It’s not just snap, crackle and pop in Latin America… but pester power is one of the key drivers of the booming branded breakfast cereal market, despite relatively high retail prices. Emily Woon reports.
Retail value sales of breakfast cereals in Latin America reached US$2.9bn in 2006, representing robust growth of 13% on the previous year, according to the latest research from Euromonitor International. Correspondingly, retail volume sales of breakfast cereals hit around 490,000 tonnes in the same year, registering an increase of around 9% on 2005. The relatively high retail value growth in breakfast cereals was undoubtedly due to the increased launch of more premium healthier lines.
The majority of sales in Latin America are derived from Mexico, which accounted for a huge 56% value share in 2006. The second largest market is Brazil, which accounted for less than a 9% value share in the same year. Venezuela followed closely behind with an 8% value share. Sales of breakfast cereals in other Latin American countries are still relatively insignificant due to the attachment most Latin American consumers have to their traditional breakfast habits. Generally, Argentineans still prefer biscuits, bread, toasts or pastries with coffee or tea, while Chileans are still in love with their traditional bread.
Breakfast cereals are increasingly gaining acceptance among consumers in Latin America, especially those in the upper and middle-upper income segments. This is largely due to the fact that more consumers are being exposed to American diets through increased holiday or business travel to the US, and they are becoming ever more aware of the benefits of healthy eating and living.
On the other hand, consumption of breakfast cereals among lower-income earners is still very much restricted, due to their high unit price. In 2006, the average unit price of breakfast cereals in Latin America was US$5.9 per kg, just 60 cents cheaper than the developed Western European market. When compared to other local breakfast options such as arepa (fried/baked corn pancake) in Venezuela, a regular portion of corn flakes accompanied by whole milk and sugar easily costs twice as much.
Children’s breakfast cereals is by far one of the fastest growing segments, with impressive growth of 13.4% in value terms in 2006. Euromonitor International’s research shows that this is due to the fact that being able to consume breakfast cereals remains an aspiration for the vast majority of children who exert great influence over the food purchased by their parents. Children’s interest in breakfast cereals is further bolstered by manufacturers’ aggressive investment in packaging and promotional activities, which are often linked to movies or cartoon characters. For example in 2005, Kellogg in Mexico sold breakfast cereals in packaging portraying the images and characters of the film Star Wars Episode III. This strategy works well for Kellogg, as children ask for these cereals because they can easily recognise them.
In addition, manufacturers have been actively launching a wide variety of cereal products to cater for the demands of their young consumers. Latest findings have revealed that chocolate-based cereals are very popular, especially in Brazil. As a result, Kellogg saw its combined sales of Choco Krispies and Chocos increase by more than 40% between 2004 and 2005.
Historically, malnutrition has been a leading concern among governments in Latin America and many programmes have been employed to tackle this problem and other related public health issues. Today, governments must also contend with obesity and its health-related side effects, which is becoming a chronic problem in several Latin America countries. As a result, the Mexican government, for example, started awareness programmes in 2004 to promote the consumption of healthier food and a more balanced diet.
The growing concern over health issues in recent years has indeed spurred sales of healthier breakfast cereals. In 2006, the regional combined retail sales of reduced-fat breakfast cereals as well as those high in fibre, hit US$746m, equating to growth of 14% on the previous year. Euromonitor’s findings in Mexico reveal that young women represent the largest target market for high-fibre and reduced-fat cereals as they tend to be more concerned about their weight. Therefore, cereals promising to help consumers lose weight are witnessing increasing sales. Current favourite brands include Special K (Kellogg), Fitness (Cereal Partners Worldwide) and Kellogg’s All Bran. The recent launch of a new line, Fitness & Yoghurt (Cereal Partners Worldwide), which contains real yoghurt with live and active cultures, has been well received by Mexican consumers. This successful launch saw Fitness increase its value share in breakfast cereals in Mexico by 0.2 percentage points to 4.1% between 2004 and 2005.
Sales of hot cereals remain strong in Latin America, especially in Venezuela, where 2006 value sales increased by more than 33% on the previous year. Such robust growth was underpinned by strong demand from Venezuelans between 50 and 80 years of age. Hot cereals such as oatmeal or fororo (Canarian-style gofio) are typically consumed for breakfast. This tradition of eating hot cereals was inherited from European settlers and is a deeply rooted custom in rural areas and among older adults. In addition to the elderly segment, there is strong demand for a number of affordable hot cereal brands such as Polly Crem-Arroz (Unilever Group) from low-income families to feed their babies when initiating cereal consumption.
As a result of more competitive pricing, wider product variety, and more convenient business hours, supermarkets and hypermarkets increased their value share of breakfast cereals by 0.4 percentage points between 2004 and 2005. In addition, retail growth was also observed in convenience stores, indicating that companies are widening their distribution networks to reach more points of sale. In contrast, sales of breakfast cereals via independent stores, which are usually very small neighbourhood stores located in highly populated areas, have dwindled quite significantly, largely due to a lack of demand from poorer consumers.
Euromonitor International expects demographics will play a strong role in shaping future growth, particularly in children’s cereals. The population under 14 years old in Latin America totalled over 165 million in 2006, which represents a massive 30% of the total population. No other region registers such a high proportion of children aged 14 years and below, except for Africa and the Middle East. In terms of per capita consumption, an average child (aged 14 or below) in Latin America consumed less than 1kg of breakfast cereals in 2006, versus 3.9kg and 6.6kg in Western Europe and North America respectively. On the back of these trends, retail sales of children’s breakfast cereals are expected to grow by at least 9% in constant value terms annually through to 2010.
The latest packaged food reports from Euromonitor International will be available on just-food.com by the end of February.