The news out of Battle Creek, Mich., a couple weeks back raised eyebrows as far as Wall Street: Kellogg’s, denizen of the family breakfast table, suffered an earnings loss of 15 percent. The big hit was in what Kellogg’s calls its “Morning Foods Business”—in other words, cereals like Rice Krispies, Froot Loops, Frosted Flakes and Special K. Those brands are close to half of Kellogg’s business, and their sales tumbled 4.9 percent. “The cereal category,” said CEO John Bryant, “… remained challenging.”
Bryant was addressing his shareholders, so his language was appropriately restrained. Translated for the rest of us, though, the message is basically that the breakfast cereal category is in trouble.
Sales of cold breakfast cereals slipped 3 percent over the decade between 2001 and 2010, according to research from Mintel. Between 2009 and 2010, it dropped a nauseating 6.3 percent. “Cereal Falls Out of Fashion,” blared The Street in the wake of the Kellogg’s earnings report. As the public radio program Marketplace recently observed, “Americans are not buying cereal like they used to.”
Seeing as breakfast cereals sit in over 90 percent of our homes, why do so many of us want nothing to do with it? As it turns out, there are many answers to that question, and none of them are very encouraging for the cereal industry.
Eating cereal used to be as American as apple pie and baseball. John Harvey Kellogg developed the first corn flake in 1896, and by the 1900s breakfast cereals were considered cutting-edge vegetarian eating by the likes of Amelia Earhart and Thomas Edison. From the cowboy shows of the 1950s to the cartoons of the 1970s, the big sponsors were always the big cereal companies.
Cereal is still a $7.7 billion business in America (and one that pays for somewhere around 1.3 million TV spots annually) but clearly the product’s best days are behind it. One big reason is sugar—a carbohydrate that cereal brands use 816 million pounds of each year. The time is long gone when mom smiled cluelessly as her progeny plowed into a bowl of Count Chocula or Lucky Charms.
“Breakfast cereals have been suffering from an unhealthy perception among U.S. consumers, who generally regard these products as too high in sugar,” said Euromonitor senior analyst Francisco Redruello in a recent report. “With childhood obesity at historically high levels, health-conscious parents are aiming to cut down the volume of breakfast cereals consumed by their offspring.”
Cereals have also been under steady attack by numerous public health groups that have criticized both their ingredients and the marketing. Quoted in Time magazine’s 2009 roundup of the least-nutritious breakfast cereals, noted nutritionist and author Marion Nestle (no relation to the food purveyor) announced, “the large cereal companies have chosen to aggressively market only their least nutritious products directly to children.”
Another problem is gluten intolerance. Celiac disorders have increased fivefold since the end of WWII, and may affect as many as 3 million Americans. That’s a lot of people who won’t be dropping a cereal box into their shopping carts. Cereals have also been hit with “increasing competition from other breakfast options,” to quote the Canadian government’s 2012 American Eating Trends Report. Items like snack bars and Greek yogurt aren’t just quicker than sitting down to a bowl of cereal, they’re portable, too.
Finally, regardless of what we Americans like to have for our morning meal, the truth is that more of us are skipping it. Surveys by the NPD Group and the Dairy Research Institute have found that 31 million Americans now skip breakfast—that’s a whopping 18 percent of Americans. In 1977, that number was more like 6 percent.
Back at Kellogg’s, the R&D people have responded by rolling out new products to “meet the changing needs” of Americans, including Special K bars and Kellogg’s To Go breakfast shakes.
Neither of which, of course, is a cereal.