The Changing Landscape of the Breakfast Table
Heeju Kim, Dartmouth Business Journal
One of the iconic breakfast foods to emerge in the last 50 years is cereal. Pioneered by Will Keith Kellogg, cereal was first advertised as a healthy and quick alternative for working class Americans. In a time when meats were standard breakfast food, cereal gained popularity rapidly due to its relative health benefits, affordability and fuss-free preparation that parents could trust their children to execute. Seizing this opportunity, cereal companies began to target children – then, the baby boomer generation – by loading up the “healthy alternatives” with sugar and attaching them to iconic characters and advertisements. According to U.S. magazine Consumer Reports, Kellogg’s Honey Smacks, a popular product at the time, were over 50 percent sugar by weight.
As with most consumer goods, time inevitably changes demographic preferences. Cereal companies that once sat cozy in their position atop the breakfast food empire are now struggling to understand and adapt to the radically different inclinations of the rising millennial generation. According to Accenture, by 2020 millennials will represent 30 percent of total retail sales for an estimated value of $1.4 trillion. This change has proven to be problematic for many cereal companies that have built their products and strategies around the eating and purchasing habits of the baby boomers. Unlike their parents’ generation, millennials place a greater emphasis on speed and convenience. They do not tie themselves to meal times or locations; rather, they have adopted what Rabobank, a global leader in food and agribusiness financing, has coined “snackfast,” where smaller, portable breakfasts are preferred to those that require a table.
While cereal giants have been hurt by this demographic change, other industries have been able to capitalize. Changing preferences sparked the popularity of breakfast sandwiches, wraps and small pastries. McDonald’s is the most prominent example of a company that has been benefitting greatly from these new breakfast trends. According to Forbes, McDonald’s claims over 30 percent of the market share under its golden arches. The company has moved almost in tandem with the generational shift, with their hugely successful McMuffin, the successful launch of their all-day breakfast and a focus on customization. McDonald’s points to its emphasis on coffee culture as the driving factor of their success in the breakfast industry. Already a popular coffee destination, McDonald’s has successfully been able to convince patrons to buy a sandwich to complement coffee beverages. Other coffee shops and restaurants such as Starbucks, Taco Bell and Burger King are scrambling to match McDonald’s success by adding menu items, extending hours and promoting online orders.
Beyond convenience and portability, the millennial-heavy health and nutrition craze has further acted to discredit cereal giants. Spurning gluten and carbs for juices and proteins, the breakfast industry came full circle with a return to meats, proteins and fresh fruit. The belief that proteins will keep you satiated for longer have prompted penchants for cold cuts and eggs, which were long considered an unhealthier choice. The juicing trend has sparked juice bars, recipe books and equipment for people to make their own healthy juices at home. An increasing awareness of what is in food works against cereal companies as well; more people are looking at nutrition facts, realizing that cereal is a vessel for sugar, and are choosing alternative options. The rejection of sugar by adults also influences and shapes what children eat, contributing to a shrinking market for cereal companies that relied on children for sales.
Cereals are still aiming to stay relevant. One cereal that is adapting to the health-focused breakfast industry is Chex. General Mills changed flavors and advertisements before labeling it as gluten-free and GMO-free. According to Sanford C. Bernstein stock analysts, Chex experienced 5.1 percent annual sales growth from 2010 to 2014, while overall cereal sales declined or plateaued. Brands are also trying to appeal to its history by running commercials that play on the nostalgia of cereal; after all, adults are half the market for Cinnamon Toast Crunch. Following the incorporation of such advertisements, General Mills reports growing sales of Lucky Charms since 2013.
So what is taking over the breakfast industry? The answer appears to be yogurt. According to IBISWorld, yogurt is a $4.2 billion dollar industry, with about a third composed of Greek yogurt. Its portability, protein content and rich taste make it ideal for people who want to feel full during a commute. The most telling sign of yogurt’s power and potential is the exit of the head of Kellogg’s US-breakfast foods division, David Denholm, in favor of a CEO position at Chobani. A timely departure, no less – according to Euromonitor, cereal companies have declined 17.9 percent in worth since 2010, and are expected to fall another 8.6 percent by 2020. Kellogg is cutting its global workforce and closing plants in order to redirect the savings toward product innovation. Meanwhile, Chobani’s sales have rocketed to nearly $1 billion. Yogurt’s new power makes perfect sense for a demographic that seeks portability, convenience, freshness and health.
Companies are innovating to produce products that accommodate these new preferences, but their products are largely attempting to catch up to competitors that are too dominant to justify the required resources. To create something healthy, fresh and flexible is a looming challenge for the cereal sector of the breakfast industry. The only way that cereal companies can compete is to capitalize on their strengths – creating products that can be purchased anytime and consumed anywhere at any time in any fashion. Although it has never been its cornerstone, it is something that neither the fast food industry nor the fresh produce providers can deliver. An overestimation of the appeal of breakfast bars, which offer little customization or carb alternatives and cannot compete with the popularity of proteins and produce, has handicapped the industry enough already.
New products that a cereal company releases should refrain from using any GMOs and heavily cut back on processed sugar. Vegan and gluten free options are necessary in order to appeal to a health-conscious population. The product should be highly customizable, where it is appealing straight out of the packaging or heated up and can be eaten plain or with fruits, nuts, and yogurt. It should not be a frozen food to avoid the undesirable preservatives and to allow more flexibility in preparation techniques.
There are two main weaknesses of the fast-food and coffee shop breakfast lines that cereal companies can capitalize on – the first of which is price. The higher cost of eating out for breakfast reveals an opportunity for cereal companies to acquire price-conscious consumers. The second region is environmental impact. The wastefulness of the fast food industry in its packaging is something that shows little sign of changing in the near future. Cereal companies can appeal to the environmentally conscious millennial generation and gain market share. One idea is a granola bowl, which is highly customizable and can be taken on the go. Packaging can be innovative to provide convenience as well as a low environmental impact. Cereal companies like Kellogg are launching new products that incorporate health and convenience, but by drastically altering their famous cereals like Cheerios. Companies should tread carefully with this tactic, since innovating on an already tried-and-true product alienates both loyal cereal eaters and does nothing to entice customers who have already formed a negative opinion of cereals.
The cereal industry can also take inspiration from the Pop-Tart, which contained an exorbitant amount of sugar but was flexible in its preparation and consumption. A healthier rendition of a similar pastry encompasses many of the characteristics that people now seek; a vegan pastry, made entirely of healthy oils, nuts, and flours captures many of the food industry’s buzzwords and can appeal to the new average consumer. The product should be closely identified with a healthy lifestyle through its branding and advertisements.
Shifting preferences are difficult for any company to handle. In order to stay relevant, the cereal industry needs to recognize what their advantages are and strategize accordingly. The industry began as a retaliation to the status quo of an era that was coming to a close. The trends of today, however, show no indication of disappearing in the near future, and cereal companies must address this before it is too late.