RTE Cereals and Health Bars
|One of Kellogg’s signature brands, Special K, has expanded far beyond its cereal roots and into nutrition and protein bars.|
Like a small town high school marching band, the success of the breakfast food market is largely determined by the widely varying talents of its members. Price/value perceptions, convenience and health emerge as key themes across all breakfast offerings. Even with recovery, ongoing economic woes will continue to drive cost-conscious consumers to seek out bargains. As such, private label has been a highly competitive sales force.
From 2007-2009, the breakfast cereal market yielded moderate performance gains, increasing 5.8% to $10.8 billion. However, 2008 and 2009 proved to be “above average” for growth in the market, fueled by price increases (as record commodity prices forced manufacturers to pass along high costs) and a resurgence in use of cereal as a “value”-positioned food. Since 2006, sales of health and nutrition bars--a much smaller category--have been growing moderately and reached just over $1 billion in 2008.
Some Like It Hot
Ready-to-eat (RTE) cold cereal dominates the cereal market, accounting for a full 88% of sales in FDMx during 2009, leaving hot cereal to fill the remaining 12% of the market.
However, over the past five years, hot cereal sales outpaced growth in the cold cereal segment at a rate more than three times greater. The majority of these gains were realized in 2004-2005, as consumers “rediscovered” hot cereal for its positive health benefits. More recently, however, the trade-down trend to private label has deflated segment sales. As competition has escalated in terms of healthy cold cereals and alternative breakfast options, hot cereal sales have stagnated.
Cold cereal has seen little growth in dollar sales during the past few years and even posted a decline in sales by volume. A mature market with high household penetration, cold cereal also faces increased competition from alternative breakfast foods, like cereal and nutrition bars.
In the future, both cereal segments will likely continue on a path of limited growth, impeded by their existing success: nearly universal household penetration. Upticks in use of cereal as a cost-efficient food option will likely be offset by the trade-down trend to less expensive private label by many of the category’s users.
The Business of Bars
When it comes to health/nutrition bars, wellness continues to drive sales. While boredom with weight-loss programs is hurting sales of diet bars, some brands--like Kellogg’s Special K and Zone--are surviving and appealing to people who are not on diet programs. Wellness bars are increasing their appeal, as consumers increasingly turn to “healthy” snack and meal offerings. Clif Bar is the clear leader in the wellness segment, with 45% of sales, and is making headway in the athletic bar segment, also.
Within the broader snack/granola bar category, sales of breakfast/cereal/snack bars have been particularly strong at the expense, it seems, of those products classified as health or nutrition bars. Additionally, granola bars have seen a strong surge in sales, suggesting an interest in more general bar offerings, rather than those positioned for specific health-related reasons; this likely is boosting sales in general, wellness-focused nutrition bars.
Competition for the Food Dollar
Competition from packaged goods, and the increasing focus on breakfast by the foodservice industry, has intensified the battle for the consumer food dollar. There are myriad breakfast choices available to consumers, and data reveals consumers shift between them frequently. Convenience, health and occasion impact those choices.
While many consumers are perhaps more likely to be cooking at home to save money, foodservice remains a viable threat to the cereal and nutrition bar markets, especially as QSRs and fast-casual restaurants continue to increase focus on breakfast offerings by highlighting value and convenience. Internal competition is also substantial, and the numerous products available result in little brand loyalty.
Overall, breakfast cereal is perceived as a good value, giving it an advantage over other breakfast foods. According to Mintel’s exclusive consumer research, four out of 10 respondents who eat breakfast cereal do so because it is reasonably priced, and 29% say breakfast cereal is a better value than other breakfast options.
However, while the economic downturn has fueled resurgence in demand for cereal as a thrifty food choice, at the same time, it also causes consumers to look for the best value, spurring a trade-down trend to private label.
Rising Food Prices
Rising food prices have impacted the breakfast food market, causing consumers to seek out bargains and trim back grocery bills. According to USDA’s Eco-nomic Research Service projections, consumer prices for cereal increased 10.2% in 2008 and another 3% during the first half of 2009, outpacing price hikes for overall food at home (up 6.4% in 2008).
Higher food prices have imposed shifts in consumer behavior, intensifying the propensity for coupon use, trading down to less expensive brands and private labels, and buying cereal in bulk. In fact, according to Mintel’s exclusive consumer research conducted in June 2009, nearly a quarter of all adults reported a trade-down to less expensive cereal in the past year, while 45% reported using coupons for their cereal purchases.
Cereal and health/nutrition bars are a less economical option, but what they lack in affordability, they make up for in convenience. Consumers of these products appear less price-conscious, focusing instead on the immediacy and convenience of bars as a meal or snack option. As such, competition from private label is much less prevalent in this segment than it is for cereal.
The Functional Factor
Functional foods--those that make an explicit health claim on packaging, in advertising, and/or on the company or brand’s website--are playing an increasingly prominent role in a number of the breakfast foods segments, including breakfast cereals and bars. With breakfast the first and most important meal of the day, functional foods that “set the table” for a healthy, happy and productive day ahead will be best received by consumers.
Vitamins and minerals continue to be a key addition to many breakfast cereals, particularly those targeted to children, providing parents with reassurance regarding nutritional value. Functional benefits are becoming more prominent, with whole grains leading the way, particularly for their digestive health benefits. In fact, research conducted for Mintel’s “Breakfast Foods--U.S., November 2009” report found a full 37% of respondents are looking for whole-grain claims, when making breakfast food decisions.
Breakfast cereals, it appears, are answering the call. According to Mintel’s Global New Products Database (GNPD), whole grain was the second most popular claim in cereal launches (second only to kosher) and is found in nearly half of new cereals launched in the U.S. This is up from just 11% of cereals making the claim in 2003.
Bars offer a perfect delivery system for nutrients and functional ingredients, which has led to an increased emphasis on ingredients over functional claims. The emphasis in the bar category over the past year has been on cultivating the “realness” of these products, with organic and all-natural topping claims among new product launches.
With 93% of households using cold cereal and 68% using hot cereal, the category enjoys high penetration. As such, new product launches and market trends tend to cannibalize existing sales. This barrier will likely continue to stifle sales growth, despite industry efforts to shift cereal usage beyond the morning occasion and into snacking and other meals.
Younger adults and those with children in the home (often the same groups, as households with children are typically younger than those without) are more likely to eat cold cereal, while older consumers and African-American households are more apt to use hot cereal.
Although only 14% of the population (based on Mintel’s exclusive consumer research) consumes nutrition bars, they appeal to virtually all demographics: for peak performance and recovery with weekend warriors; for vitality and youth with Baby Boomers; for a healthier snack alternative for all ages; and for replacement meals with the elderly. Diet fatigue has also hit the American public, and some are turning to nutrition/energy bars as a tool to help lose weight. In fact, among those aged 25-44, almost four in 10 are eating nutrition/energy bars in the hopes of losing weight.
For those Americans living a fast-paced lifestyle, nutrition/energy bars clearly fit the bill as healthy, grab-n-go alternative fare. They are convenient, portable, relatively inexpensive and are perceived as being healthier than junk food. However, there is still much growth to be had in the snack bar segment. (Special K, as shown below, has been able to parlay success in the cereal marketplace into strong nutrition bar sales.)
Other opportunities exist among children. According to Mintel’s “Kids’ Snacking--U.S., March 2008” report, nearly all kids snack on some type of sweet treat; however, they (or their parents) are increasingly trying to avoid sweets, making better-for-you options in the segment more important for future growth. Parents concerned about their children’s diets may find fruit-enhanced nutrition/energy bars a satisfactory answer.
Brand Focus: Kellogg’s Special K
As one of Kellogg’s signature cereals, Special K has built brand equity by aligning itself with health and nutrition. The Special K Challenge diet plan is designed to deliver positive results in a short amount of time, to give consumers the confidence and motivation to continue with a long-term, healthier lifestyle.
Health/wellness innovation has focused on bridging the gap between health and taste by launching line extensions to meet increased demand for flavor diversity, while piggy-backing off the brand’s positive health perception.
The expansion of the Special K line beyond cereal has proven successful. Special K health/nutrition bars were introduced in 2006 and, thanks to aggressive advertising and brand recognition, have become a key player, helping boost overall segment sales. Within the bar line, the brand offers seven flavors of Special K bars and seven Special K Protein flavors, and three of the newest, Special K Bliss bars.
More recently, the line has been expanded to include frozen waffles, crackers and even protein water to capture other breakfast and snack opportunities, all the while maintaining its commitment to and focus on the Special K two-week challenge. pf
Molly Heyl-Rushmer is a senior analyst, health and wellness, with Mintel International, a consumer, media and market research company with offices in Chicago and London. Mintel’s Global New Products Database (GNPD) is the company’s source of global product intelligence. Please visit http://reports.mintel.com for more information or call Mintel at 312-932-0400.
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Going Global: Breakfast Cereals
In general, cold cereal with milk is most popular in the West (especially in countries such as the UK and the U.S.) and not so typical in regions such as Asia.
According to Mintel’s Global New Products Database (GNPD), Europe led new product introductions in January-June 2009 and currently accounts for more than a third of the global breakfast cereal launches, followed closely by Asia Pacific, which increased share 3% from 2008-2009. Similar to trends seen in the U.S. market, whole-grain and vitamin-/mineral-fortified claims were consistently popular across the regions, highlighting the nutritional importance of breakfast cereals. Natural claims also were significant, with organic the top trend in Europe and no additives/preservatives performing well. The following products exemplify the more outstanding/unusual global product launches of 2009.
Launched in the UK, Perfekt Nutrition Nut Free Organic Granola with Pink Apple forms part of a new premium cereal range claimed to provide the ideal balance of carbohydrates and protein for sustained energy release. The formulation is rich in organic oats, natural fruit, magnesium, iron and B-vitamins and is sweetened with low-calorie agave syrup, which ties in with the overall low-GI positioning of the products. The cereals are targeted to female consumers and, in addition to basic weight-loss benefits, tout the ability to help maintain healthy hair, skin and nails.
In a similar health-related vein, Kellogg has extended its All-Bran Buds range in Canada with the addition of All-Bran Buds Singles. This product aims to make consumption of psyllium fiber more convenient, at home or on the move, with each serving containing over a third of the recommended daily intake of fiber.
PHOTOS COURTESY OF MINTEL’S GNPD