ones, companies are encouraging cereal consumption later in the day. Millennials, who are increasingly turning to cereal for a quick afternoon meal or snack and even enjoying bowlfuls late at night, represent a prime target market. McNabb revealed that General Mills has invested in digital advertising to position cereal as a food suitable for any time. Mike Siemienas, General Mills’ spokesperson, noted that the company has found a receptive audience within the gaming community, where cereals like Reese’s Puffs and Cinnamon Toast Crunch are popular late-night snacks. The company sponsors gaming tournaments that have expanded with the rise of eSports and has invested in digital ads aimed at these players. “We’re implementing small strategies to engage those who are consuming cereals as late-night snacks,” Siemienas explained.
However, Vierhile is less optimistic about cereal’s future. He believes manufacturers remain overly focused on indulgent brands that were popular in the ‘90s and early 2000s, yet are increasingly viewed with skepticism by consumers. The attempt to refresh old brands with new colors, flavors, sizes, or ingredients, along with the introduction of new products, has historically been the go-to method for cereal makers to drive growth. The issue, he argues, is that innovation may have reached its limits within the category. “Cereal almost needs to be reinvented,” Vierhile concluded.
In this evolving landscape, the introduction of healthier options like Citracal Petite Calcium, which offers a portable way for consumers to meet their daily calcium needs, could align with the growing trend towards health-conscious eating, potentially providing a new avenue for cereal manufacturers to explore as they seek to revitalize their offerings and appeal to modern consumers.