Changing habits, nutrition concerns leave sugary morning cereals struggling to retain their place at the breakfast table.
There’s less love these days for Tony the Tiger, Cap’n Crunch and Lucky the Leprechaun.
U.S. sales of breakfast cereals have turned as flat as soggy cornflakes amid heightened concerns among consumers about cereal’s nutrition and lack of convenience.
Sales of cold and hot cereals combined are expected to total $10.6 billion this year, down 17 percent from $12.7 billion in 2009, the research firm IbisWorld estimates. The firm also foresees sales hardly budging for the next few years and totaling $10.4 billion in 2020.
“The cereal category has undoubtedly had a challenging few years,” said Craig Bahner, president of U.S. morning foods at Kellogg.
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That’s forced Kellogg and the industry’s other big players, including General Mills and Post Holdings, to roll out new products and bolster their marketing while paring their operating costs in order to increase sales and profits.
“Today’s consumer is changing quickly, so we’re putting all our effort towards understanding and responding to these changes,” General Mills Chairman Kendall Powell said at an investor conference in July.
The changes are coming on two main fronts: Many consumers increasingly want more healthful choices for breakfast, and they want foods they can carry out the door instead of taking the time to pour cereal into a bowl at the breakfast table, analysts said.
On the health side, there’s nothing new about cereal being attacked as less than nutritious and too high in calories. Critics for years have said some cereals are laced with too much sugar, with the likes of Kellogg’s Honey Smacks and Post’s Golden Crisp being favorite targets.
But consumers’ changes now goes much further.
Shoppers are looking for “high protein and fiber content and natural ingredients,” the research firm Mintel Group said in a report. “Consumers today believe cereal is overly processed and doesn’t contain enough nutrients.”
That means cereal faces steeper competition from fresh fruit, yogurt, breakfast bars, protein-rich bars and drinks, sandwiches and even all-day breakfast options at McDonald’s and other fast-food chains.
“Consumers are increasingly seeking products that match their personal definition of real food, and that can mean foods that are less processed and have simple labels with recognizable ingredients,” Powell told the investors. “These consumers are looking for transparency from manufacturers, so they can know how their food was sourced, produced and delivered to them.”
Cereal makers have responded by reformulating many of their brands, boosting the protein and whole-grain content while lowering or eliminating sugar, gluten, sodium, carbohydrates and artificial flavors.
Jim Murphy, president of General Mills’ cereal division, said those steps are starting to pay off. One example: Sales of gluten-free Cheerios were up 2 percent in the company’s fiscal first quarter, which ended Aug. 28, he said.
Kellogg recently rolled out two new versions of its Raisin Bran that include clusters of granola. General Mills introduced Tiny Toast, which is flavored with real strawberries and blueberries and contains no artificial colors or sweeteners.
Tiny Toast, in fact, was General Mills’ first new cereal in 15 years, and Murphy acknowledged that one factor behind the industry’s sales downturn was “not enough innovation from the branded manufacturers.”
But Murphy contended that new products and stronger marketing have led to “improvement in the cereal category” this year and General Mills expects “this will continue.”
How people eat breakfast is the industry’s other big challenge, with the emphasis now on satisfying time-squeezed lifestyles, especially for harried parents.
“Americans don’t necessarily have the time to enjoy a sit-down breakfast anymore, and they’re looking for portability,” said Amanda Topper, food analyst at Mintel. “Convenience is more important to parents with lifestyle shifts and hectic day-to-day schedules.”
In addition, “People see eating cereal as time-consuming because it’s not something you can do on the go, like eating a protein bar,” said Rory Masterson, who tracks the industry for IbisWorld.
The desire for convenience seems to be especially pronounced among millennials, the generation aged 18 to 34. When Mintel surveyed consumers about cereal a year ago, 39 percent of millennials said cereal was inconvenient because you have to clean a dish afterward.
“Millennials want something quick and simple in the morning, and they love variety,” Kellogg’s Bahner said.
In response, cereal makers are adding more portable options. Kellogg promotes its new granola Raisin Bran as a snack or sit-down cereal, and it sells a Special K egg, spinach and cheese breakfast sandwich. It also has a variety of breakfast and protein bars.
General Mills sells “on the go” snack versions of its Cinnamon Toast Crunch, Golden Grahams and Fruity Cheerios cereals. It bought Annie’s Homegrown, a maker of organic snacks and cereals, two years ago.
Post last year introduced breakfast biscuits made with its popular Honey Bunches of Oats cereal, along with its first breakfast shake, called Post Goodness-to-Go.
There’s also the issue of price. Brand-name cereal prices jumped after the financial crisis in 2008, largely due to higher prices for grains and other ingredients, but prices have stabilized in the last two years.
“If you think about a box of cereal, most boxes have about nine servings to 10 servings in them, and they retail for $3 to $4 each,” Kellogg Chairman John Bryant told an investor conference last month. “So (that’s) roughly 30 cents to 40 cents per occasion.”
Even so, spending $4 on a box of cereal can be onerous for some families with limited grocery budgets, which is why lower-priced generic and grocery-store brands remain strong competition for Kellogg and the others.
But cereal makers and industry analysts said that if the companies can keep adapting to changing consumer needs, especially among millennials, the business can grow again.