US retail sales of RTE cereal dropped 4% in 2014, says IRI, but Kellogg, Gen Mills insist decline isn't terminal

By Elaine Watson contact

- Last updated on GMT

US retail sales of ready to eat cereal dropped 4% in 2014, says IRI
US retail sales of ready to eat breakfast cereal continued to fall in 2014, with multi-outlet* data from Chicago-based market research firm IRI revealing a 4% drop in dollar sales and unit sales in the 52 weeks to December 28, 2014.

While there were pockets of growth, the top four players in the category - General Mills, Kellogg, Post, and MOM Brands (which is soon to become part of Post Holdings​) – all posted negative growth in volumes, with unit sales down 2.24%, 5.28%, 1.79% and 10.16% respectively.

Private label products did not fare much better, meanwhile, with dollar sales down 5.05% and unit sales down 5.51% over the same period.

Drilling down to individual brands, however, several were in positive territory in terms of dollar sales, including Post’s Honey Bunches of Oats (+4.76%), General Mills’ Original Cheerios (+3.44%) and Cinnamon Toast Crunch (+8.7%), Kellogg’s Froot Loops (+3.27%) and Post’s Fruity Pebbles (+19.33%).

Weaker performers were General Mills’ Honey Nut Cheerios (-5.59%) and Lucky Charms (-5.24%); and Kellogg’s Frosted Flakes (-4.52%), Special K Red Berries (-12.03%) and Frosted Mini-Wheats (-4.8%).  

Is the cereal market in terminal decline or is this a blip?

So what's gone wrong?

On paper at least, boxed breakfast cereal ticks all the right boxes.

It’s quick, great value for money (low cost per serving), and more nutritious than many alternatives, meaning it should really be the perfect recession-proof food. 

However, consumption has been steadily dropping over the last decade as consumers have sought out more convenient - and often more expensive - alternatives, while ‘breakfast’ has switched from being one of three square meals a day to just another snacking occasion.

And cereal with milk is not the most convenient option for people that eat breakfast on the move, or at work, while demographics are also working against it as Millennials are just as likely to snack on Greek yogurt, snack bars or a 300-cal frozen breakfast sandwich that can be heated in the microwave, note market researchers. 

Kellogg: We believe we can return our developed cereal business to growth

But not everyone is convinced that the category is in terminal decline.

Speaking to analysts on Feb 12 during Kellogg’s Q4 earnings call, CEO John Bryant said: "We believe we can return our developed cereal business back to growth.  

"We expect that sales in the U.S. cereal business will be down in 2015, but that trends will show a real improvement over those we saw in 2014."

Kellogg cereals
Kellogg: "We need to think more about how we bring convenience, portability to play."

Now there's almost two breakfasts to many people's mornings 

Speaking at the Consumer Analyst Group of New York (CAGNY) conference yesterday, chief growth officer Paul Norman stressed that Kellogg was still committed to growing the category.

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The new Kellogg's Origins range is all about “real food prepared simply, no preservatives, no artificial colors, no artificial flavors; whole grains, fiber, and an ingredient list you can understand,” says chief growth officer Paul Norman.

He added: "70% of people still see breakfast as the most important meal of the day, and one in five people are eating more breakfast each morning...

"​[But] the breakfast occasion is changing, now there's almost two breakfasts to many people's mornings, one at home and one on the go, which means we need to think more about how we bring convenience, portability to play."

Kellogg also plans to unveil a new range of cereals, muesli and granola this year called Kellogg's Origins, which will be all about "real food prepared simply, no preservatives, no artificial colors, no artificial flavors; whole grains, fiber, and an ingredient list you can understand," ​he said.

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Cereals now account for 45% of Kellogg's revenues compared with 70% in 2000, says CEO John Bryant

General Mills: Huge growth opportunities for cereal in emerging markets

Ken Powell square
General Mills CEO Ken Powell: 'Emerging markets represent the growth opportunity for ready-to-eat cereal.'

Bosses at General Mills, meanwhile, who have just unveiled plans to make most varieties of Cheerios gluten-free​, told CAGNY delegates that the US, the UK, Canada and Australia accounted for 54% of total cereal consumption, but just 6% of the world’s population, and that the big growth opportunities for cereal were in emerging markets.

* IRI is a Chicago-based market research firm. Its US Multi-Outlet data covers supermarkets, drugstores, mass market retailers, military commissaries and select club & dollar retail chains.

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