Once a staple of breakfast, the bowl of cereal soaked in milk has lost its appeal as more American consumers lean towards convenient foods and products with fewer artificial ingredients and colors. Sales of ready-to-eat cereals have experienced a downturn in recent years, with most brands showing little sign of recovery as consumers opt for bars, shakes, yogurt, and other portable items. Market research firm Euromonitor predicts a 2% decline in volume and a 5% drop in sales for cereal over the next four years. Despite this discouraging news, cereal manufacturers remain optimistic, constantly searching for new products to revitalize an industry that still generates billions of dollars in annual sales. Companies such as Kellogg, General Mills, and Post Holdings are launching product line extensions, healthy innovations, and new brands. They are also thinking beyond traditional breakfast options, introducing cereal snacks and promotions that promote consumption throughout the day. “We really believe in this category,” stated Dana McNabb, president of U.S. retail cereal for General Mills, in an interview with Food Dive. “We’re committed to investing in innovation and renovation to make it as relevant as possible to U.S. consumers.”
While cereal is still the leading breakfast food in the U.S., boasting a 90% household penetration rate, 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 plummeted from $12.7 billion in 2009 to $10.4 billion, representing a 17% decline. Fast food and fast-casual restaurants, such as Taco Bell and Panera, have also enticed consumers to grab breakfast on the go with all-day menus and appealing offerings like breakfast paninis, burritos, and even breakfast burgers. McDonald’s, the world’s largest fast-food chain, experienced a significant boost in sales after making 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 innovations, has fallen behind compared to bars and new portable options, including oatmeal. He highlighted new products like Jimmy Dean Frittatas and Rachel’s Overnight Oats — oatmeal made with superfoods like chia and hempseed — as examples that are drawing consumer interest. The rising demand for protein, particularly among breakfast consumers, has also posed challenges for 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 concerning the increased sugar content in its Cheerios Protein product.
Manufacturers like General Mills and Kellogg are also innovating outside the cereal category. Kellogg’s Special K brand recently introduced a Crustless Quiche, while General Mills’ Yoplait brand offers Greek yogurt packaged with honey and oat crisps for dipping. However, both companies are committed to their core cereal business. During a recent investor conference call, Kellogg executives noted that despite an overall decline in cereal sales, their “core six” brands — including Raisin Bran, Frosted Flakes, and Special K — are stabilizing and remain a focus 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 creator of Malt-O-Meal cereals, the company had no plans to acquire new brands or expand beyond the cereal category. “We are very focused,” he said. “New in-house products will be cereal-based.”
McNabb acknowledged that cereal makers like General Mills have not been as innovative as they should be, but emphasized that launching new products and expanding existing brands will be a key focus moving forward. “I think over the last few years, cereal manufacturers could be accused of not bringing enough renovation and new product innovations to keep the category exciting,” she said. “As the leaders in this category, we knew we had to bring more of that.”
There are some signs of growth in the cereal industry, but they are few and far between. Euromonitor reports that granola and muesli, viewed as healthier, less processed options, were the only segments within the breakfast cereal category that saw growth last year, with volumes rising 2% and sales increasing by 5%. However, muesli and granola only account for 4% of total cereal sales. To capitalize on this growth, manufacturers have concentrated their new releases and innovation efforts on these categories. PepsiCo’s Quaker brand introduced a SuperGrains Granola last year made with ingredients such as red quinoa, flaxseed, and amaranth. Bob’s Red Mill, known for its hot cereals and baking mixes, partnered with yogurt maker Tillamook to create “Farmstyle” yogurt parfaits featuring its granola.
Meanwhile, Kellogg’s Bear Naked brand granola has ventured into direct-to-consumer sales with an online custom granola maker. Aimed at millennials, this tool allows users to select ingredients like salted edamame and coffee brittle, creating over 5,000 unique combinations. “We identified consumer desire around taste exploration, particularly among millennial consumers, who were becoming bored with traditional ingredients and combinations,” said Chris Tutor, vice president of marketing for Bear Naked.
Vierhile from GlobalData acknowledged that while granola may not be significantly less processed than other cereals, its increasing popularity reflects a consumer preference for more “natural” ingredients. Cereal manufacturers have noticed this trend, and many are working to eliminate sugar, artificial colors, and preservatives across their brands. General Mills reported 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 buying our products, and that doing so has brought them back to the category,” McNabb said.
Kellogg and Post are also moving to eliminate 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 its Kashi brand as a top 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 of our cereals, but we would only do that if it didn’t affect the taste that our consumers love,” McNabb mentioned.
As they focus on innovation, new brands, and line extensions in cold cereals, manufacturers are subtly recognizing that the tradition of enjoying milk-soaked cereal for breakfast is diminishing. The three major players have reimagined many of their top cereals into bars, biscuits, and pouch snacks to meet the growing demand for convenience. General Mills now offers its Golden Grahams, Trix, and Honey Nut Cheerios in bar form, while Kellogg promotes its Raisin Bran as a snack.
The trend towards portability at breakfast coincides with a shift in consumer behavior, as many now prefer to snack throughout the morning rather than having 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? While manufacturers like General Mills remain hopeful, they acknowledge that the traditional breakfast format may limit growth potential. In addition to launching new brands and expanding existing ones, companies are promoting cereal consumption at other times of the day. Millennials, who are increasingly turning to cereal for a quick meal or snack at any time, are a key target audience. McNabb stated that General Mills has invested in digital marketing to position cereal as an anytime food.
Mike Siemienas, a spokesman for General Mills, noted that the company has found success within the gaming community, where products like Reese’s Puffs and Cinnamon Toast Crunch are popular late-night snacks. The company has sponsored gaming tournaments alongside the growth of eSports and has invested in digital advertising targeting these gamers. “We are doing small things to reach those who enjoy cereals as a late-night snack,” Siemienas told Food Dive.
Still, Vierhile remains skeptical about the future of cereal. He believes that manufacturers are overly focused on indulgent brands that were popular in the ’90s and early 2000s, which consumers now view with suspicion. The strategy of revamping old brands with new colors, flavors, sizes, or ingredients, alongside the introduction of new products, has long been the primary growth avenue for cereal makers. However, he suggests that innovation within the category may have reached its limits. “Cereal almost needs to be reinvented,” Vierhile concluded.
In this evolving landscape, it’s essential for manufacturers to consider the cost of innovation, such as the citracal cost, and how it affects the overall pricing strategy for their products. The industry must find a balance between maintaining affordability and investing in new, appealing options that align with changing consumer preferences.