The U.S. Breakfast Market: Cereals

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Breakfast cereals are a mature, yet exciting market. Worth $9.8 billion at retail in 2000, cereals have rallied in the past couple of years, after slumping during much of the 1990s. This new Packaged Facts report studies such powerful sales drivers as the expanding range of FDA-allowed health claims, the building cereal presence in drugstores and at mass merchandisers, and America's greying population. Sales data spanning 1995-2005 are presented for both the cold and hot cereal categories. Qualitative analysis of market ups and downs is exhaustive; it includes tactical profiles of the Big Four -- General Mills, Kellogg, Quaker, and Nabisco. Challengers such as Ralston, Hain Celestial Group, and Malt-O-Meal are scrutinized, too. All-important IRI share data and Simmons demographic info are also provided.

  1. Executive Summary
    • Scope and Methodology
    • The Scope of This Report
    • Report Methodology
    • The Products
    • Two Breakfast Cereal Categories: Hot and Cold
    • Three Cold Cereal Types: Sweetened, Natural, and Regular
    • Hot Cereals Are Either Regular or Instant
    • Other Ways of Classifying Breakfast Cereals
    • The Market
    • Breakfast Cereals in Rally to $9.7 Billion in 2000
    • Cold Cereals in Push to $8.8 Billion
    • Hot Cereals Truly Hot, at $919 Million
    • Table 1-1: U.S. Retail Dollar Sales of Breakfast Cereals, by Category, 1995-2005
    • Breakfast Cereals Push to $11.5 Billion in 2005
    • Cold Cereals to Reach $10.4 Billion
    • Figure 1-1: U.S. Retail Dollar Sales of Breakfast Cereals, by Category, 1995-2005 (dollars): Cold (R-T-E), Hot
    • Hot Cereals in Steady Growth to $1.1 Billion
    • Basic Nutrition, Plus...
    • Convenient—But Not Convenient Enough
    • New Health Claims Allowed
    • Kids Are an Evergreen Audience
    • Supermarkets Losing Share to Mass Merchandisers
    • Table 1-2: Share of U.S. Retail Dollar Sales of Breakfast Cereals, by Channel, 1995-2000 (percent): Supermarkets, Mass Merchandisers, Drugstores, Other Outlets
    • The Marketers
    • Six Major Marketers
    • In Cold Cereals, General Mills Edges Out Kellogg
    • Quaker Has Rock Solid Command of Hot Cereals
    • A Game of Intense Marketing and New Product Development
    • The Price Pressure
    • A Strong Trend: Cross-Positioning to Multiple Audiences
    • Ad Spending at $769 Million in 1999
    • Six Million-Dollar Ad Spenders
    • Much Cold Cereal Is Sold "On Deal
    • A Sophisticated Array of Promotions
    • Distribution and Retail
    • The Classic Four-Step Path, Plus DSD
    • Supermarkets Dominate Cereal Scene
    • Retail Margins Narrowing
    • The Consumer
    • Almost 99 Million Purchase Cold Cereals for Their Households
    • No Demographics Stand out in Overall Cold Cereal Purchase/Use
    • Over Half of Decision-Makers Cite Heavy Cold Cereal Consumption
    • Nearly 71 Million Purchase Hot Cereals
    • Older Folks, African Americans Mark Hot Cereals Use
    • Heavy Use of Hot Cereals Dominates
  2. The Products
    • Introduction
    • Scope of This Report
    • Clarification of Terms
    • Supermarket
    • Market/Category/Segment
    • The Products
    • Definition of the Word "Cereal"
    • Cereal Grains
    • Other Ingredients
    • Breakfast Cereal Manufacturing Processes
    • Granolas and Mueslis
    • "Enriched" versus "Fortified" versus "Nutraceutical"
    • Two Breakfast Cereal Categories: Hot and Cold
    • Three Cold Cereal Types: Sweetened, Natural, and Regular
    • Hot Cereals Are either Regular or Instant
    • Other Ways of Classifying Breakfast Cereals
    • Semi-Naturals
    • Packaging
    • Freshness Dating
    • Regulation
    • Agencies Involved
    • United States Department of Agriculture (USDA)
    • The Food and Drug Administration (FDA)
    • The Federal Trade Commission (FTC)
    • The Nutrition Labeling and Education Act of 1994
    • The FDA's 11 Permissible "Relationship" Claims
  3. The Market
    • Market Size and Growth
    • Breakfast Cereals in Rally to $9.7 Billion in 2000
    • Table 3-1: U.S. Retail Dollar Sales of Breakfast Cereals, by Category, 1995-2000 (dollars): Cold (R-T-E), Hot
    • Figure 3-1: U.S. Retail Dollar Sales of Breakfast Cereals, by Category, 1995-2005 (dollars): Cold (R-T-E), Hot
    • Cold Cereals in Push to $8.8 Billion
    • Hot Cereals Truly Hot, at $919 Million
    • A Mature Market Stimulated by Healthier Products, Retail Channel Strategies
    • Sales Growth Dampened by High Prices, Breakfast Alternatives
    • Cereal Volume Rises to 3.5 Billion Pounds
    • Cold Cereal Volume Restored to 3.1 Billion Pounds
    • Hot Cereal Volume Climbs to 434 Million Pounds
    • Table 3-2: U.S. Pound Sales of Breakfast Cereals, by Category, 1997-2000 (pound): Cold (R-T-E), Hot
    • Average Price Still Climbing
    • Table 3-3: U.S. Average Retail Price of Breakfast Cereals, by Category, 1997-2000 (dollars): Cold (R-T-E), Hot
    • Factors in Future Growth
    • Basic Nutrition, Plus..
    • Convenient—But Not Convenient Enough
    • New Health Claims Allowed
    • Kids Are an Evergreen Audience
    • Table 3-4: Projected U.S. Births, 2000-2010 (number)
    • A Trend to Some Indulgence in Eating
    • The Advent of Barley Cereals
    • The Issue of High Price
    • Boomers Are Feeling Old
    • Table 3-5: Projection of U.S. Population by Age, 2000-2010 (number): 6 age brackets
    • The Grain Supply—Minimal Effect on Price
    • Projected Sales
    • Breakfast Cereals Push to $11.5 Billion in 2005
    • Cold Cereals to Reach $10.4 Billion
    • Hot Cereals in Steady Growth to $1.1 Billion
    • Table 3-6: Projected U.S. Retail Dollar Sales of Breakfast Cereals, by Category, 2000-2005 (dollars): Cold (R-T-E), Hot
    • Market Composition: By Product
    • Cold Cereals Losing Share to Hot
    • Table 3-7: Share of U.S. Retail Dollar Sales of Breakfast Cereals, by Category, 1995-2000 (percent): Cold (R-T-E), Hot
    • Market Composition: By Outlet
    • Supermarkets Losing Share to Mass Merchandisers
    • Supermarkets Lose Cold Cereal Dollars
    • Supermarkets Manage to Swell Hot Cereal Share
    • Table 3-8: Share of U.S. Retail Dollar Sales of Breakfast Cereals, by Channel, 1995-2000 (percent): Supermarkets, Mass Merchandisers, Drugstores, Other Outlets
    • Market Composition: Regionality
    • Special Note on Simmons Regionality Data
    • South Leads in Cold Cereal Sales
    • Table 3-9: Household Use of Cold (R-T-E) Breakfast Cereals, by Census Region, 1999 (number and percent): South, Midwest, West, Northeast
    • Cold Cereal Regionality, by Product Type
    • Regular
    • Sweetened
    • Natural
    • Table 3-10: Household Use of Cold Breakfast Cereal Types, by Census Region, 1999 (number and percent): Regular, Sweetened, Natural; South, Midwest, West, Northeast
    • South Also Leads in Hot Cereal Sales
    • Table 3-11: Household Use of Hot (R-T-E) Breakfast Cereals, by Census Region, 1999 (number and percent): South, Midwest, West, Northeast
  4. The Marketers
    • The Marketers
    • Six Major Marketers
    • A Few Hundred Other Marketers
    • Further Consolidation Is Possible
    • Types of Companies Involved
    • Table of Breakfast Cereal Marketers and Their Brands
    • Table 4-1: Leading Breakfast Cereal Marketers and Their Brands, by Type and Target Audience, 2000 (listing): 16 marketers, 163 brands
    • Marketer Shares
    • Special Note about IRI Data
    • In Cold Cereals, General Mills Edges Out Kellogg
    • Table 4-2: Share of U.S. Retail Sales of Cold (R-T-E) Breakfast Cereals, by Marketer and Brand, 1998-2000 (percent): General Mills, Inc., Kellogg Company, Philip Morris Cos., The Quaker Oats Company, All Other Brands, Private Label; 52 brands
    • Quaker Has Rock Solid Command of Hot Cereals
    • Table 4-3: Share of U.S. Retail Sales of Hot Breakfast Cereals, by Marketer and Brand, 1998-2000 (percent); The Quaker Oats Company, Nabisco, Inc., Malt-O-Meal, Ralston Foods; 9 brands, All Other Brands, Private Label
    • The Competitive Situation
    • A Game of Intense Marketing and New Product Development
    • The Price Pressure
    • The Weak Alternative Scene
    • Consolidation
    • Competitive Profile: General Mills, Inc.
    • A $6.7 Billion Company
    • Six Current Business Segments
    • A Pending Merger with Pillsbury
    • The Right Mix of Extensions and New Brands
    • General Mills' Bold Organic Move
    • A Joint Venture with Nestle
    • The Big G Becomes a Research Powerhouse
    • Other Big G Brands
    • Competitive Profile: The Hain Celestial Group, Inc
    • A New Company with Net Sales of $404 Million
    • Hain Celestial's Unique Stance in Multiple Retail Channels
    • Other Hain Celestial Brands
    • Competitive Profile: Kellogg Company
    • Net Sales Revive to More Than $7 Billion
    • Kellogg Trims Trade Promos, Loses Top Spot
    • Kellogg's Missteps in New Product Development
    • What Kellogg Intends to Do Now
    • Frosted Flakes Still a Good Performer
    • Kellogg's New Structure-Function Claims
    • Other Kellogg Products
    • Competitive Profile: Malt-O-Meal Company
    • Sales of Perhaps $350 Million
    • A Brief History
    • A Cereal Specialist with a Value Stance
    • Malt-O-Meal Still Strongest in Midwest
    • Competitive Profile: The Philip Morris Companies, Inc
    • Operating Revenues Estimated at $81.5 Billion in 2000
    • Four Business Segments
    • Keeping the Blue-Chip Post Franchise Modern
    • Philip Morris' Acquisition of Nabisco Merely a Follow-Through
    • Other Philip Morris Labels
    • Competitive Profile: The Quaker Oats Company
    • Net Sales Expected to Rebound in 2000
    • Food and Gatorade Segments now Combined
    • Quaker's Cholesterol-Reduction Coup
    • Quaker Innovates to Create a Second Sales Wave
    • PepsiCo Announces Purchase of Quaker
    • A Specialty Market for Quisp
    • Other Quaker Brands
    • Marketing Trends
    • Cross-Positioning to Multiple Audiences
    • Accommodation of the Health Conscious
    • Looking to Other Product Markets—and Vice Versa
    • Product Trends
    • Lots More of the Same
    • Lots More of Healthful SKUs
    • "Semi-Naturals
    • Flavored Instant Hot Cereals
    • Promotional/Seasonal SKUs
    • Table 4-4: Selected New Product Introductions, 1998-2000 (listing): 25 marketers, 57 brands
    • Consumer Advertising Expenditures
    • Ad Spending at $769 Million in 1999
    • Six Million-Dollar Spenders
    • General Mills Spends a Colossal $357 Million
    • Kellogg Trims Spending to $169 Million
    • Philip Morris Allocates $138 Million
    • Quaker Pumps Ad Budget to $98 Million
    • Nabisco Spends $6 Million
    • Malt-O-Meal Drops Media Buys to $1.3 Million
    • Other Spenders
    • Consumer Advertising Positioning
    • Taste
    • Healthfulness
    • Increased Cross-Positioning Between Adult, Kid, and Family Audiences
    • Nostalgia
    • Resurrecting Mikey
    • Energy
    • Weight Loss
    • The Semi-Naturals
    • Product Placement in Television Shows
    • Consumer Promotions
    • Much Cold Cereal Is Sold "On Deal"
    • A Sophisticated Array of Promotions
    • Coupons
    • Table 4-5: Share of Consumer Dollars Spent to Take Advantage of Marketers' or Retailers' Special Promotions, 1998 (percent): 10 products
    • Marketer-Labeled Price Specials
    • In-Pack Premiums
    • Merchandise Offers and Tie-Ins
    • Free Air Miles
    • Some Use of Sweepstakes, Entertainment Tie-Ins, Celebrities
    • A Bible Promotion Stopped
    • American Heart Month and National School Breakfast Week
  5. Distribution And Retail
    • Distribution
    • The Classic Four-Step Path, Plus DSD
    • Marketers' Category Management and ECR
    • Transora.com Formed to Streamline the Packaged Foods Path
    • At the Retail Level
    • Supermarkets Dominate Cereal Scene
    • Retail Margins Narrowing
    • Table 5-1: Retailers' Average Gross Profit Margins on Breakfast Cereals, 1995-1999 (percent): cold cereals, hot cereals, grits
    • Where Shelved
    • Assortment
    • Product Mixes: Sweetened Often Dominates
    • Retailers Boutiquing Breakfast Alternatives in Cereal Aisles
    • Marketers Cater to Drug Channel
    • Webvan: An E-tailer Allies with Fleming and SuperValu
    • Retailers Bank on Private Label
  6. The Consumer
    • The Consumer of Cold Breakfast Cereals
    • The Simmons Consumer Survey
    • Almost 99 Million Purchase Cold Cereals for Their Households
    • No Demographics Stand out in Overall Cold Cereal Purchase/Use
    • Over Half of Users Cite Heavy Cold Cereal Consumption
    • Figure 6-1: Household Level of Consumption of Cold (R-T-E) Breakfast Cereals, 1999 (percent): Heavy, Medium, Light
    • Women Decide the Majority of Cold Cereal Purchases
    • Table 6-1: Level of Household Consumption of Cold (R-T-E) Breakfast Cereals, by Gender of Decision-Maker, 1999 (number and percent): Heavy, Medium, Light
    • A Family Profile for Heavy Consumers of Cold Cereals
    • Table 6-2: Demographic Factors Favoring Use of Cold (R-T-E) Breakfast Cereals, by Number of Portions Used by Household During Previous Week (listing): Any, Heavy, Medium, Light; 12 Factors
    • Regular and Sweetened Types Are Most Popular
    • Table 6-3: Household Consumption of Cold (R-T-E) Breakfast Cereals, by Type of Cereal and by Gender, 1999 (number and percent): Regular, Sweetened, Natural
    • Age, Occupation, Income Distinguish Cold Cereal Types
    • Table 6-4: Demographic Factors Favoring Household Use of Cold (R-T-E) Breakfast Cereals, by Type, 1999 (listing): Regular, Sweetened, Natural; 12 factors
    • The Sole Type User Skews Senior
    • Table 6-5: Demographic Factors Favoring Sole Type Household Use of Cold (R-T-E) Breakfast (listing): 12 factors
    • Cheerios, Kellogg's Corn Flakes, Kellogg's Frosted Flakes Lead in Popularity
    • Sole versus Primary Brand Use
    • Table 6-6: Cold (R-T-E) Breakfast Cereal Purchase, by Brand, 1999 (number and percent): 22 brands, private label, sole brand user, primary brand user
    • Key Factors Marking Cold Cereal Brand Use
    • Age
    • Marital Status
    • Children
    • Education, Occupation, Income
    • Table 6-7a: Demographic Factors Favoring Household Use of Cold (R-T-E) Breakfast Cereals, by Brand, 1999 (listing): Cap'n Crunch (Plain), Cheerios, Apple Cinnamon Cheerios, Frosted Cheerios; 12 factors
    • Table 6-7b: Demographic Factors Favoring Household Use of Cold (R-T-E) Breakfast Cereals, by Brand, 1999 (listing): Honey Nut Cheerios, Cocoa Puffs, Golden Grahams, Kellogg's Apple Jacks; 12 factors
    • Table 6-7c: Demographic Factors Favoring Household Use of Cold (R-T-E) Breakfast Cereals, by Brand, 1999 (listing): Kellogg's Corn Flakes, Kellogg's Corn Pops, Kellogg's Frosted Flakes, Kellogg's Frosted Mini Wheats ; 12 factors
    • Table 6-7d: Demographic Factors Favoring Household Use of Cold (R-T-E) Breakfast Cereals, by Brand, 1999 (listing): Kellogg's Froot Loops, Kellogg's Raisin Bran, Kellogg's Rice Krispies, Kellogg's Special K; 12 factors
    • Table 6-7e: Demographic Factors Favoring Household Use of Cold (R-T-E) Breakfast Cereals, by Brand, 1999 (listing): Lucky Charms, Nabisco Spoon Size Shredded Wheat, Post Grape-Nuts, Post Honeycomb; 12 factors
    • Table 6-7f: Demographic Factors Favoring Household Use of Cold (R-T-E) Breakfast Cereals, by Brand, 1999 (listing): Post Raisin Bran, Wheaties, Private Label; 12 factors Factors in Sole versus Primary Cold Cereal Brand Use
    • Table 6-8: Demographic Factors Favoring Household Use of Cold (R-T-E) Breakfast Cereals, by Sole and Primary Brand Use, 1999 (listing): Sole Brand Use, Primary Brand Use; 12 factors
    • The Consumer of Hot Breakfast Cereals
    • Nearly 71 Million Purchase Hot Cereals
    • Older Folks, African Americans Mark Hot Cereals Use
    • Heavy Use of Hot Cereals Dominates
    • Table 6-9: Demographic Factors Favoring Household Use of Hot Breakfast Cereals, 1999 (listing): 12 factors
    • Figure 6-2: Household Level of Consumption of Hot Breakfast Cereals, 1999 (percent): Heavy, Medium, Light
    • Table 6-10: Level of Household Consumption of Hot Breakfast Cereals, by Gender of Decision-Maker, 1999 (number and percent): All, Heavy, Medium, Light Seniors, Low Incomes Featured in Heavy and Medium Use
    • Light Users of Hot Cereals Well Educated and Prosperous
    • Table 6-11: Demographic Factors Favoring Use of Hot Breakfast Cereals, by Number of Portions Used During Previous Week, 1999 (listing): Any, Heavy, Medium, Light; 12 factors
    • Quaker Instant Oatmeal Is the Most Popular Hot Cereal
    • Table 6-12: Hot Breakfast Cereal Purchase, by Brand, 1999 (number and percent): 7 brands
    • Hot Cereal Brand Use: Older Age Groups, Family Situations, Less Affluence
    • Table 6-13a: Demographic Factors Favoring Household Use of Hot Breakfast Cereals, by Brand Used Most Often, 1999 (listing): Aunt Jemima Grits, H.O. Instant Oatmeal, Malt-O-Meal, Nabisco Cream of Wheat; 12 factors
    • Table 6-13b: Demographic Factors Favoring Household Use of Hot Breakfast Cereals, by Brand Used Most Often, 1999 (listing): Quaker Instant Oatmeal, Old Fashioned Quaker Oats, Quaker Grits; 12 factors

    Appendix I: Examples Of Consumer And Trade Advertising And Promotions
    Appendix II: Addresses Of Selected Marketers

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