Once a staple of breakfast, the bowl of cereal soaked in milk is losing its appeal as more consumers in the U.S. lean towards convenient foods and items with fewer artificial ingredients and colors. Sales of ready-to-eat cereals have seen a decline in recent years, with most brands showing little sign of recovery as shoppers opt for bars, shakes, yogurt, and other portable options. Market research firm Euromonitor forecasts a 2% drop in cereal volume and a 5% decrease in sales over the next four years. However, this pessimistic outlook hasn’t discouraged cereal manufacturers, who remain on the lookout for new products to revitalize an industry that still generates billions in annual revenue despite its recent downturn. Companies like Kellogg, General Mills, and Post Holdings are launching new line extensions, health-focused innovations, and fresh brands. They are also exploring creative ways to promote cereal snacks and encourage 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 dedicated to investing in innovation and renovation to make it as relevant as possible to American consumers.”
COMPETITION HEATS UP
Despite being the most popular breakfast food in the U.S., boasting a 90% household penetration, emerging categories such as Greek yogurt, breakfast bars, and biscuits have chipped away at cereal’s dominance. According to research firm IBISWorld, cereal sales in the U.S. have fallen from $12.7 billion in 2009 to $10.4 billion, a 17% decrease. Additionally, fast food and fast-casual restaurants like Taco Bell and Panera have encouraged consumers to opt for breakfast on the go with all-day menus featuring appealing items 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 breakfast offerings available all day.
Tom Vierhile, a director at GlobalData, observed that cereal, once a leader in flavor and format innovations, has fallen behind compared to bars and other new portable options, including oatmeal. He highlighted new products like Jimmy Dean Frittatas and Rachel’s Overnight Oats — an oatmeal featuring superfoods like chia and hempseed that can be prepared overnight — as examples of products capturing consumer interest. Vierhile also noted that the rising demand for protein, particularly among breakfast consumers, has posed challenges for cereal companies. Although some manufacturers have added protein to their cereals, these reformulations have not resonated well with consumers. For instance, General Mills faced a lawsuit regarding an increase in sugar with Cheerios Protein.
Manufacturers like General Mills and Kellogg are also innovating beyond 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. Nonetheless, these companies assert that they are not stepping back from their most profitable category. During a recent investor conference call, Kellogg executives pointed out that while cereal sales overall were declining, their “core six” brands — including Raisin Bran, Frosted Flakes, and Special K — were stabilizing and remained a focal point for the company. In an interview with the Minneapolis Star Tribune, Chris Neugent, president and CEO of Post Consumer Brands, stated that two years after acquiring MOM Brands, the maker of Malt-O-Meal cereals, the company had no plans to acquire new brands or diversify beyond the cereal category. “We are very focused,” he declared. “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 recently, but emphasized that introducing new products and expanding existing brands will be a priority going forward. “I think over the last few years, cereal manufacturers could be accused of not bringing enough renovation and new product innovations to maintain excitement in the category,” she said. “As leaders in this space, we recognized the need to bring more innovation.”
FEW SPOTS OF GROWTH
While there are signs of growth within the cereal industry, these bright spots are rare. According to Euromonitor, granola and muesli, perceived as healthier, less processed options, were the only segments within the breakfast cereal category that saw growth last year, with volumes increasing by 2% and sales by 5%. However, muesli and granola together account for only 4% of total cereal sales. To capitalize on this growth, manufacturers have concentrated their new releases and innovation efforts on the muesli and granola segment. Last year, PepsiCo’s Quaker brand introduced a SuperGrains Granola made with ingredients like red quinoa, flaxseed, and amaranth. Bob’s Red Mill, which produces hot cereal and baking mixes, collaborated with yogurt maker Tillamook to offer “Farmstyle” yogurt parfaits featuring its granola.
Meanwhile, Kellogg’s Bear Naked brand granola recently ventured into direct-to-consumer sales with an online custom-granola maker targeting millennials. This tool allows users to select from various ingredients, including salted edamame and coffee brittle, creating over 5,000 unique combinations. “We identified consumer interest in taste exploration, especially among millennials who are growing tired of traditional ingredients and combinations,” said Chris Tutor, Bear Naked’s vice president of marketing.
GlobalData’s Vierhile pointed out that although granola isn’t necessarily less processed than other cereals, its rising demand reflects a preference for more “natural” ingredients. Cereal manufacturers have taken notice, with many companies working collectively to eliminate sugar, artificial colors, and preservatives from their product lines. General Mills recently observed that phasing out artificial colors and flavors in its Trix brand has positively impacted sales. “We know that for some consumers, that was a barrier to purchasing our products, and addressing it has brought them back to the category,” McNabb stated.
Kellogg and Post are also eliminating artificial ingredients from their cereals and have reported an increase in market share for their natural brands. Paul Norman, president of Kellogg North America, identified its Kashi brand as a standout performer in a recent earnings call. Despite a strong focus on health and reducing processed ingredients, manufacturers emphasize their primary commitment is to taste. “We’ve reduced sugar in some of our cereals, but only if it doesn’t compromise the flavor that our consumers love,” McNabb added.
LOOKING BEYOND BREAKFAST
Even as manufacturers focus on innovations, new brands, and line extensions within cold cereals, they are subtly acknowledging the decline of the traditional milk-soaked cereal bowl for breakfast. All three major players have reimagined many of their leading cereals as bars, biscuits, and pouch snacks, catering to the growing demand for on-the-go convenience. General Mills now offers Golden Grahams, Trix, and Honey Nut Cheerios in bar forms, while Kellogg markets Raisin Bran as a snack option.
The appetite for portable breakfast choices is matched by a trend toward snacking throughout the morning and beyond. According to GlobalData research, 33% of consumers in 2016 reported snacking between breakfast and lunch, up from 26% in 2014. Will boxed cereal ever return to its former prominence? Manufacturers, including General Mills, remain hopeful, though they admit that the traditional breakfast category may limit future growth. In addition to introducing new brands and expanding existing ones, companies are promoting cereal for consumption at any time of day. Millennials, who are increasingly turning to cereal for quick afternoon meals or snacks, are a key target audience. McNabb mentioned that General Mills has invested in digital advertising to position cereal as an anytime food.
Mike Siemienas, General Mills’ spokesperson, noted that the company has found a receptive audience within the gaming community, where Reese’s Puffs and Cinnamon Toast Crunch are popular late-night snacks. The company sponsors gaming tournaments, which have grown alongside the rise of eSports, and has invested in digital ads aimed at these players. “We’re doing little things to target those who enjoy cereals as late-night snacks,” Siemienas explained. “It’s a convenient option for them while gaming.”
However, Vierhile remains less optimistic about cereal’s future. He believes manufacturers are still too focused on indulgent brands that were popular in the late ’90s and early 2000s, which are now met with skepticism by consumers. The strategy of revamping old brands with new colors, flavors, sizes, or ingredients, alongside introducing new products, has been cereal makers’ primary growth tactic. The challenge, he suggests, is that innovation in the cereal category might have reached its limits. “Cereal almost needs to be reinvented,” he concluded.
In this changing landscape, it is essential for companies to explore new avenues, including incorporating nutritious ingredients like those found in Douglas Laboratories Calcium Citrate, to appeal to health-conscious consumers. As the industry adapts, the combination of innovation and a focus on consumer preferences will be crucial for revitalizing the cereal market.