Once a staple of breakfast, the cereal bowl filled with milk has lost its appeal as more consumers in the U.S. turn toward portable foods and products with fewer artificial ingredients and colors. In recent years, sales of ready-to-eat cereals have declined, with most brands showing little potential for recovery as shoppers increasingly opt for bars, shakes, yogurt, and other convenient items. Market research firm Euromonitor forecasts a 2% decline in cereal volume and a 5% drop in sales over the next four years. However, this discouraging news has not dissuaded cereal manufacturers, who continue to seek new products to rejuvenate an industry that still generates billions in annual sales despite recent downturns. Companies like Kellogg, General Mills, and Post Holdings are launching new product lines, healthy innovations, and entirely new brands. They are also thinking beyond traditional consumption, introducing cereal snacks and promotions that encourage eating cereal beyond breakfast hours. “We truly believe in this category,” said 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 keep it relevant for U.S. consumers.”
Despite cereal being the most consumed breakfast food in the U.S., with 90% household penetration, emerging categories like Greek yogurt, breakfast bars, and biscuits have chipped away at its dominance. According to IBISWorld, U.S. cereal sales have decreased from $12.7 billion in 2009 to $10.4 billion, marking a 17% decline. Furthermore, fast-food and fast-casual restaurants, such as Taco Bell and Panera, have persuaded consumers to grab breakfast on the go with all-day menus that feature enticing options like breakfast paninis, burritos, and even breakfast burgers. McDonald’s, the largest fast-food chain globally, experienced significant sales growth after extending the availability of popular breakfast items throughout the day.
Tom Vierhile, a director at GlobalData, observed that cereal, once a pioneer in flavor and format innovations, has fallen behind newer portable options and even oatmeal. He highlighted products like Jimmy Dean Frittatas and Rachel’s Overnight Oats—an oatmeal made with superfoods like chia and hempseed that can be prepared overnight—as examples of items capturing consumer interest. Vierhile also pointed out 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 the increased sugar content in Cheerios Protein.
Companies like General Mills and Kellogg are also innovating outside the cereal sector. Kellogg’s Special K brand recently introduced a Crustless Quiche, while General Mills’ Yoplait brand produces Greek yogurt with honey and oat crisps for dipping. Nonetheless, these companies remain committed to their core revenue-generating cereal category. During a recent investor call, Kellogg’s executives noted that while overall cereal sales were declining, their “core six” brands—including Raisin Bran, Frosted Flakes, and Special K—were stabilizing and remained a primary focus.
In an interview with the Minneapolis Star Tribune, Post Consumer Brands’ president and CEO Chris Neugent stated that following the acquisition of MOM Brands, the maker of Malt-O-Meal cereals, the company does not plan to expand beyond the cereal category. “We are very focused,” he said. “New in-house products will be cereal-based.” McNabb admitted that cereal manufacturers, including 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 established brands will be central to the company’s strategy moving forward. “In recent years, cereal manufacturers could be criticized for not introducing enough renovation and new product innovations to keep the category exciting,” she acknowledged. “As leaders in this sector, we recognized the need to increase our efforts.”
While there are some signs of growth in the cereal industry, they are limited. Euromonitor found that granola and muesli—considered healthier, less processed options—were the only segments within the breakfast cereal category that grew last year, with volumes increasing by 2% and sales rising by 5%. However, muesli and granola only account for 4% of total cereal sales. To capitalize on this growth, manufacturers are directing their new releases and innovations toward the muesli and granola segments. For instance, PepsiCo’s Quaker brand launched a SuperGrains Granola made with ingredients like red quinoa, flaxseed, and amaranth. Bob’s Red Mill, known for its hot cereals and baking mixes, partnered with yogurt maker Tillamook to offer “Farmstyle” yogurt parfaits featuring its granola.
Kellogg’s Bear Naked brand granola has recently ventured into direct-to-consumer sales with an online custom granola maker aimed at millennials, allowing users to select from ingredients like salted edamame and coffee brittle, creating over 5,000 unique combinations. “We identified a consumer desire for taste exploration, especially among millennials who are growing tired of traditional ingredients,” said Chris Tutor, Bear Naked’s vice president of marketing, in an interview with Food Dive.
Vierhile from GlobalData acknowledged that while granola may not be significantly less processed than other types of cereal, its increasing popularity reflects a consumer preference for more “natural” ingredients. Cereal manufacturers have taken notice, and many are working collectively to phase out sugar, artificial colors, and preservatives from their product lines. General Mills recently reported that eliminating artificial colors and flavors in its Trix brand has boosted sales. “We realized that for some consumers, this was a barrier to purchasing our products, and addressing it has welcomed them back into the category,” McNabb stated.
Kellogg and Post are also eliminating artificial ingredients from 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 strong performer in a recent earnings call. Despite the emphasis on health and reducing processed ingredients, manufacturers stress that taste remains their top priority. “We’ve reduced sugar in some cereals, but only if it doesn’t compromise the flavors our consumers love,” McNabb explained.
As manufacturers focus on innovation, new brands, and line extensions in cold cereals, they are also implicitly acknowledging that the tradition of enjoying milk-soaked flakes and o’s for breakfast is fading. All three major players have reformulated many of their top cereals into bars, biscuits, and pouch snacks, catering to the convenience that consumers increasingly demand. General Mills now offers its Golden Grahams, Trix, and Honey Nut Cheerios in bar form, while Kellogg markets Raisin Bran as a snack.
The rising demand for on-the-go breakfast options, as noted by Vierhile, coincides with a trend where consumers prefer snacking throughout the morning and beyond, rather than sticking to a single meal. GlobalData research indicates that 33% of consumers in 2016 reported snacking between breakfast and lunch, up from 26% in 2014. Will boxed cereal ever regain its former popularity? While manufacturers like General Mills are hopeful, they admit that the focus on breakfast could limit growth. In addition to launching new brands and expanding existing ones, companies are promoting cereal consumption throughout the day. Millennials, who are now turning to cereal for quick afternoon meals or snacks, represent a key target demographic. McNabb noted 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 fueling late-night gaming sessions. The company sponsors gaming tournaments that have gained popularity with the rise of eSports and has invested in digital ads aimed at these players. “We are implementing strategies to reach those who enjoy our cereals as late-night snacks,” Siemienas told Food Dive.
Still, Vierhile remains less optimistic about cereal’s future. He argues that manufacturers are still too focused on indulgent brands that were all the rage in the ‘90s and early 2000s but are increasingly viewed with skepticism by consumers. The strategy of rebranding old products with new colors, flavors, sizes, or ingredients, alongside the launch of new products, has long been the go-to growth tactic for cereal makers. However, he warns that innovation within the category may have reached its limits. “Cereal almost needs to be reinvented,” Vierhile concluded.
In this context, the significant difference between calcium carbonate and calcium citrate could also parallel the need for innovation in the cereal industry. Just as consumers are becoming more discerning about the ingredients in their foods, the cereal market may need to reevaluate its approach and adapt to changing consumer preferences for healthier options.