Market Overview

Report: Cold Breakfast Wars Are Heating Up

Report: Cold Breakfast Wars Are Heating Up

At a time when consumers are opting for less sugar and more healthy options, The Wall Street Journal reports cereal makers are battling harder than ever to support sales.

What Happened

General Mills, Inc. (NYSE: GIS), the maker of Cheerios and Wheaties, has seen zero growth in cereal sales over the past three years, WSJ said in a Tuesday story.

The company has been trying to reverse its fortunes and tried everything from healthier alternatives to cereals with extra sugar.

On top of operating in a zero-growth environment, cereal makers need to contend with grocery retailers who are "forced to be a little bit more selective," Hunter Williams, partner at consulting firm Oliver Wyman, told WSJ.

One cereal maker who is benefiting from retailers becoming more selective is Post Holdings Inc (NYSE: POST), WSJ said.

The cereal maker is behind many store brands it designs for retailers, and this helped the company show a rare 2% growth in cereal sales in its recent earnings report.

Why It's Important

Cereal makers don't necessarily have to increase sales to boost their bottom lines.

Kellogg Company (NYSE: K) scaled back on its promotions and transitioned its operation to include a more standard set of box sizes.

But the company isn't ending its initiatives there, as it is experimenting with combining new flavors with older brands, such as Berry Froot Loops and strawberry-flavored Rice Krispies.

"It's not that people don't eat breakfast. It's more that they don't eat it the way they used to," Tory Gundelach, an analyst at Kantar Consulting, told WSJ.

The cereal sector may have one factor working in its favor although over a long time frame, WSJ said.

According to the U.S. Census Bureau, the number of children younger than 5 is expected to rise by 2.6% over the next decade to 21 million by 2030.

Related Links:

The Big Business Of Cereal: Which Company Is Winning The Breakfast Bowl Wars?

General Mills Debuts First New Cereal In 15 Years


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