RTE Breakfast Cereals Struggling

NEW YORKAlthough ready-to-eat (RTE) breakfast cereals have traditionally proven one of the strongest packaged-foods categories in terms of consistently strong sales, the sector has struggles of late, according to a recent story from 24/7 Wall Street. As the article notes, branded RTE breakfast cereal sales have dropped by 2.55% for the 52 weeks ending April 17 to $6.41 billion, and private-label RTE cereals fell by 7.2% to $637.5 million during that period (data provided by Symphony/IRI Group, Chicago). The article also notes that sales have been lackluster since 2007, which places this decline before the recent recession and increases on commodity prices. Products cited as struggling include some of the categorys top brands: Kelloggs Corn Flakes, Cheerios, Raisin Bran, Rice Krispies, Corn Pops, and Special K, with Symphony/IRI citing that some of these brands fell by double digits from 2007 through 2010.

The article notes that higher prices unveiled in the 1990s and competition from other breakfast alternatives, including bagels and toaster pastries, as well as egg-based sandwichesgenerally purchased from a quick-serve restaurant, like McDonaldshave helped precipitate this decline in RTE breakfast cereal sales. Also, a representative from Dean Foods noted that soft milk sales have added to cereals struggles; nearly 30% of milk usage is tied to cereal consumption.

Another factor that could negatively affect cereal sales include potential moves by federal regulators to restrict usage of cartoon characters to market products to children in a move ostensibly to help combat the rising rates of childhood obesity, even though manufacturers have been voluntarily reformulating products to reduce sugar levels in cereals.

Despite this gloomy perspective on the RTE cereal market, some shafts of light have penetrated the darkness. Products like Multi-Grain Cheerios and Cinnamon Toast Crunch have made gains over the last few years.