ROLLING OATS

MIKE STERNMAN

Despite in-aisle expansion for a host of new breakfast options, hot cereal is enjoying its best season in years.

As reported in SN, the category got a big boost in the thick of the winter selling season -- just three weeks ago, when the Food and Drug Administration, acting on a petition by Quaker Oats, Chicago, allowed certain whole-oat food products to carry a health claim that they reduce the risk of heart disease.

"Oatmeal being touted as healthy \-m\ that, more than anything -- has helped drive that category," said Doug Keller, director of grocery for Save Mart Supermarkets, Modesto, Calif. "The nutrition statements on all packaging have definitely contributed."

Model language that can be used on packaging is being provided by the FDA: "Diets low in saturated fat and cholesterol that include soluble fiber from oatmeal may reduce the risk of heart disease."

The FDA language is similar to an endorsement by the American Heart Association in 1994, which allowed certain items to carry phrasing that they meet its dietary guidelines for healthy people when used as part of a balanced diet. The AHA endorsement has been appearing on many oatmeal boxes.

Last month's FDA ruling is significant because it's the first time the agency has sanctioned such a claim on vendor packaging.

Oat cereal producers are responding to the FDA ruling with extensive promotions. Quaker Oats, for instance, is getting the word out with over $15 million in media support, said Bruce Poole, director, hot cereals, Quaker Oats cereals division.

"We are getting the claim about the benefits of oatmeal on our packages as fast as possible," Poole said.

To qualify for the FDA claim, whole-oat containing foods must provide at least 0.75 grams of soluble fiber per serving. The amount of soluble fiber needed for an effect on cholesterol levels is about 3 grams per day.

The FDA health claim and the AHA endorsement are expected to warm hot cereal sales not only during the colder months, but also throughout the year, retailers told SN.

"What has an impact on hot cereal at times are these health pronouncements, there's no doubt about that," said Lee Salo, buyer, Raley's Supermarkets, West Sacramento, Calif. Salo fears, however, that there may be too many health claims on the market. He said it may lead people to eat whatever they want to, only more moderately.

"We saw a push in the early fall from Quaker because of the certification from the American Heart Association," noted John Scholze, cereal buyer at Copps Corp., an IGA retailer and wholesaler based in Stevens Point, Wis. He said that the campaign hasn't boosted sales yet.

The health claims are part of what's becoming a more profitable category. Scan figures provided by ACNielsen, Schaumburg, Ill., to Quaker Oats, the leader of the category, show a 3.8% dollar growth to $679.2 million for the 52-week period ended Nov. 23, 1996. Moreover, in the last 12 weeks of that time, hot cereal improved 5.6% to $188.5 million over the same period of the previous year.

"This is a category which, previous to [1996], had actually declined about 2% a year for the last five years. So we are seeing a real reversal of the trend and the fortunes of the category," said Poole of Quaker Oats.

Among other trends in the category, new, extended or restaged instant products promise to bring single-serving instant packets, first introduced 30 years ago, to a renewed boil.

"I think the reason behind better sales performance is a resurgence of the oatmeals, the old staples, as well as a rotating mix of new items with a high turnover of new flavors," added Garry Stevens, senior marketing director at Big V Supermarkets, Florida, N.Y.

"Hot cereal is up from the prior year," said Jim Nicholson, a category manager for Randalls Food Markets in Houston. He credits the rise primarily to strong demand for convenience in the form of instant oatmeal in packets.

The category at Randalls is being improved further by a major reset of hand-held breakfast and hot cereal subsegments.

Said Nicholson, "We went from a 12-foot section, which incorporated Pop Tarts and instant breakfast, to an 8-foot set for hot cereal only, integrating private label with the leading brand.

"In the process, we found ourselves carrying items that weren't adding substantial sales and profit, and reduced our stockkeeping unit count. We made the set more presentable and easy to shop. I've since had positive lifts on both subsegments," Nicholson concluded. Retailers also cited the positive effects of private label on the category. For the 52-week period ended Nov. 3, 1996, private label captured 16.8% of category dollars, up from 13.7% from the previous year, according to Infoscan data from Information Resources, Inc., Chicago. Private label garnered $111.3 million in sales.

Certainly, widening choices of store-brand SKUs, often priced more than $1 dollar less per box vs. national brands, is giving private label a higher profile, retailers told SN.

Genuardi's Family Markets, Norristown, Pa., introduced its Genuardi's line this past fall, in 18- and 42-ounce canisters. Emil Oles, buyer for the chain, hoped to have store-brand microwaveable envelopes on the shelf by this month.

The microwaveable line is planned to include the most popular flavors: regular, maple and brown sugar, and apple and cinnamon.

"Take a look at the top movers in instant hot cereal," said Tony Zimbicki, director of grocery merchandising at Bedford Heights, Ohio-based Riser Foods.

"You'll see the variety packs doing the best job. Those products especially have extended the season."

Other retailers agreed.

"Variety packs go over particularly well where you have several people (in the larger household) with different instant favorites," said Mort McKillop, merchandiser for frozen, grocery and dairy at G&R Felpausch Co., Hastings, Mich. He noted that Cream of Wheat and similar cereals were consumed mostly by adults.

The highest user groups in 40% of all households and 32% of individuals that eat a hot cereal are adults over the age of 65, the 55 to 64 age group and kids under six years of age, respectively, according to Harry Balzer, vice president at the NPD Group in Rosemont, Ill., a research firm known for tracking the nation's eating habits.

"The weakness in the market is that 18 to 44 age group," Balzer added.

Joe Tarver, senior vice president of purchasing, Minyard Food Stores, Coppell, Texas, agreed that aging adults keep traditional hot cereals moving year round, with little or no promotional prompting.

Most of the retailers SN interviewed mentioned a microwave-only oatmeal product called Quick'n Hearty from Quaker Oats as a new item aimed at people over 40. Retailers recently added Nabisco's Banana Nut Bread Instant Multigrain Hot Cereal to their shelves \-m\ a value-added product whose suggested retail is about 41 cents per single serving. Nabisco's Specialty Products Co. said the strong initial sell-through was stimulated by generous doses of TV and print ads, national sampling, and freestanding inserts, according to a company spokesman.

Quaker's media spending for 1996-97 is set at $30 million for television alone, which is 71% higher than the previous year. Trade support for all Quaker Oats' products for the entire season is $42 million.

Though widely supported by the older population, hot cereal is also breaking more heavily into the kids' market. Buyers told SN that they cleared space for several lines targeted at kids, such as Quaker Oats' Kids' Choice Fruit Madness and the newly introduced Kids' Choice Cookie Blast.