Kellogg Tries Moving Cereal to the Produce Section


Cereal maker Kellogg (NYSE: K) is looking more desperate in its attempts to boost sales. Earlier this month it launched a pop-up cafe in New York to sell bowls of cereal for around $5 each, about what you would spend to buy an entire box at the supermarket. Now it’s going to relocate its processed breakfast staple to the fresh produce section of Meijer grocery stores as a means of reinforcing the idea of having fresh fruit with your cereal.

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Kellogg, General Mills (NYSE: GIS), Post Holdings (NYSE: POST) and other ready-to-eat cereal makers still dominate the morning routine, but their share of the breakfast table has falling markedly in recent years, dropping from 31% in 2009 to under 27% in 2015, according to NDP Group data.

Kellogg reported a 1.6% decline in North American comparable sales in 2015 while General Mills said sales for the last 12 months fell 5% in the U.S. Post has only been able to post sales growth as a result of acquisitions, such as its purchase of MOM Brands last year, but like the rest of the industry, it remains weak.

There are a number of trends that account for this, and they don’t portend well for the future:

Falling milk consumption. According to Kellogg, about 95% of breakfast cereals are eaten with milk, but the USDA says milk consumption is on a decades-long slide, down almost 40% since the 1970’s. Less milk drunk is going to mean less cereal eaten.

Millennials are lazy. The market researchers at Mintel found that 40% of this age cohort thought eating cereal was inconvenient because they had to wash a bowl afterwards.

Avoiding the center aisles. Consumer preferences have changed; shoppers are increasingly eating more fresh foods and less processed ones. Shopping the perimeter of the store is seen as a healthier choice than hitting the middle aisles.

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General Mills has responded to that last trend by making a campaign out of removing artificial ingredients and colors from its products. Kellogg’s plan to move out of the center aisles would — superficially, at least — seem to increase its chances for sales. Still, with growing numbers of consumers shunning carbs, Kellogg has a tall order before it, no matter where it shelves its cereals.

Source: Investopedia


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