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CATEGORY PERFORMANCE: COLD CEREAL

Dollar sales $5,806,528,000 %Change from Last Year -2.62e increasingly skipping sit-down meals in favor of convenience foods that require no preparation. Thus, sales of ready-to-eat cereal have been down in the major channels while breakfast bars have become one of the fastest-growing food categories.While supermarkets account for the overwhelming bulk of cereal sales in the supermarket, drug store

Dollar sales $5,806,528,000 %Change from Last Year -2.62

e increasingly skipping sit-down meals in favor of convenience foods that require no preparation. Thus, sales of ready-to-eat cereal have been down in the major channels while breakfast bars have become one of the fastest-growing food categories.

While supermarkets account for the overwhelming bulk of cereal sales in the supermarket, drug store and mass merchandise channels combined, dollar sales declined 2.62% to $5.8 billion in the 52 weeks ending June 13. In calendar years 2003 and 2002, that downward trend was also evident with sales decrease of nearly 1.7% and 3.7%, respectively.

Meanwhile, drug stores have been rapidly expanding their small serving of the category, growing sales 10.6% to $98.7 million in the 52 weeks ended June13-- on top of increases during the prior two calendar years. Then growth was pegged at 2.1% on sales of $94 million in 2003, and nearly 20% on sales of $92 million in 2002.

Flavor extensions of popular kids' brands have helped prop up flagging cereal sales; within the category, it's the sugary versions whose sales are the strongest. Manufacturers also arebanking on new reduced-sugar kids' cereals and functional cereals to boost sales of the category, recognizing consumers' demand for products that can help them lead a healthier lifestyle.

Dollar Sales Latest 52 Weeks Ended June 13, 2004; % Change; Dollar Sales Calendar Year Ended Dec. 28, 2003; % Change; Dollar Sales Calendar Year Ended Dec. 29, 2002; % Change

Supermarkets: $5,806,528,000; -2.62; $5,918,366,000; -1.65; $6,017,386,000; -3.86

Drug: $98,668,510; 10.59; $93,984,380; 2.13; $92,022,990; 19.71

F/D/MX: $6,098,537,000; -2.55; $6,206,401,000; -1.88; $6,325,520,000; -3.31