Although cereal sales are slightly down, retailers have noticed that they are up in certain segments, particularly in the "healthy" category. And recent introductions of healthy offerings from Kellogg Co. and General Mills may signal that better-for-you offerings are one way to grow. According to Information Resources Inc., Chicago, ready-to-eat cereal in supermarkets was down 2% last year, but still had sales of $6.99 billion, compared with last year's figure of $7.1 billion. Nonetheless, all the retailers SN talked with said that sales have increased. Retailers differed, however, on which factors are driving the category. While some saw sales of better-for-you cereals increasing, others said that children's cereals were seeing the best sales.
At Food Giant Supermarkets, Sikeston, Mo., many more people are buying healthy cereals, according to Tom Schmutz, division manager, and cereal sales have increased. "We're selling a lot more cereal and I'm buying more healthy cereal," said Schmutz. "More and more people are becoming aware of the fat content, sugar content -- even carbohydrates -- than ever before."
Balls Food Stores, Kansas City, Kan., is also seeing healthy sales for healthy cereals. Larry Brown, director of grocery buying, has seen more activity in that segment than a year ago. He also noted that private labels are not doing well in the chain's 48- to 64-foot cereal sections.
Kellogg and General Mills, the two largest cereal makers, have recently introduced new products to please the health-conscious. Kellogg has included three new cereals in its Ensemble line, made with psyllium, a cholesterol-lowering soluble fiber.
In addition to adding cereals to the Ensemble line of functional foods, the company has fortified four of its major cereal brands with additional B vitamins and calcium. Meanwhile, General Mills has introduced Sunrise cereal, made with organic corn and whole wheat. While health may be one driver in the cereal category, sweet products for children are another. For example, according to Roger Cooper, marketing director for C&K Market, Brookings, Ore., "flavored and sweetened cereals generate the highest percentage of sales."
Cooper based his comment on information from wholesaler United Grocers of Portland, the supplier for C&K, which operates under Ray's Food Place and Shop Smart Warehouse banners. According to Cooper, two to four times as many stockkeeping units are in sweetened cereal than in other segments.
Nonetheless, Cooper noted that although the sweetened and flavored categories are being sold more, the "plain segment is generating more dollars per SKU" and is also a strong category.
The cereal section averages 32 feet at C&K, and the stores generally have a 50/50 split of SKUs in the sweetened and plain cereal categories. Feature ads for discount sales usually give $2 to $4 off, depending on the category. Promotional endcaps are a big part of cereal displays at C&K, Cooper said.
Doug Carlson, category manager at Brown & Cole, Bellingham, Wash., has seen a slight increase in ready-to-eat cereal sales, and he attributes that to the sweet cereals.
"A lot of the sweeter cereals are doing well," he said. "The honey and nut type of cereal is what companies are making to try to appeal to the kids," said Carlson. Carlson noted that new items also drive the category.
"Cereal is always a major category in our [promotion] plans. We advertise it every week," added Carlson. "It's usually one of the Top 10 categories."
One way Brown & Cole moves cereal is by having a special sales day. "We've done one-day sales events with cereals marked down, but other than that we haven't done anything out of the ordinary," Carlson said.
North West Co., Winnipeg, Manitoba, caters to a fairly poor community, and Al Milne, category manager for packaged grocery and frozen foods, has noticed that sweetened cereal also drives the category at his stores.
"Our market is a little different than Loblaw or IGA, where the focus seems to be health-conscious cereals," said Milne. "The demographics in our communities are people under the age of 25, and the bulk of cereal sold is presweetened. Kids are driving this category. The No. 1 cereal here is [Kellogg's] Corn Pops.
"Cereal is a growth category for us. We're aiming to be a dominant player in our community," he continued.
Still another retailer, Lowe's, Littlefield, Texas, has seen increases in the bagged cereal segment. According to Bill Elliott, director of procurement, new bagged cereals are driving the category, with Quaker and Malt-O-Meal brands leading the way.
Elliott said that a lot of attention is given to cereal in the 45-store chain and that, depending on the store, cereal is given between 60 and 120 feet of space. Although Lowe' creates displays to promote boxed cereal, bagged is still doing the best. "Very few do better. Basically, everyone is buying bagged," said Elliott.
Brown at Balls Food Stores is also seeing bagged cereals as the new business in the category. "Bagged cereals seem to be a new hot trend," said Brown.
Like Elliott, Schmutz of Food Giant also promotes the cereal category frequently. Ads are run weekly in newspapers, and displays and endcaps are constantly stacked with various brands on promotion. "We take care of everyone in the store," Schmutz said. "Kellogg's, General Mills and Post are all in the displays."
While retailers are seeing sales increases in certain segments, it looks like the large cereal companies want to ensure that overall category sales grow in 1999. Kellogg raised its prices 2.7% in December of 1998. Meanwhile, General Mills has just raised its prices again, to 2.5%. The company last hiked prices 2.6% in July 1997. Not to be left behind, Quaker Oats Co. is now raising prices on nearly half of its ready-to-eat cereal line by 3%. "People will continue to buy even though the prices will go up," said Cooper from C&K. "In fact, today I just received information on General Mills' future promotions. Big promotions from companies like General Mills and Kellogg's get the customers in."
Although Brown at Balls has not yet seen the increases, he believes they are minimal and won't affect cereal sales in his stores.
