Shopper trends: Cereal firms react as breakfast habits evolve

By Jason Stroud, IRI | 8 January 2014

Mondelez has had success with Belvita in the UK

Mondelez has had success with Belvita in the UK

Major cereals manufacturers are reporting disappointing sales and there has been a decline in volume sales over the last few years. It would be easy to think that this GBP1.3bn market, (US$2.14bn) (in the UK alone) had gone stale, but with pockets of growth and lots of innovation, this is one category that is certainly hotting up.

Hot cereals is one growth segment, with value sales up 83% in the last five years. Growth in porridge, for instance, has been driven by continued innovation as manufacturers respond to consumer demand for added convenience with new formats such as sachets and pots that provide more options for breakfast-on-the-go. Brands such as Quaker Oatso Simple have tapped into this whilst also offering a wider range of new flavours. Alpen and Special K have also launched products into this buoyant sector. There is also growth in Germany, where manufacturers Kölln and Vitalis introduced single portion cereals, and Spain. The growing pots format has increased the price of cereal per kilo, driving value sales up 52% in the last five years in the UK. 

Other breakfast alternatives such as cereal bars and breakfast biscuits are also tapping into ‘out of home’ breakfast occasions as consumers with busier lifestyles change what and where they eat. According to Mintel 16% of adults now eat breakfast out of home at least twice a week. This has led to the value of the total breakfast alternatives category growing by 25% over the last five years.

The breakfast biscuits category is another innovation that has been created by Kraft with its Belvita biscuit brand. With sales growing from zero to a GBP56m over the last three years, Belvita has become the number four breakfast brand overall in the UK. This category is also growing in Germany and Greece, where shoppers are reducing the volume of food that they buy in most other categories. Other morning goods such as croissants are also showing growth of 12% year-on-year as British consumers continue to become more continental in their breakfast habits.

Cereal manufacturers are also developing breakfast drinks to try to offer consumers more convenient options. Weetabix is the latest manufacturer to launch such a line, following the introduction of similar products in the country from smaller firms Lacka Foods and Fresh Marketing.

So while the value of the ready to eat cereals segment grew by just 2% in value in the last five years, this was mostly the result of price increases by manufacturers. Volume sales for ready to eat breakfast options have declined as changing breakfast eating habits and more breakfast alternatives squeeze the size of the market. Some brands, such as Kellogg’s Crunchy Nut, continue to outperform the sector by hitting key price points and performing well on promotions. 

Even as the economy improves, changing shopper habits that are driven by less time mean that promotions that benefit the category and not just the manufacturers’ share of the market will be as important as continued innovation.

Sectors: Cereal, NPD & innovation

Companies: Kellogg, Weetabix

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