The cereal industry has been beset by a wealth of setbacks due to trends in the wider consumer environment. People seek to cut carbohydrates out of their diets, but cereal is mostly carbs. Many consumers are recognizing their allergies to gluten, but many cereals include wheat as a main ingredient. And busy consumers want foods that they can take with them as they rush out the door in the morning, whereas cereal requires breakfasters to grab a bowl and spoon, pour some milk, and sit down to eat.
In response, cereal manufacturers are undertaking various marketing efforts. But according to the largest cereal maker, General Mills (GM), not every brand is doing its share. Thus, in a seemingly contradictory move, GM is calling on its competitors to step up their marketing efforts, in an effort to save the industry.
As examples, GM cites the 7 percent increase in its advertising budget as evidence of its dedication to keeping cereal alive. Furthermore, GM has offered a range of promotional discounts on some of its most popular cereal brands, including Cheerios, which accounts for approximately one out of every eight cereal boxes sold in the United States.
And what are the others doing? Not cutting their prices, promises Kellogg CEO John Bryant. In response to GM’s complaint that his company was not doing enough to benefit the cereal industry, he responded by pointing to the innovations the company has pursued recently. Arguing that the preferable solution would be to meet consumers’ needs better, rather than tempt them with discounts, Kellogg is experimenting with increasingly portable versions of its cereals that can address consumers’ demands for greater convenience.
Still others suggest that all these marketing moves are overreactions. Previous consumer trends similarly have been predicted to spell the end of cereal (remember Atkins?), but grocery store aisles are still full of options for morning meals. Yet the most recent earnings reports for GM, Kellogg, and Post, the other big name in cereal, have all been negative. So even if cereal seems unlikely to disappear completely, marketers for these firms worry that its share is shrinking—and there seems to be no consensus about what to do about it.
Source: Annie Gasparro, “In the Low-Carb Age, Does Cereal Have a Future?” The Wall Street Journal, September 19, 2013