CREAL DRAMA

AMITY K. MOORE

Ready-to-eat cereals targeted at kids are frosting the category with sweet rewards, retailers report.

Thanks, in part, to price reductions from the leading manufacturers, retailers are now benefiting even more from the sweet sugared brands. Various merchandising and promotional strategies are spurring segment growth.

"The kids' cereal market, the way I define it, probably makes up 40% of the entire category. But it's about 60% of the sales," said Tom Schmutz, division supervisor at Food Giant Supermarkets, Sikeston, Mo.

The category's greatest benefit has been the recent price cuts from the leading manufacturers. One week after Kellogg USA announced it was reducing prices by an average of 19% on 16 items, General Mills dropped the price of 20 cereals and sizes by an average of 11%. Several popular children's brands were affected, including Cocoa Puffs, cut by 22%; Trix, slashed by 18%, and Lucky Charms, down 13%.

"Demand has increased because of the recent price reductions in kids' cereal. Parents are now able to purchase more," said Tom Hughes, director of marketing at Clemens Markets, Kulpsville, Pa. "It has spiked an increase in sales."

Along with the price cuts, bagged cereals and new private-label introductions also are making it easier for parents to afford what their children want. Though overall category sales are down, increased emphasis on children's brands is helping to sweeten product movement.

Good product exposure, advertising, promotions targeted specifically at kids and clever merchandising strategies also have helped keep sales crisp. Retailers are making products that are now more affordable and more visible.

For instance, Food Giant's Schmutz organizes his set by cereal type rather than by manufacturer. "It's a lot easier for a consumer to look at seven or eight different types of raisin bran, rather than having to run all the way up and down the aisle to look at Post, then Kellogg and then General Mills."

Just as important are advertising and discounts. For instance, Byrd Food Stores, Burlington, N.C., features cereal in its ads nearly every week, said Pat Hudson, grocery buyer. It also highlights the category in its in-store circular.

"Cereal is driven by price here," added Schmutz. "A majority of our cereal sales, probably 75%, come when we run it in an ad or if we display it at a good price." Such strategies also have been beneficial for Fred W. Albrecht Co., Akron, Ohio. "Kids' cereals are impulse items. If they're at a good value, our customers pick them up. We use them as lead items," said Rich Rhodes, cereal category manager.

Television advertising also plays a big role in product movement. Children often want many of the cereals promoted throughout their Saturday morning television show lineup, retailers report.

"Kids, more than parents, seem to be aware of displayed cereal because of all the [advertising] hype," said Jack Paulk, category manager and merchandiser at Abco Foods, Phoenix. "Kids' cereal is highly influenced by TV advertising." Byrd's Hudson agreed. "All the Saturday morning cartoon TV advertising is geared toward kids' cereals," he said. To make these products more visible to youngsters, most chains merchandise them at eye level.

"We try to keep the kids' cereals on a lower shelf to get the kids'-eye view," said Paulk. "With most of the so-called healthy cereals -- adult cereals -- you can roll it to the top shelf and not worry about it."

Endcap displays are effective as well, industry officials agreed. Like inline displays, products on endcaps shouldn't be too high, some said.

"You're going to want them at the middle of the bottom shelf where the kids are going to see them," said Rick Friedrichsen, grocery buyer at the wholesale division of Holiday Cos., Fairway Foods, Bloomington, Minn. Store brands also are increasing in popularity and are becoming more accepted, along with new bagged cereals, than they used to be.

"Kids' cereals with the new bagged programs from Quaker and Malt-O-Meal are very successful," said Albrecht's Rhodes. "We see most of our expansion in private label. That's where we're seeing the growth -- in value-priced cereals." Rick Hagan, sales manager, and David Scully, director of operations and merchandising, at Camellia Food Stores, Norfolk, Va., said their stores, too, are reaping the rewards of private-label cereal.

"It gives the consumers a price-point advantage," Hagan said. Scully added that "We have our private-label boxed cereal next to the highest-moving volume item in the name brand. It's placed between No. 1 and No. 2 with equal or more space."

According to retailers, almost all promotions address price reductions. Some of the more effective promotions retailers cited included "two-for" promotions. "For our business, it's mainly price," said Debbie Goulding, category manager at Buehler Foods, Jasper, Ind. "A 'two-for' type advertising for us has worked very well. With a two-for-$4 or buy-one-get-one-free, it's unbelievable how much cereal we can move." The price reductions from Post and Kellogg have positively affected sales as well. Retailers report that consumers have taken a renewed interest in branded products.

"We are moving more cereal just because of the reduction in price," Goulding said. A week after Kellogg announced a 19% reduction on 16 of its cereals, Randalls Food Markets, Houston, ran a full-page ad promoting selected Kellogg cereals at two-for-$5.