CHAMPAGNE WISHES & CEREAL DREAMS

CHRISTINE BLANK

Less manufacturer promotion and high retail prices are to blame for flat cereal sales, according to grocers, and with the exception of slight increases in adult cereal movement, overall sales have remained fairly steady over the past year, they report.

"It is still a very price-sensitive category," said Jim Bent, owner of Bent's Family Foods in Camp Point, Ill. Most shoppers are not interested in $4 per box cereals, but their "eyes light up" over private-label and lower-priced bagged cereals, he told SN.

Because of their lower price points, private-label cereals are still the top sellers in supermarkets, but unit sales dropped 2% in the 52 weeks ending March 26, according to Information Resources, Inc., Chicago. Meanwhile, sales of General Mills, Quaker Oats Company and Kashi Co. rose, while Kraft Foods' Post cereal sales fell slightly and Kellogg Co.'s unit sales plummeted 10% in the past year.

"We're selling a lot more cereal on ad. We're not getting the couponing from cereal manufacturers like we used to," said Carl Willoughby, assistant general manager of Ream's Food Stores, Salt Lake City, Utah. He has noticed increased sales of both private label and brands in bags. "Bagged cereals have created a [lower] price image, and the boxed ones just aren't selling," he said.

Although cereal manufacturers acknowledge less couponing, they are still doing group free standing insert promotions as well as targeted promotions. "We're not relying on coupons as much, but they're still an important strategy," said Meghan Parkhurst, senior manager of marketing communications at Kellogg Co., Battle Creek, Mich. Instead, the company is focusing on "adding value" to its brands, including fortifying some of its additional cereals with vitamins and offering a new airline miles rewards program, she said.

However, the three major cereal makers' switch to multiple-purchase coupons in recent years has been met with mixed reactions from retailers.

Although Bent says coupons that require shoppers to purchase more than two boxes of cereal do not go over well, promotions such as two boxes for $5 have been successful. He has also not seen much interest in promotions that tie in other foods/beverages, such as orange juice with cereals. "It's a straight-up category," he said.

Conversely, weekly manufacturer FSIs touting $2 off on a box of cereal as well as multiple-purchase promotions are well received at Genuardi Family Markets in Norristown, Pa., said category manager Emil Owles. "If you go in anyone's cupboard, you would find a few boxes, so multiple purchases aren't unusual," he said.

However, instead of aligning with manufacturers' promotions, Genuardi's Owles groups children, family and adult cereals of a given brand in one ad so everyone in the family can get the cereal they like.

Although there have been new introductions in the healthy cereal category, including Kellogg's Smart Start soy cereal and General Mills' Sunrise organic cereal, in most cases, retailers say healthy cereal sales also remain fairly even.

We're still seeing a small increase in adult cereals, not double digit," said Karrie Thomason, cereal buyer for Spartan Stores in Grand Rapids, Mich. Sales of cereals such as All-Bran, Just Right and Special K, along with oatmeal products, remain strong, she added. Thomason noted that news from the American Heart Association on the health benefits of oats is having an effect on sales.

Owles has also seen some increases in adult cereal sales, but not as much as family cereals, such as Cheerios.

At the same time, certain "healthy" and adult cereals are taking off. Genuardi stores are selling out of Kashi Co.'s Good Friends, because a major diet program recommended it, according to Owles. "It depends on what kind of press they [healthy cereals] get," he said.

Sales of "good for you" cereals also depend on their placement and pricing. Arran Stephens, president of Nature's Path Foods, Delta, British Columbia, which manufactures organic cereals, notes that many supermarkets' organic cereal prices are prohibitive -- up to $4 a box. "They're not going to see turns if the product is at $4.19, when Wild Oats is selling it on deal for $1.99," he said.

Although organic cereals should also be integrated into the main cereal aisle, Stephens said retailers with separate health food departments are selling more organic and natural cereals. "The store-within-a-store sections have good movement and do the product justice with good presentations," Stephens said.

Meanwhile, some retailers say kids' cereal sales could stand to see more movement. "Children's cereals, as well as family cereals, are flat," Thomason said. "Manufacturers are doing a lot of things to get them back, but we're seeing a baseline erosion in which promotions are not enough to make up for it," she added.

Cereal prices could also be affecting sales of children's cereals, according to Thomason.

Meanwhile, manufacturers are working to garner more interest in children's cereals with new products and promotions. For example, Kellogg recently introduced Pokemon Toasted Oat Cereal With Marshmallow Bits, and is rewarding kids with prizes when they send in a proof of purchase, a promotional strategy which the company has not implemented since 1995.