Retailers Seek to Hold Consumer Interest in Breakfast Foods

In the years before the pandemic, sales of cereal and many other center-store breakfast foods were on the decline. Following the trend toward better-for-you products, consumers sought out healthier options to start their day, and cereal was left in the sugar-coated dust.

Then came COVID. With millions of people working from home instead of commuting to offices, Americans suddenly had time to slow down and enjoy breakfast in their own homes. Add to that scenario consumers’ hunger for comfort and nostalgia in a stressful time—not to mention their desire to stock up on pantry staples—and you’ve got a recipe for cereal success.

NielsenIQ data tell the story of shelf-stable breakfast food’s remarkable sales trajectory. During the 52 weeks ending Dec. 28, 2019, dollar sales for ready-to-eat cereal dipped 0.74%. However, in the year ending Dec. 26, 2020, sales grew nearly 9% over the previous year. Pancake mix saw the biggest pandemic spike at 30%, followed by hot cereal (including oatmeal) at 11%, and toaster pastries at just under 10%. The only category to show a decline last year was cereal/granola bars, which dipped 2% in response to the lack of demand for on-the-go products.

Now that consumers are spending less time at home, pandemic sales surges are leveling off. During the latest 52 weeks ending May 1, 2021, all of the above categories declined slightly, except for pancake mix and toaster pastries, which saw 4% and 1% gains, respectively.

Now, as we enter the second half of 2021, suppliers and grocery retailers are looking for ways to maintain consumers’ renewed interest in cereal and other center-store breakfast items.  

Leveling Off, Trending Up

For Boise, Idaho-based Albertsons Cos., the initial pandemic surge in cereal and granola sales eventually plateaued, settling at a higher growth rate than the previous year. Granola bars had a tougher time.

“Some of the granola bar brands suffered a bit of a ‘lunchbox penalty,’ ” says David Huettl, national category steward of pantry items for Albertsons. “With less on-the-go activities and a decline in school and work lunches, the overall category did not keep pace with the rest of the department.” Other breakfast categories, such as pancakes and waffles, did “remarkably well.”

With some suppliers unable to keep up with demand, he adds, large national brands with reliable product supplies saw the strongest growth rates.

Heuttl finds that as the pandemic wanes, breakfast cereal remains a large category with routine purchases, and sales are recovering for on-the-go products. Albertsons plans to continue supporting the category through online, print and in-store advertisements, as well as off-shelf displays to maximize exposure.

Healthy options will likely be a strong driver of growth and innovation in the future, he says, especially for products with key dietary call-outs such as high protein, gluten-free and keto.

Giant Food, based in Landover, Md., also saw a strong pandemic uptick for center-store breakfast items as shoppers stocked up to limit their trips to the grocery store. With the exception of on-the-go items, says Breakfast and Baking Category Manager Matthew Tetro, “all products and categories saw strong increases.” The children’s cereal category saw the biggest surges.

With people returning to offices and schools, sales have since subsided to pre-pandemic levels and portable products are making a comeback.

Craving Comfort and Novelty

While its cereal brands performed well during the pandemic, Minneapolis-based General Mills is seeing continued growth in the family, adult, granola and nutrition categories. Cheerios Oat Crunch, Cinnamon Toast Crunch, Reese’s Puffs, and Golden Grahams have fared well, along with smaller brands such as Basic 4 and Nature Valley protein granolas.

“We are seeing both new consumers who started eating our cereals for the first time during the pandemic and many more who have come back to our products because of the great taste and comfort that our brands bring during uncertain times,” says Scott Marcoux, head of consumer and market intelligence for the company’s cereal division.

With some people now returning to offices, he expects many will keep working remotely at least part time, providing more opportunities for adults to eat breakfast at home. As kids go back to school, Marcoux says, cereal will provide a convenient breakfast solution for busy households.

To keep the momentum going, General Mills plans to continue investing in the cereal category. “We will focus on innovation, because we know people love variety in the cereal aisle,” Marcoux says. “We will also invest in brand-building activities so people remember to visit the cereal aisle—whether virtually or in person.”

Grocery retailers can help by creating end-cap displays in prime areas of the store, he says. “We know that in-store displays help to grow and increase sales within the category.”

Permission to Indulge

Like General Mills, Post Consumer Brands of Lakeville, Minn., saw significant sales spikes in 2020 across its portfolio. Growth was especially strong for the company’s Pebbles, Honey Bunches of Oats, Honeycomb, Great Grains, Malt-O-Meal and Grape-Nuts brands.

“The pandemic changed routines for everyone and made people fall in love with cereal again,” says Chief Innovation Officer Tom “TD” Dixon. “People naturally crave familiarity during stressful times.”

With pandemic stresses subsiding, Post is looking to build on its brand equity and create innovative products based on current trends in food and culture. Along with focusing on demand for better-for-you breakfast options, the company is tapping into consumers’ love of snacking with the launch of Pebbles Crisps and Honeycomb Big Bites cereal snacks. 

Another key trend is the idea of “permissible indulgence,” which centers on allowing oneself small rewards to reduce stress and anxiety. “Today, it’s all about balance,” Dixon says. “Even consumers who are focused on health and fitness are giving themselves permission to indulge every once in a while.”

Pandemic Impacts Present Cereal Sales Opportunities

A recent report by U.K.-based market research firm Mintel analyzes the pandemic performance of cereal in the U.S. market and offers takeaways for keeping the category relevant beyond 2021. With nearly 40% of consumers reporting they ate breakfast more often in 2020, the industry now has the opportunity to maintain and build on that momentum.

“This is an opportune time to reinforce the merits of a good start to the day, but perhaps more importantly, [to stress] the versatility, convenience and value the category can offer, even beyond breakfast,” the Hot and Cold Cereal: Impact of COVID-19 report states.

With stiff competition for consumers’ breakfast dollars and continued health perception challenges for the cereal category, Mintel’s report suggests positioning cereal as a better-for-you snacking option. The firm found that 35% of U.S. cereal consumers view it as healthier than other snacks, and believe it is a fun way to treat themselves.

“With well-being, value and convenience top of mind, cereal brands have more than one path to staying relevant with shoppers,” says Kaitlin Kamp, consumer insights analyst for Mintel. “Brands have an opportunity to turn renewed category engagement into continued residual engagement.”