Breakfast club

31-May-2010 - Last updated on 16-Mar-2017 at 11:36 GMT

Related tags Breakfast cereals Breakfast cereal Kellogg

When it comes to media whipping boys, the breakfast cereals sector is up there with Gordon Brown and speed cameras.

The Food Standards Agency (FSA) was already breathing down its neck to further reduce salt in cereals. Then a recent mysupermarket.com survey showed a bowl of Nestlé Cheerios or Kellogg’s Crunchy Nut cornflakes contained as much sugar and salt as a jam doughnut or a slice of chocolate cake.

And Kellogg has come under fire for launching Krave: a breakfast cereal with a chocolate filling, aimed at 16- to 24-year-olds. It also got bad press for advertising Coco Pops as an after-school treat.

These are just the latest in a long series of brickbat attacks on the cereal industry’s heath credentials in the media, stretching back years.
So what are the various cereal manufacturers doing to develop their businesses and grow sales in this climate of distrust? What are the new product development (NPD) areas? And what work is underway to cut sugar and salt levels in products in line with FSA demands?

Mature market

To put the situation in context, take a look at the dynamics of the cereals market. The statistics point to the fact that the cereals sector is mature, showing marginal growth and dominated by established brands. According to the latest figures from Kantar Worldpanel for the 52 weeks to March 22 2010, value sales of cereals were up 6% to £1.86bn. Volumes were up 2% to 0.54bn tonnes.

Kellogg remains market leader, with almost 40% of value sales, and it owns seven of the top 10 brands in the market.
Weetabix lies in second place, with a value share of around 16%, although Weetabix itself is the best-selling cereal brand, according to Kantar Worldpanel. With a share of 15%, the market’s third largest supplier is the Cereal Partners joint venture with Nestlé. Its main brands include Shreddies and Cheerios.

Leatherhead Food Research, meanwhile, says consumers are extremely loyal to their favourite brands. So, in this stable market, with the low-hanging fruit harvested, where is the growth going to come from?

There remains a double challenge for manufacturers looking at NPD opportunities. First, to find new areas of consumer demand with two-thirds of consumers already eating breakfast at home every day (according to Mintel). And, secondly, to offer something new to their consumers.

But at the heart of the issues that brands are grappling with is the fact that products containing more sugar fare better in taste tests. Mintel says in its Breakfast cereal report of February 2010 that the goal for manufacturers should now be to increase usage occasions.

Just under half of all consumers eat cold breakfast cereals at least once a day or more, whereas only about a fifth eat hot cereals (eg porridge) once a day or more. Cereals can also be positioned as a quick after-school snack for children, focusing on the healthier cereal ranges, and so tapping into consumer demand for healthy snacks, it says.

Well, we already see Kellogg suggesting that Coco Pops can be eaten at novel times of the day; in the hunt to stretch the brand and attract new consumers. We’ve also seen the launch of breakfast cereal bars from the big brands. And, of course, the launch of super-indulgent products such as Krave.

'Adult enjoyment...'

Kellogg’s spokesman Paul Wheeler talks about the importance of offering “a range of cereals to suit shoppers’ needs”. He says the biggest growth in cereals is towards “the adult enjoyment segment”, meaning appetising products aimed at adults.

This segment has enjoyed a 12% year-on-year increase (Source: IRI Grocery Outlets 52 w/e Feb 27 2010).
The new adult chocolate cereal Krave (described as ‘whipped chocolate blended with toasted grains, topped with crunchy toffee bits, and wrapped in a luscious chocolatey coating’) was aimed at the previously untapped 16- to 25-year-old audience. It has already achieved 0.6 share points.

Kellogg’s Crunchy Nut was another of the big success stories of the last year, he says. Volume sales increased by 12.6% and value by 21.5% to £96.8m [IRI 52 w/e November 7] and the brand now ranks third in category. Sales profiles like these give the company a clear warning not to overdo it with changing products to cut levels of sugar and salt.

Wheeler says: “Clearly, the primary concern with any food change it not to alienate the existing shopper. If you can’t take consumers’ palates with you as you reduce salt or sugar, the end result will actually negate the desired outcome that public health campaigners want. If people don’t like the taste of the reformulated product, they’ll simply switch to high salt/sugar alternatives that deliver the taste profile they want.”

Kellogg has actually taken salt levels in its cereals down by around 40% over the last decade, but this has been done in steps to let consumers’ taste buds acclimatise, he says. And it’s not a simple nip and tuck job, there was extensive research at each stage of the reformulation process to ensure adaptations continue to deliver the taste expectations of our shopper, he adds.

Healthy cereals

Outside ‘adult enjoyment’ cereals, Kellogg has also been at work within the healthy cereals segment. It was the first to introduce breakfast cereals containing the prebiotic inulin. Elsewhere, the Special K range has performed well as a result of addressing consumer health concerns, while the Optivita heart health brand has carved out a niche.

Nestlé/Cereal Partners says its biggest NPD launch in recent years has been Cheerios Clusters. The Cheerios franchise has a combined market share of almost 4% and is growing by 9% in sales value terms versus last year, despite any critical headlines likening Cheerios to doughnuts.

“Radical changes to product reformulation will lead to consumers switching away from these products, and perhaps choosing to seek out less healthy alternatives,” says a spokeswoman. “We are constantly reviewing our products and innovation is an ongoing process to meet changing consumer tastes and demands.”

Between 2004 and 2007, Nestlé has significantly reduced sodium in its cereals, it says. For Shreddies the reduction was 15% and for Cheerios it was 18%.

“With any product innovation the most important factor is ensuring that the consumer continues to enjoy their purchase,” says the spokeswoman.

Meanwhile, Quaker is tackling the fact that hot cereals only have around 8% of the overall cereals market with marketing activity and flavour extensions behind its Oatso Simple brand. And it has also stepped into the hot children’s cereal arena for the first time with Quaker’s Paw Ridge porridge, launched last year.

Only about 5% of Quaker’s current sales were coming from the children’s market, even though parents are looking for healthy breakfast options for their children.

Like Kellogg, Jordans says that, within the everyday sector, it is the ‘tasty’ and added value products that are driving growth. That includes new products such as Jordans Country Crisp with dark chocolate curls, which is currently boosting Jordans’ share in the sector. The new variant includes a combination of Belgian dark chocolate curls, made with 70% cocoa chocolate.

Dorset Cereals’ head of communications Mandy Cooper identifies premiumisation and adding value (in the granolas area in particular) as the major trend. She said it has had a great success with honey granola and a very positive launch of Fairtrade chocolate granolas.

Cooper says Dorset steers clear of adding any sugar, using fruit instead, calling for a distinction to be made between naturally-occurring sugars and added refined sugar in products.

Vitamins and minerals

With the manufacturers appearing to focus on indulgence with their new launches, cereals’ trade body The Association of Cereal Food Manufacturers defends the heath credentials of breakfast cereals.

It points to data from the National Diet and Nutrition Survey (jointly funded by the FSA and the Department of Health), which shows that breakfast cereals only make a small contribution to the day’s intake of sugar (less than 5%) and salt (2%), yet make a valuable contribution to the intakes of several vitamins and minerals in the diet (25–30%).

A spokeswoman says: “With any product innovation there are many factors involved, most importantly ensuring that consumers continue to be happy with their purchases. Breakfast cereal manufacturers are constantly reviewing their products and innovation is an ongoing process.

"The industry is making good progress in many areas. For instance, we have succeeded in reducing levels of salt in breakfast cereals by nearly 50% since 1998.”

Indeed, the FSA acknowledged that salt in branded breakfast cereals had been cut by about 44% on branded breakfast cereals since last May, when it set revised targets. The new salt target on breakfast cereals is 0.68g per 100g by 2012, a further reduction on the previous target of 0.8g per 100g by 2010.

When it comes to producing healthier cereal products, manufacturers have come on in leaps and bounds. If you look back a few more years, sugar was first added to breakfast cereal after World War II in order to make it more appetising as it was increasingly targeted at children. For example, Kellogg’s Sugar Smacks, created in 1953, had 56% sugar by weight. Cheerios only contain 21.6% now.

Top 10 UK cereal brands by volume for the 52 weeks ended March 21, 2010: