How America’s Top 2 Breakfast Cereal Makers Are Responding to Soggy Sales

Crunch time for Kellogg's and General Mills

Oh, for the good old days of breakfast cereal. If you're of a certain age, chances are you can hum Kellogg's "Two scoops of raisins" jingle, imitate Tony the Tiger growling how "Grrreat!" Frosted Flakes were, and perhaps even remember when Bruce Jenner adorned a Wheaties box. There was a time, not too long ago, that ready-to-eat cereals accounted for 38 percent of the breakfast food eaten by Americans—many of them kids, who got their daily sugar fix from brands like Cap'n Crunch, Trix, and Fruity Pebbles.

But those days are over. Cereal sales have been circling the drain for over a decade now. According to Nielsen data, Americans still spent $8.75 billion on ready-to-eat cereal last year—but as recently as 2012 that figure was $9.6 billion. And even though March 7th was National Cereal Day, the two dominant players in the category—General Mills and Kellogg's—have found little to celebrate. But as Americans turn to breakfast alternatives in increasing numbers, it's worth looking at how these companies are responding to an eroding market. Below, a snapshot of their strategies.

Kellogg's
Kellogg's is the world's largest maker of cereals. That's no small boasting point—at least, until you consider that cold cereal ain't so hot anymore. While 90 percent of households still buy box cereal, younger Americans are leaving it behind for alternatives like yogurt or portable options such as breakfast bars. Already declining for years, the retail volume of breakfast cereals slipped another 2 percent in 2015, per Euromonitor. Faced with those soggy prospects, Kellogg's has adopted an interesting tactic: It's using the name recognition of its many breakfast cereals to launch new products that might be for breakfast, but aren't cereal. For example, debuting in May were Kellogg's Raisin Bran Granola, designed for eating on the go, and Special K Crustless Quiche, "an entirely new breakfast option," according to headquarters. These products came on the heels of a December 2015 initiative that encouraged Americans to "reimagine their breakfast" and "think outside the cereal box" by using cold cereals as a key ingredient in new dishes curated by celeb chef Christina Tosi. These included Raisin Bran Carrot Cake and Corn Flakes Chilaquiles. Meanwhile, Kellogg's has also been modifying its famous cereals into "portable" form with products like Special K Breakfast Medley Sandwiches and Chewy Nut Bars that "fit the way many people eat breakfast today." So how's all this working? While Kellogg's said it "continued to make progress" in the "cereal category share," Q1 2016 sales in its morning foods division still slipped 1.2 percent.

General Mills
Faced with the slow but steady decline of breakfast cereals, General Mills has responded by increasing its investment in them. "Our top priority in U.S. retail this year is to drive growth in cereal," General Mills CEO Ken Powell told analysts late last year. And how to do that? Big G cereals (the General Mills division that represents 22 percent of company sales) is out to spruce up cold cereal's reputation by eliminating the high fructose and artificial ingredients that have characterized—and, in recent years, tarnished—its many famous brands, especially sugar-laden granddaddies like Cocoa Puffs and Lucky Charms. As of this year, Big G had reformulated three-quarters of its lineup, including Trix, Cocoa Puffs and Golden Grahams, and rolled out a new spot called "Love Cereal Again." "We want people to be able to … feel better about what they are eating and serving their families," General Mills' R&D manager Kate Gallager said in a statement. Meanwhile, earlier this month, Big G doubled down on its strategy by launching Tiny Toast, its first new cereal brand in 15 years. Unfortunately, Wall Street didn't feel as good as General Mills, whose stock took a dip on the day of the announcement. Skeptics contend that the cereal category is already laden with too many brands and doubt that time-starved, mad-dashing Americans can be lured back to the leisurely breakfasts they enjoyed a generation ago. Still, General Mills' retail segment did post a 4 percent sales increase for Q1 2016—and that's a start.

This story first appeared in the June 20, 2016 issue of Adweek magazine.
Click here to subscribe.