* “Better-for-You” Items Drive Sales

* Both Cold and Hot Cereals Show Growth

* Whole Grains, Gluten-free and Low-sugar Offerings Abound

According to a 2011 report from the Hudson Institute, a policy research organization, companies that offer products with “better-for-you” (BFY) attributes perform better financially than companies that don’t. The report, “Better-For You Foods: It’s Just Good Business,” found that BFY items, while constituting only 40% of total of sales for the companies the institute polled, actually drove more than 70% of sales growth for those companies during the 2007-2011 period.

The cereals category, including breakfast bars, is certainly formulating new products along the BFY spectrum. Over the past year, there have been increases in ingredient contributions from protein, fiber, fruit and whole grains. In studies  conducted by NSM Research Inc. in 2011 among health-conscious consumers, 92% of participants rated protein and 88% of participants rated fiber, as “somewhat” or “extremely” important in a BFY product (especially for managing hunger). The category has also reformulated to remove ingredients, such as sugar and gluten.

According to Datamonitor, the cold cereal category in the U.S. is at $11.3 billion in retail sales, growing at a compound annual rate of 4% over the past three years, while the hot cereal category is at $1.46 billion, growing at 1% over the same time period. The breakfast cereal market is dominated by Kellogg’s and General Mills, each with about 30% of the market, followed by Ralcorp (including Post, prior to its spin-off into Post Holdings Inc.) at about 11%. Private label has steadily garnered greater market share over the last five years, from 8.5% in 2006 to the current estimated share of 10% in 2011.

Many companies have taken note of the growing consumer interest in protein, but formulating a high-protein product always holds the challenge of balancing the flavor profile; sometimes it’s hard to avoid a trade-off between flavor and performance. According to Mintel’s Global New Products Database (GNPD), 410 new snack, cereal and energy bars were introduced in the U.S. in 2011. Almost 20% of these new products made the “high protein” claim. In 2011, 10g of protein per serving seemed to be the magic number. (By way of comparison, a large egg has about 6g of protein, while a cup of milk has about 8g.)

General Mills Inc.’s Nature Valley launched Nature Valley Protein Chewy Bars—with 10g of protein (15% of the Daily Value) from all-natural sources, 5g of fiber and 190 calories. The bars are available in two flavors, Peanut Butter-Dark Chocolate and Peanut, Almond & Dark Chocolate.

At the same 10g of protein level, Abbott Nutritionals Inc.’s ZonePerfect has added Sweet & Salty all-natural nutrition bars to its line, in both Cashew Pretzel and Trail Mix varieties. In addition to being an excellent source of protein, each bar has 19 vitamins and minerals and is rich in the antioxidants vitamins C and E, and selenium.

On the breakfast cereal front, 500 new cold cereals and 104 new hot cereals were launched in 2011, according to GNPD. Over 50% of the new products showcased a “kosher” or “environmentally friendly package” claim, and 47% of the new introductions had a “whole grain” claim.

While “high protein” was not specifically listed in the top 10 claims, often it was one of many benefits offered. Some of the highlights in new cereal introductions included the following: Kashi Co.’s GoLean Crisp! Cinnamon Crumble featured a new cereal with 10g of protein, 9g of fiber and 20g of whole grains. The cereal is minimally processed, with all-natural ingredients and no high-fructose corn syrup. The company states it would like to “give people new ways to get as much protein as an egg.”

Fiber Still Hot

Fiber consumption continues to be heralded as part of a healthy diet, with USDA guidelines highlighting the importance of adequate intake. Fiber appears to reduce the risk of developing various conditions, including heart disease, diabetes, diverticular disease, constipation and, according to some research, certain cancers. The National Academy of Sciences (Institute of Medicine) recommends 28g of dietary fiber based on a 2,000kcal/day diet. The current guidelines state that foods labeled “high in fiber” must contain at least 5g of fiber per serving.

Weighing in at 9g of fiber, The Kellogg Co.’s expanded its FiberPlus line to add FiberPlus Caramel Pecan Crunch. This blend of whole-grain wheat and rice flakes with naturally and artificially flavored caramel and pecan clusters provides more than a third of the recommended daily requirement of fiber and a total of 24g of whole grains. The Quaker Oats Co. introduced a new product called Whole Hearts, lightly sweetened heart-shaped bites that can be consumed with or without milk, thus allowing the breakfast occasion to extend into snacking. The product is high in dietary fiber and contains 6g of protein per serving.

Fiber by way of fruit additions continues to attract interest. 2011 saw several new products touting the benefits of fruit. Post added Raisin Medley to their Honey Bunches of Oats line. The Honey Bunches of Oats Raisin Medley contains three different types of Sun-Maid raisins—natural seedless, jumbo seedless and flame (red grapes). Raisins are a concentrated source of important nutrients, such as iron, calcium, protein and vitamin C, and, as with all dried fruits, are an excellent source of fiber. One cup of the cereal provides 12g of whole grains, 200 calories, 2g of fat, 0g of saturated fat, 2g of fiber, 14g of sugar and 3g of protein.

Going With the Grain

Kellogg’s added Frosted Mini-Wheats Touch of Fruit in the Middle Mixed Berry, which is comprised of  lightly sweetened, whole-grain biscuits and contains real fruit in the filling of each piece. It provides 24% (6g) dietary fiber per serving. Meanwhile, Quaker added Natural Granola with Real Fruit in an Apple Cranberry Almond flavor, promoted as containing heart-healthy whole grains and high in fiber and low in sodium.

The words “Whole Grain” and “More Whole Grain” seem to be plastered across the majority of breakfast cereal facings. As the Whole Grain Council states, “Studies show that eating whole grains instead of refined grains lowers the risk of many chronic diseases. While benefits are most pronounced for those consuming at least three servings daily, some studies show reduced risks from as little as one serving daily. The message: Every whole grain in your diet helps!”

General Mills has more than 50 of its Big G cereals now featuring a white checkmark, which signifies the cereal has more whole grains than any other single ingredient. To promote whole grain education, the company partnered with Travis Stork, M.D., an emergency room physician and host of the TV show The Doctors. An online educational game has been designed in which consumers are challenged to quickly identify products that have whole grains as the first ingredient while shopping virtual grocery store aisles. Players have the option to enter a sweepstakes (www.WholeGrainNation.com) to win one of each of the dozens of cereals bearing the white check.

In January 2012, General Mills added variety to its Multi Grain Cheerios brand with the introduction of Multi Grain Cheerios Peanut Butter. Made with real peanut butter, Multi Grain Cheerios Peanut Butter provides 16g of whole grain and has 110 calories per serving. According to consumer preference studies, peanut butter is a popular flavor among people looking to manage their weight.

Quaker Oats added a new flavor to its line of Quaker Oatmeal Squares cereal. The new flavor, Honey Nut, with a touch of honey and a nutty crunch, packs a walloping 46g of whole grain per serving. On the hot cereal front, Quaker went somewhat indulgent, introducing a Chocolate Chip Instant Oatmeal, marketed under the umbrella of heart-healthy whole grains.

Putting together a trifecta of benefits, Kashi GoLean Instant Hot Cereal introduced Hearty Honey & Cinnamon. The company’s mission is “to provide great-tasting, all-natural and innovative foods that enable people to achieve optimal health, wellness and weight management goals.” All Kashi products are “natural,” minimally processed and free of highly refined sugars, artificial additives and preservatives. The front panel names the main benefits: 8g protein, 5g fiber and 7 whole grains.

Formulating BFY products, while often achieved by adding “good-for-you” ingredients, can also take the form of removing that which is perceived as not “good for you.” Gluten-free products continue to be important for a subset of the population, as one in every 133 Americans can’t eat products that contain gluten, a protein found in wheat. (A subset of this population is unable to eat gluten from rye, oats and barley.) Gluten-free grains quinoa, millet, buckwheat, corn, sorghum and amaranth, among others, are now seen increasingly in supermarkets, health food stores and ethnic specialty stores.

Gluten Free Growing

Kent Spalding, vice president of marketing for Weetabix USA’s Barbara’s Bakery division, notes that the strength of the Natural/Organic category trend is still strong. Spalding points to the AMG Natural Organic Shopper Community report of June 2011, which shows that the shopper of “natural & organic” products spends more, shops more and has more brand loyalty than the conventional shopper. According to the report, 74% shoppers buy natural/organic products at least once a week, and more than half—56%—of shoppers plan on spending more money on natural/organic products in the next year. About 50% of these shoppers rate their loyalty to their natural/organic brand as “somewhat” or “extremely” loyal, looking for the phrase “organic” (86%) or “natural” (70%) when shopping for products at their natural/organic food store.

“While the adult and children’s cereal segments are relatively flat, the ‘all-family’ segment continues to drive the growth in the natural/organic cereals category,” adds Spalding. He points out that, as consumers new to natural/organic search for cereal options, they’re drawn to the familiar, especially to a national brand emulator. “At Barbara’s, the focus on natural ingredients extends to using great taste to build the bridge between purchasers of conventional cereal and the ‘natural’ category,” continues Spalding. “Since Barbara’s sits alone as the only all family natural/organic brand in the natural marketplace, this uniquely positions the brand as the perfect ‘cross-over’ cereal for the mainstream consumer looking for a healthier alternative. Consumers are willing to try Barbara’s familiar, family-friendly cereals as opposed to other brands.”

But, outpacing natural and conventional grocery cereal sales is the gluten free sub-category. “Consumers are paying attention to gluten-free claims,” says Spalding. “And it isn’t a fad—those who suffer from celiac disease or a gluten intolerance will always need these products.” Gluten-free products are expected to grow to over $5 billion in sales in the U.S. by 2015, and 15-25% of consumers say they want gluten-free foods. Of those purchasing gluten-free products, 46% percent do so for perceived health benefits and said products are perceived as being “healthier than their conventional counterparts.” When it comes to breakfast products, “gluten free” labeled cereals account for 26% of total dollar sales in the natural channel, and accounted for $45 million in annual sales in 2010.

To serve this market, Barbara’s just launched its “Simply Delicious” gluten-free line, featuring Honest O’s, Multigrain Corn Flakes and Brown Rice Crisps. Most are certified organic by the USDA, without artificial flavors or preservatives. They’re excellent sources of vitamins C and D, as well as of calcium and iron, and include fruit juice-sweetened varieties with as little as 1 to 5g sugar per serving. They provide up to 40% daily whole grain needs, making them fiber-rich, heart-healthy breakfast options. The Honest O’s are made with pure oat flour.

Most persons on gluten-free diets stayed away from oats, because cross-contamination with wheat, rye and barley is a major concern. Barbara’s sources pure, all-natural oats certified by the Gluten-Free Certification Organization (GFCO) and tested by enzyme-linked immunosorbent assay (ELISA). “Oats add nutrition to a gluten-free diet not only via natural fiber, but with iron, magnesium and B vitamins, nutrients often lacking in a gluten-free diet,” says Spalding.

While many gluten-free products have been making their way to the market, cereal customers have had few options. Kellogg’s introduced Rice Krispies Gluten Free cereal, replacing the barley malt in original Rice Krispies with naturally gluten-free, puffed whole-grain brown rice. It is fortified with several vitamins and minerals, and contains 120 calories, less than 1g of sugar, 1g of fat and fiber, 3g of protein and 190mg of sodium per serving. Interestingly, the suggested retail price is the same as the original version. The company must take extra steps to ensure product integrity, producing the gluten-free version in a separate facility and testing each batch to ensure it is free of gluten.

Another avenue for gluten-free is to avoid the use of grains altogether. Deepa Shenoy, Ph.D., Founder and CEO of Crunchfuls Inc. did just that last year when the company broke new ground as the first company to hit the market with RTE cereals and snacks made primarily from legume-derived flours. The blend of lentils, dry beans and split peas (a.k.a. “pulses”) in its  Crunchfuls RTE cereal allow for 4g protein and 4g fiber (about twice as much as most grain-based cereals) in a single 100-calorie serving that gets its sweetness from only 3g dried cane juice.

Billing itself as a “better-than-whole-grain alternative for cereal and snack eaters” the line is organic, vegan, kosher and gluten-free, as will be the cereal bars the company is launching later this year. As an unexpected bonus, Crunchfuls cereals also offer a full serving of vegetables and complete protein for breakfast. They are fortified with 14 vitamins and minerals plus omega oils.

Another better-for-you aspect of Crunchfuls involves a unique processing technique in which the milled pulse flour is fast-cooked using high-pressure steam cooking, followed by toasting to create a long-lasting crunchy texture. And the combination of low oil content and processing that keeps what little oil there is from high heat virtually eliminates acrylamides, suspected carcinogens that derive from high-heat starch processing.

Gluten-free is also moving into the realm of hot cereals with Bakery on Main’s Strawberry Shortcake Flavored Instant Oatmeal. The product promises the health benefits of a multigrain blend of certified gluten-free oats, amaranth and quinoa.

Finally, reducing the sugar content in breakfast cereal will continue to be pushed by a wide range of consumer promotion and health groups. A report by the Environmental Working Group warns that many major label breakfast cereals contain as much or more sugar per cup (one serving) than a typical dessert. Most major cereal manufacturers will continue to push the R&D and marketing teams to lower sugar content using natural alternatives, such as stevia, flavor enhancers and other means without sacrificing consumer expectations for taste, texture and the overall breakfast experience.