Article: Not Just for Breakfast -- May 2008

For 42% of consumers, a bowl of cereal is part of the normal morning routine. However, cereal is not just for breakfast--44% of those surveyed by Mintel say they often eat cereal as a snack, illustrating this traditional breakfast food’s versatility.

Cereal is not just a “sit down for breakfast” type of food; it has also become an “accessory,” sold as a topping for ice cream and frozen yogurt in such trendy outlets as Red Mango and Pinkberry. In addition, it has become a “freestanding restaurant concept,” epitomized by such chains as Cereality Cereal Bar and Café, which sells hot and cold cereals, primarily in outlets on or near college campuses.

Even with the popularity of cereal in different guises (or perhaps because of this shift from kitchen table to café), at-home cereal sales have remained relatively flat: between 2005-2007, sales of cereal through food, drug and mass merchandisers (excluding Wal-Mart) increased just 0.3%. Cold cereal sales declined 0.3%, while sales of hot cereal, buoyed by the health halo accorded such products as oatmeal, increased 5%, according to Mintel and Information Resources Inc. (IRI).

The fortunes of cereal have waxed and waned, as the breakfast staple has had to contend with a number of issues. Escalating prices, questionable nutritional value among kids’ cereal products, the high sugar content of many cereal products and the fallout from such diet fads as low-carb have contributed to the flattening of the market. However, consumers continue to buy cereal, and new products keep coming to market, with more “health and lifestyle” claims than ever.

According to the Mintel Global New Products Database (GNPD), 430 new cereal products were launched in the U.S. in 2007, an increase of almost 40% over 2005. To convince consumers that these new products were worth trying, manufacturers relied on a number of claims, the most popular of which were kosher, whole-grain, organic, all-natural and no preservatives.

An Expensive Food

For about three quarters of respondents to Mintel’s recent survey, price is a major consideration when choosing a breakfast cereal. Only 32% of those surveyed believe cereal is reasonably priced, and just 29% consider it a better value than other breakfast options.

A price check of major brands shows some of the more popular options can cost more than $4 per pound: premium products (including those with natural and organic ingredients) are extremely expensive, and as the price of wheat and corn continues to rise, even more basic products will increase in price.

Store brands and mainstream brands such as Malt-o-Meal have consistently kept their prices below those of better-known national brands by economizing on packaging and promotions. However, a third of respondents believe cereal manufactured by companies like Kellogg’s or General Mills is higher in quality than store-brand cereal.

Many store-brand products have now moved beyond the “store-brand image;” such companies as Kroger, Safeway and Wegman’s have successfully transitioned into tiered store-brand marketing strategies. Their top tier or premium “own-name” products--traditionally priced higher than regular store brands, but still lower than premium national brands--are likely to gain acceptance among consumers, as cereals become more expensive.

Healthy Cereals

When cereal first became a breakfast staple in the early and mid-20th century, the products were built on a platform of positive health and nutrition. As American prosperity grew, cereals reflected the new consumers’ enjoyment of tasty, sweet and “fun” processed foods.

In the 1950s and 1960s, processed foods represented the apex of industrialization. It was the era of Tang and “space age” food, most of which had grown away from the industry’s natural, homemade roots. Sugary cereals, such as Honeycomb and Sugar Smacks, were the mainstay of the breakfast aisle, and whole-grain or unsweetened products were relegated to adult-focused products with little promotion or attention paid to them.

By the end of the 20th century, the food universe had turned, and consumers were moving away from sugared options--especially for their children, who had profited from decades of prosperity by developing questionable eating habits and a propensity for obesity never seen before in the U.S. New cereals are lower in sugar and higher in whole grains than they have been since the 1950s. At the same time, consumers are seeking better cereals for themselves and for their kids.

Mobility and the Cereal Market

The cliché that “breakfast is the most important meal of the day” continues to exist in this on-the-go culture. While much has been made of fast food breakfast options, Mintel’s research indicates 55% of respondents do not get breakfast at restaurants or fast food places once a week or more. Instead, for many consumers, “breakfast on-the-go” is breakfast brought from home to eat in the car or at work.

According to Mintel’s research, 21% of respondents choose breakfast foods they can eat on-the-go, and the same percentage sometimes takes cereal with them in a bag or other portable option, so they can eat it on-the-go. While the need for a “movable feast” suggests that an option such as a cereal bar or snack bar would be a better choice, one third of responders say they prefer eating cereal to eating a breakfast bar or a snack bar. Surprisingly--and a positive statement cereal manufacturers should emphasize--only 5% of respondents to Mintel’s survey say they have not found a cereal they really like. That statement perhaps best summarizes the status of cereal in the American culture: it is, and will likely remain, a popular food for breakfast and for snacks

For Adults, Taste Rules

When Mintel questioned adults aged 18 and older who had eaten cereal in the past three months about the attributes they consider important when buying cereal, more than nine in 10 cited taste as the top quality they seek. The importance of taste governs cereal purchases regardless of age, income or any other demographic characteristic of the respondents.

After “taste,” important attributes of cereal resonate differently with respondents, depending on their age. Price has always been a point of discussion for breakfast cereal, and as the price of grain continues to rise, this issue will become even more important. When the Mintel survey was performed in July 2007, 72% of respondents said price was an important or very important consideration when purchasing breakfast cereal.

However, price is not the only factor shoppers take into account. For respondents aged 65 and older, “whole grains” and “fiber content” rank as the second and third most important attributes, even eclipsing price.

At the other end of the spectrum, respondents aged 18-24 are considerably less likely than average to be concerned about the “health attributes” many new cereals claim. These youngest respondents are more likely to worry about taste and price and less likely than average to be concerned about fiber or sugar content.

Nutrition is the Key for Kids' Cereals

While taste beats all other cereal qualities when respondents discuss products they purchase for themselves, the picture is very different when it comes to buying cereal for children.

Mintel asked adults aged 18 and older who purchase breakfast cereal for the children in their household to rank the attributes they consider to be important or very important. While taste was the top consideration for adult cereals, nutrition is key for selecting cereal for children. Some 84% of respondents cited “nutrition” as important or very important, while 72% cited price.

Two-thirds of respondents said sugar content was a major factor when choosing cereal for kids, which suggests adults are trying to keep an eye on their children’s nutritional well-being. However, this may not be as easy as it sounds.

Even though adults are aware of what their children need to be healthy, almost two thirds (62%) of them consider “what my child asks for” as an important or very important factor when choosing a cereal. This suggests that, for many parents, there is an ongoing struggle between the “non-negotiable demands” of kids and their own attempts to cut back on high-sugar foods. While consumer groups have been fighting for a reduced-sugar content in cereal, backed by the government and by manufacturers themselves, kids are driving many of the cereal decisions in households. Moves to cut back on advertising high-sugar foods to children are underway, as are efforts to change the ingredients in kids’ cereals.

The real challenge is to convince children to ask for cereal that is good for them: products with lower sugar and wholesome ingredients. General Mills’ use of whole grains in its cereal products is a step in that direction, but manufacturers may want to develop new—and even more healthful--cereals that will capture children’s attention. It is a challenge, however, as kids tend to gravitate to foods eaten by their friends or promoted by their role models.

While children have become more vociferous consumers, licensed characters or promotions do not necessarily sway adults. Only 34% cite a “character my kids like or fun things to do on the box” as an important or very important attribute when purchasing cereal for their children, and this lack of interest in the “non-nutritional” aspect of cereal marketing may bode well for parents being able to regain control of the cereal aisle.

1: Only 32% of those surveyed believe cereal is reasonably priced, and just 29% consider it a better value than other breakfast options.

This article contains information from the Mintel report “Breakfast Cereals, U.S., August 2007.” Please visit http://reports.mintel.com for more information or call Mintel at 312-932-0400.