Americans losing appetite for cereal

Consumers concerned about nutrition, lack of convenience

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Los Angeles Times

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 Co.

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 toward 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 healthier 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’ push for healthier cereals now goes much further.

Shoppers are looking for “high protein and fiber content and natural ingredients,” the research firm Mintel Group Ltd. 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 Corp. 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.

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