Once a staple of breakfast, the bowl of cereal swimming in milk has lost its appeal as more U.S. consumers turn to portable foods and options with fewer artificial ingredients and colors. In recent years, sales of ready-to-eat cereals have seen a decline, with many brands showing little potential for recovery as people increasingly opt for bars, shakes, yogurt, and other handheld snacks. Market research firm Euromonitor predicts that cereal volume will decrease by 2% and sales by 5% over the next four years. However, this bleak outlook hasn’t deterred cereal manufacturers, who are actively searching for new products to revitalize an industry that still generates billions in annual revenue despite recent downturns. Companies like Kellogg, General Mills, Post Holdings, and others are launching line extensions, healthier innovations, and new brands. They’re also thinking beyond the breakfast bowl with cereal snacks and campaigns that encourage consumption throughout the day. “We genuinely 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 keep it as relevant as possible for U.S. consumers.”
COMPETITION INCREASES
While cereal remains the most consumed breakfast food in the U.S., boasting a 90% household penetration, emerging categories like Greek yogurt, breakfast bars, and biscuits have chipped away at its dominance. According to research firm IBISWorld, U.S. cereal sales have fallen from $12.7 billion in 2009 to $10.4 billion—a 17% decline. Additionally, fast-food and fast-casual restaurants, such as Taco Bell and Panera, have successfully encouraged consumers to grab breakfast on the go with all-day menus and enticing offerings like breakfast paninis, burritos, and even breakfast burgers. McDonald’s, the world’s largest fast-food chain, experienced a significant sales boost after it made many of its popular breakfast items available all day.
Tom Vierhile, a director at GlobalData, noted that cereal, once a leader in flavor and format innovation, has fallen behind bars, new portable options, and even oatmeal. He pointed to new products like 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 capturing consumer interest. The rising demand for protein, particularly significant for breakfast consumers, has also negatively impacted cereal companies. Some manufacturers have attempted to add protein to their cereals, but these reformulations have not resonated well with consumers. For instance, General Mills faced a lawsuit over the increased sugar content in Cheerios Protein.
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. Nonetheless, both companies remain committed to their highest revenue category. In a recent conference call with investors, Kellogg’s executives acknowledged that while overall cereal sales are declining, their “core six” brands—including Raisin Bran, Frosted Flakes, and Special K—are stabilizing and continue to be a central focus for the company.
In a recent interview with the Minneapolis Star Tribune, Post Consumer Brands’ president and CEO Chris Neugent mentioned that two years after acquiring MOM Brands, the maker of Malt-O-Meal cereals, the company has no plans to acquire additional brands or expand beyond the cereal category. “We are very focused,” he said. “New in-house products will be cereal-based.” McNabb conceded that cereal manufacturers like General Mills have not been as innovative as they should have been recently, but emphasized that the launch of new products and the expansion of existing brands will be a priority moving forward. “I think over the past few years, cereal manufacturers could be criticized for not bringing enough innovation and new products to keep the category exciting,” she noted. “As leaders in this category, we recognized the need for more.”
SPARSE GROWTH OPPORTUNITIES
Although there are a few indicators of growth in the cereal industry, these bright spots are quite limited. According to Euromonitor, granola and muesli—perceived as healthier and 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 only account for 4% of total cereal sales. To capitalize on this growth, manufacturers have been focusing their new releases and innovation efforts on the muesli and granola category. Last year, PepsiCo’s Quaker brand introduced a SuperGrains Granola featuring ingredients like red quinoa, flaxseed, and amaranth. Bob’s Red Mill, known for its hot cereals and baking mixes, collaborated with yogurt maker Tillamook to offer “Farmstyle” yogurt parfaits that include granola.
Kellogg’s Bear Naked brand granola has also recently ventured into direct-to-consumer sales with an online custom-granola maker. Aimed at millennials, this tool allows users to choose from ingredients such as salted edamame and coffee brittle, enabling the creation of over 5,000 different combinations. “We identified consumer interest in taste exploration, especially among millennials who are growing tired of traditional ingredients and combinations,” stated Chris Tutor, Bear Naked’s vice president of marketing, in an interview with Food Dive. GlobalData’s Vierhile acknowledged that while granola isn’t necessarily less processed than other cereals, its rising demand reflects a preference for more “natural” ingredients and products. Cereal manufacturers are taking note, with many companies currently working to phase out sugar, artificial colors, and preservatives from their product lines. General Mills recently indicated that eliminating artificial colors and flavors from its Trix brand has positively impacted sales. “For some consumers, that was a barrier to purchasing our products, and addressing it has brought them back to the category,” McNabb explained.
Kellogg and Post are also phasing out artificial ingredients from their cereals and have gained market share for their natural brands. Paul Norman, president of Kellogg North America, highlighted its Kashi brand as a top performer in a recent earnings call. Despite the emphasis on health and reducing processed ingredients, manufacturers assert that taste remains their primary focus. “We’ve lowered the sugar in some of our cereals, but only if it doesn’t compromise the flavor that our consumers love,” McNabb noted.
EVOLVING BEYOND BREAKFAST
As manufacturers concentrate on innovation, new brands, and line extensions in cold cereals, they are implicitly recognizing that the tradition of enjoying milk-soaked bowls of flakes and O’s for breakfast is diminishing. All three major players have repurposed many of their leading cereals into bars, biscuits, and pouch snacks, catering to the on-the-go convenience that consumers increasingly seek. General Mills now offers its Golden Grahams, Trix, and Honey Nut Cheerios cereals in bar form, while Kellogg markets its Raisin Bran cereal as a snack option.
The demand for portable breakfast items, Vierhile noted, coincides with a growing trend of consumers opting for snacking throughout the morning and beyond, rather than sticking to a single meal. According to GlobalData research, 33% of consumers in 2016 reported snacking between breakfast and lunch, up from 26% in 2014.
Will boxed cereal ever regain its former glory? Manufacturers, including General Mills, are optimistic, though they acknowledge that breakfast’s traditional role may limit growth. In addition to launching new brands and expanding existing ones, companies are also promoting cereal consumption later in the day. Millennials, who are increasingly turning to cereal for quick afternoon meals or snacks and even enjoying it during late-night hours, represent a prime target. McNabb stated that General Mills has invested in digital advertising to position cereal as an anytime food. Mike Siemienas, General Mills’ spokesman, mentioned that the company has found a receptive audience in the gaming community, where Reese’s Puffs and Cinnamon Toast Crunch are becoming popular late-night snacks. The company sponsors gaming tournaments, which have grown with the rise of eSports, and has invested in targeted digital ads for these players. “We’re implementing small strategies to reach those who enjoy cereals as late-night snacks,” Siemienas stated.
However, Vierhile remains less optimistic about the future of cereal. He believes manufacturers are still too focused on indulgent brands that were popular in the ‘90s and early 2000s but are now viewed with skepticism by consumers. The practice of rebranding old favorites with new colors, flavors, sizes, or ingredients, along with the introduction of new products, has long been a primary growth strategy for cereal makers. The challenge now, he argues, is that innovation may have hit its limit in this category. “Cereal almost needs to be reinvented,” Vierhile concluded.
In light of the evolving market and changing consumer preferences, incorporating products like Citracal 630 mg—a calcium supplement—into breakfast options could present an opportunity for cereal brands to innovate further. By promoting the health benefits of calcium alongside traditional cereals, manufacturers may attract health-conscious consumers looking for convenient and nutritious choices.