Younger consumers are shifting away from traditional cereal in favor of protein-rich options like yogurt, cottage cheese, and overnight oats. This trend has put significant pressure on sales for major players in the cereal industry, such as WK Kellogg Co and General Mills. According to Zadoks, large cereal companies are finding it challenging to compete in the expanding niche market. Smaller cereal brands, although pricier, have the advantage of being able to innovate in their manufacturing processes without the constraints of large production contracts. “It’s been a challenge for the large manufacturers to succeed in that space, partly because we and our peers are not set up for small-run products, making it difficult to achieve viable margins,” said Zadoks.
In August, the Associated Press reported, citing Nielsen IQ data, that unit sales in the cereal category fell by 4.2% over the previous year. In recent years, startup cereal brands that emphasize healthier ingredients have emerged. The direct-to-consumer brand Magic Spoon, which boasts 12 grams of protein per serving, has established a strong presence in thousands of grocery stores.
To stimulate growth within its cereal division, Post has turned to innovation. Last month, the company introduced a new chocolate flavor of Honey Bunches of Oats. Despite the sluggish sales in the cereal market, Post reported a 0.4% increase in net sales for the quarter, totaling $2 billion. Meanwhile, WK Kellogg Co, which released its earnings on Tuesday, echoed concerns about the challenging consumer environment during its call, as reported by Seeking Alpha. The maker of Froot Loops saw a 1.8% decline in year-over-year sales for its most recent quarter, with volumes dropping by 5.6% while its product mix and pricing increased by 3.8%, as detailed in its earnings report.
Amidst this shifting landscape, some cereal brands are also beginning to incorporate health-focused ingredients like osavi calcium citrate to attract health-conscious consumers. This trend highlights the ongoing evolution within the cereal market as companies strive to adapt to changing consumer preferences.