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The trouble with breakfast cereals

Could new marketing and displays bring back cereal's snap, crackle and pop?

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When Kellogg’s Corn Flakes first arrived in Canada, in 1914, it was the start of a century-long love affair between Canadians and breakfast cereal.

But with so many other options on the market today, many of us are flaking out on cereal.

In December, Kellogg’s announced it will close its 89-year-old London, Ont., processing plant–a casualty of changing consumer appetites.

READ: Kellogg launches new products for busy consumers

The company posted a 2.2% decline in its U.S. morning foods business in Q3. Kellogg’s woes underscore the tough challenges faced by cereal makers.

In 2013, sales of ready-to-eat cereals in Canada grew by 2%–due largely to increased prices–while volume remained flat, according to Euromonitor International.

Hot cereals (mainly made with oats) led the category, posting a 4% sales increase. Sales of organic breakfast cereals–another bright spot—also rose 4%.

“What you’re seeing is a change in eating habits,” says Ken Wong, marketing professor at Queen’s University in Kingston, Ont. “A lot of messages say you should have a healthy breakfast. But people now consider a wider range of options for breakfast.”

Competition is rising from all sides, most notably fast food. “McDonald’s and Tim Hortons in particular have put an incredibly aggressive push on breakfast sandwiches,” says Dale Storey, VP of marketing at General Mills Canada.

On top of that, protein-packed items such as Greek yogurt, at-home breakfast sandwiches and eggs are now popular.

READ: More oomph in the morning

So what’s a cereal manufacturer to do?

“Figuring out how to make ready- to-eat cereals relevant again should be No. 1 priority,” says Jason Dubroy, who began his career at Quaker Oats Company of Canada and is now VP managing director of shopper marketing at DDB Canada.

The “big three” cereal makers are hoping their own protein products will drum up excitement.

Last year, Post Foods launched Great Grains Protein Blend and, in 2012, Kellogg’s re-launched its Special K Protein cereal. Likewise, General Mills is also developing cereals with protein.

On the marketing front, General Mills, Quaker, Kellogg’s and Post have created the Breakfast Cereal Manufacturers of Canada.

In March, the association is to launch a campaign called “What’s in the Bowl?” The main component will be a website that promotes cereal’s benefits and answers questions.

“We believe cereal is inherently nutritious food, that it’s a great value and that we haven’t done an adequate job telling that story,” says Storey.

In-store solutions could also help. For years, cereals were marketed as “part of a nutritious breakfast” next to juice, toast and fruit, says Dubroy.

READ: For yogurt, a remarkable run just keeps on going and going

“However, they have never really been merchandised that way. Whoever can work out the logistical challenges to set up a ‘breakfast end’ complete with milk merchandised as part of the display will see incremental growth and profit. You will be training the shopper to look for inspiration rather than destination.”

Wong also sees opportunities in cross-promotion, notably between yogurt and cereal.

“In Europe, tossing some granola or muesli on yogurt is done every day. And [here], when the consumer turns to yogurt, they do so cereal-less.”

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