Breakfast cereal and the breakfast food market

An in-depth market study on the supermarket breakfast cereal and category

By Tom Dougherty

A brief history of Breakfast Cereal

Breakfast cereal, especially those loaded with sugar, are losing market share to a whole host of competitors: Yogurt, breakfast bars and even fast food.

What happened? And what can those brands do to take back market share? More importantly, what should the competitors (yogurt, bars, etc.) fear going forward? Things have gotten worse and the stakes are even higher. (Read a market study of consumer packaged goods here)

To truly understand this market, let’s begin by looking at the ready-to-eat breakfast market by looking back.

breakfast cereal is still a mainstayFor decades, the traditional breakfast food for the masses was oat-based porridge (a breakfast cereal). In early history, the meat-based breakfast was often considered the privy of the rich. In the US, as the market became increasingly affluent, porridges and other cereals were replaced by an upwardly mobile aspirational meat and egg-based breakfasts and the old cooked cereals were looked upon as plebeian.

In the late 1800s, health movements blossomed in the US and these reformers encouraged health conscious Americans to cut back on meat consumption at breakfast. The biggest change to the morning diet can be directly traced to one of the world’s greatest brands — Kellogg’s and its Seventh Day Adventists beginnings.

John Harvey Kellogg was a health and fitness force in his time and his sanitarium in Michigan was a recovery destination for well-to-do Americans for many decades. Health retreats at his sanatorium were more immersive of an experience than ranch-spas and adventure-spas of today. They were where the important and wealthy retreated for a rest cure.

breakfast cereal is not as dominant as they once were
The Breakfast Market is Changing

Kellogg’s religious belief emphasized exercise and vegetarianism, and led him to invent ready-to-eat breakfast foods made of grains for his visitors. Eventually, Kellogg’s of Battle Creek was born. Today, the Kellogg’s brand is synonymous with Corn Flakes and many other breakfast cereals.

Charles W. Post, a salesman who was admitted to Kellogg’s sanitarium, was impressed with the all-grain diet. As a result, he began experimenting with grain products. In 1898, he introduced Grape Nuts. The war was on over breakfast products and continues to this day.

Cereal Market
Oatmeal is a staple of the hot cereal market

Cooked breakfast cereal had a path of their own and coincided with the ready to eat cereals of Kellogg’s and Post. The American Cereal Company (Quaker Oats) created an oatmeal cereal in 1877. It invented the brand, using the Quaker Oats’ “Man in Quaker Garb” as a symbol of plain honesty and reliability. It gave Quaker Oats annual sales of $10 million.

Alexander Anderson’s creation of a steam-pressure method of shooting rice from guns produced puffed rice and puffed wheat. The brands started using associations with celebrities such as Babe Ruth and Shirley Temple. By 1964, the Quaker Oats Company sold over 200 products, grossed over $500 million, and claimed that eight million people ate Quaker Oats each day. In 2001, the much larger PepsiCo bought out Quaker Oats.

Kellogg reasoned that packaged, ready-to-eat breakfast cereal was more convenient than a product that had to be cooked. At the time, Battle Creek, Michigan, was a center both of the Seventh Day Adventist Church and of the ready-to-eat breakfast cereal industry.

Because both Kellogg and Post were located in Battle Creek, Michigan, the city became nicknamed the “Breakfast Cereal Capital of the World.”

breakfast cereal market studyAs the category matured, marketing took on a greater and greater role. It did not take long to realize that, once breakfast cereals were considered the healthier choice over meats, the choice of what breakfast cereal to eat was made by children. So, breakfast cereals were marketed to children, such as Froot Loops and Sugar Crisps, Cap’n Crunch and Fruity Pebbles.

In the United Kingdom, Force Wheat Flakes became the first ready-to-eat breakfast cereal at the turn of the last century. The cereal was at its peak consumption in Britain in 1930, selling 12.5 million packages in one year.

Back in the US, the 30’s saw the rise and interest in puffed breakfast cereal. The first puffed cereal was Kix, the result of marketing needs for new and exciting products to build the “puffed” category.

General Mills entered the market in 1924 with Wheaties and almost immediately started to market to children. Sugar was added to improve choice for children. Think about this: Kellogg’s Sugar Smacks had 56% sugar by weight. Spokespersons and mascots helped position the brands as important for children. Some are still familiar today such as the Rice Krispy’s elves, Tony the Tiger, Trix Rabbit and the trending sports figures on Wheaties (the breakfast of champions).

Canada has many, if not all, of the US based breakfast cereal in its market but cooked breakfast cereals, oatmeal, Cream of Wheat and Red River remains most typical.

China is famous for rice congee, (a type of porridge) eaten for breakfast.

Ireland is still famous for its oatmeal. The most famous variety of these is steel-cut oatmeal (like McCann’s). Oatmeal is very popular in Ireland and is a common breakfast there. However, the full Irish breakfast is one of eggs, sausages, broiled tomato and puddings.

Breakfast cereal really took off in the 50’s with the birth of baby boomers. Milk, orange juice and breakfast cereal (mostly Kellogg’s, Post and General Mills) represented the breakfast of Americans. In the mid-60’s, however, the market began the change.

More and more mothers began to work outside the home and families eating together for breakfast became more and more unusual. The focus turned to even quicker solutions for breakfast. Carnation launched its Instant Breakfast, which was in both taste and nutrition not much different than chocolate milk. Pop-Tarts hit the market and the sweetened toaster pastry began to be an accepted way to start your child’s day.

breakfast cerealThe real change in breakfast habits can be seen in the last 25 years. In recent years, we’ve seen a decline in diary consumption with fewer and fewer households buying milk and a turn from carbohydrates back to protein consumption. The trend nearly destroyed the orange juice market and has taken its toll on breakfast foods as well.

So, in many ways, the market has come full circle. Back to the very protein heavy diet that caused Mr. Kellogg to revolt and express a different view.

From our perspective, the industry is at a crossroads. The advent of Greek yogurt and protein bars are an indication of a market in flux. Where will we end up? Diet cereal brands like Special K have extended their brands to breakfast bars. Quaker markets breakfast bars, rolled oats and steel-cut oats that require 30 minutes to cook. Meanwhile, Cap’n Crunch, Lucky Charms, Raisin Bran and Sugar Frosted Flakes still fight for an ever-decreasing shelf space. What’s needed? Where will the market go?

Let’s take a look.

Cold Breakfast Cereal

If there’s a category in real danger within the breakfast realm, it’s definitely cold breakfast cereal. The days when the entire family sits down to eat cereal for breakfast are diminishing, even if those scenarios might have always been myths.

corn flakes breakfast cerealThe segment of cereals is the only one that is shrinking in the breakfast market. Volume dropped 7% from the four years between 2009-2013, and consumption has been dropping at least one percent each year for the last decade.

There are many reasons for this, all of which point to the same things: Cold cereal, especially the ones marketed to children, is not as important to us as it once was and the individual brands find themselves battling over the same ground (namely, taste and a funny character kids might like).

And they’ve been doing it for years.

The cold breakfast cereals category is still number one among ready-to-eat breakfast, holding at a $10 billion industry in the US. But that share is being eaten into by the competition, especially by yogurt, which has become a $7 billion industry.

So what has happened to cereal, especially if we consider the sugary cereals that have long dominated the category? And what can the cereals do about it?

Why the slip?

The slip in overall market share can be seen in hard market share numbers, as well as within the primary companies themselves. Kellogg’s, the second largest provider of cold cereal behind General Mills, laid off 2,000 workers last November, while General Mills reported a 2% drop in sales last year.

What happened?

There are numerous reasons and we’ll start with the most obvious. Cold breakfast cereal just isn’t your only choice any more. Yogurt, as mentioned above, is growing rapidly, having taken a 40% share of the US ready-to-eat breakfast market.

Kashi breakfast cerealThen there are the energy and cereal bars, not to mention the rise of breakfast among fast food restaurants. In a category that has seemingly maxed out on its potential, fast food restaurants have found that their greatest opportunity is in breakfast. That’s the reason why you see Taco Bell introducing breakfast and the number of fast food breakfast items jumping 17% in the last two years.

Even for the individual breakfast cereal brands themselves, there’s increased competition within their category. If you combine all the store brands together, they would represent the market leader ahead of General Mills and Kellogg’s.

But the increased competition is only one of the factors involved, including the perceived unhealthiness of cereal, especially those in the sugar category.

While some cereals have attempted to be healthier, the perception still exists. There are still cereals that, studies show, have one spoonful of sugar for every three spoonsful of breakfast cereal. Kellogg’s Honey Snacks and Post’s Golden Crisps have as much sugar as a Twinkie in each serving size. In addition, the consumption of milk has declined. You can’t have cereal without milk, unless you’re eating it straight of the box as a snack.

Breakfast behavior has also changed, especially among those in the younger demographic. They are the ones most likely to eat cereal, but they are looking for food that is convenient, such has breakfast bars or even fast food. They snack. They don’t sit down to eat.

In the US, anyway, there are fewer younger people. The birth rate has been in a five-year decline, with children below the age of 17 becoming the smallest segment of the US population.

Cold breakfast cereal is primarily a kid’s breakfast. With less of them around, the size of the cold cereal market is sure to shrink.

What’s a cold sugary cereal to do, short of encouraging couples to have more babies?

Before we get to that, let’s look at what the current breakfast cereal market is doing today.

The cold breakfast cereal playing field

If you look at the individual market shares of the individual brands, it’s difficult to draw any hard conclusions. The Cheerios brand holds the first and fourth spots with Honey Nut Cheerios up top and regular Cheerios in fourth. However, Honey Nut’s sales continue to grow, up 2.32% in 2013, while sales of regular Cheerios declined 5.92%.

You could see the healthier breakfast cereal trend upward as Special K saw sales rise more than 21%, while Cinnamon Toast Crunch dropped 8.04%

What is happening here?

Cheerios continues to be one of the top choices as a breakfast cerealHoney Nut Cheerios, as you might imagine, is focused on the honey. Its brand is “Must be the Honey,” using a bee named Buzz as its mascot/equity marker. It is obviously targeted toward children and its ads are very upbeat, often ending with Buzz tapping the cereal with his honey dipper.

Honey Nut Cheerios positions itself on the honey taste, which is a slightly different taste profile than other breakfast cereals. But it’s still sugar. It does borrow the whole grain of Cheerios to claim that it is good for your cholesterol. But the approach is not all that different from the Trix Rabbit, who is told directly by children, “Silly rabbit, Trix are for kids!”

But Trix has declined in market share as it has become one of the many cereals that faced the wrath of marketing sugar to children. It did it so directly that parents stopped buying it. (It could have said: “Silly rabbit, sugar cereal is for kids!”)

Basically, Trix didn’t have the cover of the overall Cheerios brand, which has long marketed itself as “made with 100% whole grain.” Its yellow box is instantly recognizable (and even nostalgic for some). It is currently being marketed under the “Love” tagline, but promotes itself has being good for a healthy heart.

It even has introduced a new campaign – of which the Love campaigns play a part – called the Family Breakfast Project, stating that, when families eat breakfast together, amazing things happen. This campaign directly takes on the changing trends of breakfast (needing fast meals, snacks, etc.) by encouraging viewers to return to the breakfast table. Its point is that being back at the table is better for families.

That approach comes close to what breakfast cereals should do to hold their top ranking. It addresses the category as a whole but it’s a bit sappy and, in this world of texts and cell phones, is not emotionally important.

However, Cheerios, an American staple, provides the “healthy” cover for Honey Nut Cheerios that is believable. It has the Cheerio whole grain in it and honey, while still sugar, doesn’t carry the same negativity of fruity flavors that a Trix has.

Cinnamon Toast Crunch is still among the market leaders, holding the fifth spot in most surveys. But its more than 8% drop in 2013 speaks to a falling brand.

Like most of the sugary breakfast cereals, Cinnamon Toast Crunch uses a character or two: the individual cereal squares that live in the bowl. The position is “Crave Those Crazy Squares,” while marketing on taste by saying it’s that cinnamon and sugar that makes the difference.

breakfast cereal choices include many products that have high sugar contentThere’s a deep problem here by basing marketing on taste (i.e., sugar). That’s because all of the sugary cereals market on that. Unless you have decided to not buy the sugary breakfast cereal for your kids and have left the market (as many have done), you are generally not switching to another cereal if it’s about taste. Your kids (or yourself) already like the taste of the cereal you prefer.

This is a problem in many sectors, not just breakfast cereal. The messaging, tone and look are all the same so they are often seen together, as one bunch. The main message for these cereals? Sugar!

But what about the healthy cereals?

 

Healthy Breakfast Cereal

While the steady demise of breakfast cereal is afoot, the separation between “healthy” and “sugary” cereals has remained intact. For every box of Cap’n Crunch on the supermarket shelves, you can easily find a box of Grape Nuts or Kashi.

breakfast cerealsIn 2013, the Department of Agriculture released a report headlined, “Recent trends in ready-to-eat cereals in the U.S.” In the introduction of this document, it was noted that manufacturers indicated that, “changes in the formation of breakfast cereal … may be due to several reasons, including response to public health concerns and consumer demand for healthier cereals.”

Seemingly, the public’s desire to live a healthy lifestyle has become a more important mainstream idea than it was a handful of years ago. This all means that, in order for  breakfast cereals to be healthy, it has to really be healthy to meet the needs of the masses and not simply a fringe group of shoppers.

Let’s look at Kashi, for instance. Recently, the healthy cereal brand took a tremendous hit for using GMO ingredients — a huge no-no for a healthy breakfast cereal. For the health conscious consumer, the once coveted Kashi brand broke its brand promise of being healthy. As such, the company has paid dearly for this mistake with a steady decline in market share.

One of the success stories in the healthy breakfastcereal category, however, is Special K. What makes Special K’s brand stand out from the rest? It’s simple really, it owns the position of being the healthiest cereal because it promises a certain lifestyle – and challenges its users to meet it.

breakfast cereal special KSpecial K has mustered up a challenge for consumers that it calls, “The Special K Challenge,” which consists of the following. “For meal number one, you may have a serving of any Special K Breakfast Cereal with 2/3-cup skim milk and fruit. For meal number two, you may have a Special K Protein Meal Bar, a Special K Protein Shake, or another serving of Special K cereal with 2/3 cup skim milk and fruit. Meal number three can be eaten normally. Throughout the day, one may consume two Special K snacks, choosing from Special K Protein Snack Bars, Special K2O Protein Water Mixes, Special K Cereal Bars, Special K Crackers, or Special K Fruit Crisps. For additional snacks, one may consume fruits and vegetables. Drinks may be consumed normally.”

The key here is consuming Special K products all day long — not a bad way to keep people coming back. But it also comes with a promise that you will lose weight, an important position that Special K is owning through its advertising.

Outside of Special K, we have a host of breakfast cereal brands that must meet the necessary health standards in order compete. Consumers are asking:

  • Is this cereal filled with fiber?
  • How much whole grain is present?
  • What are the grams of sugar per serving?
  • Are the health claims bogus or legit?
  • What’s the calorie count?
  • Is it low in saturated fats?
  • Will this taste good?
  • A list like this is probably headache enough for shoppers, and most likely why they would rather have a protein shake and be done with it.

The Entire Breakfast Category of Packaged Goods.

Cereal bars and toaster pastries

Cereal bars and toaster pastries are among the bright spots in the breakfast food category. Nutritionally, the pair seems to be at odds with one another. Yet, taken together, they (along with yogurt) are the only reason the “eat at home” breakfast segment continues to grow.

Kellogg’s Pop-Tarts and General Mills Toaster Strudels dominate the toaster pastries segment. Pop-Tarts has owned the segment, contributing strongly to Kellogg’s bottom line. Toaster Strudels have lagged Pop-Tarts but have also etched out its own place in the market.

The category continues to grow, mostly at the expense of cereals, although not at the pace of cereal bars.

Pop-Tarts

Pop-Tarts began around the same time as iconic cereal brands Apple Jacks, Fruit Loops, and Frosted Mini-Wheats. But it was positioned against those cereals – despite the intentions of Kellogg’s – because Pop Tarts doesn’t require a bath of milk to enjoy. Rather, all one needed was a toaster. When it launched in the 60’s, Kellogg’s was so protective of its cereal business that it created a set of detailed instructions for store operators telling them that Pop-Tarts could not be placed near the cereal and that they were in no way a substitute for cereal.

Times sure have changed. Pop-Tarts do just that now.

Pop-tarts as a breakfast option continues to growPop-Tarts have been marketed traditionally towards the youth market while trying to remain appealing to moms. It has utilized taglines like “made for fun” and the current, “crazy good,” while featuring a Pop-Tart swimming in peanut butter to promote the new “Gone Nutty” offerings.

While meaningless, Pop-Tarts’ advertising has been relentless. Kellogg’s has invested heavily in the Pop-Tarts brand and, although it misses the boat on meaning, it more than makes up for in frequency.

Kellogg’s has said that one of the reasons Pop-Tarts have remained a success for so long is through innovation such as the “Gone Nutty” offerings in the form of peanut butter and frosted chocolate peanut butter and college-branded Pop-Tarts. Kellogg’s has also “innovated” through cobranding with SpongeBob SquarePants, Hello Kitty, Barbie, and even Hardees with their Pop-Tart ice cream sandwich. You can even order a box of Pop Tarts with your name on it.

“Innovation” and advertising frequency, however, are not what has made the Pop-Tarts brand a success. The Pop-Tarts brand has been successful because it has naturally adapted to changing consumer tastes and behaviors. The form of the Pop-Tart allows it to be eaten cold, on the go, toasted, or as a snack.

Pop-Tarts Stix was created as an after-school or on-the-go snack. When you look at the reasons Pop-Tarts Stix failed, consumers clearly did not want Kellogg’s telling them how they should eat their Pop-Tarts. It is the versatility of the product that has made it successful, not to mention they taste pretty good.

Toaster Strudels

General Mills/Pillsbury introduced the world to the Toaster Strudel in 1985 claiming it to be part of the “hot, flaky breakfast revolution.” It does about a third of the revenue Pop-Tarts does and its sales have been soft as of late, falling 1% over the last full year. Unlike Pop-Tarts, Toaster Strudels are frozen and, therefore, must be heated.

While Kellogg’s was reluctant to position Pop-Tarts against cereals (and it happened anyway), Toaster Strudel embraced being the anti-cereal. It was a wise position because, in truth, any market share would likely come at the expense of cereal, theirs, Kellogg’s or another competitor.

Pillsbury made a decision early that, in order to break into the toaster pastries market, it would have to cannibalize some of its parent brand’s share. However, as sales have begun to decline, the consumer shift to “on the go” has accelerated.

Toaster Strudel has expanded the Pop-Tart category and has hurt the breakfast cereal marketIn an effort to curb attrition, Toaster Strudels recently launched an ad campaign featuring a child clad in lederhosen named Hans. The ad features the tagline, “Get zem going.”

Meaningless much like the before mentioned Pop-Tart commercial, sales may pick up for a short period but the campaign does nothing to build brand equity. More importantly, it positions the Toaster Strudel as nothing more than a harder to prepare Pop-Tart.

Much like cereal is married to milk, Toaster Strudels are married to the toaster and the trend is moving toward both healthy and portability. Toaster Strudel has neither.

Cereal Bars

The category of breakfast bars is made up of a mix of granola bars, energy bars, protein bars and cereal bars. You can place them in two markets – health and for lack of a better term, “not-health.”

breakfast cerealFor example, most people would not look at a Rice-Krispy’s bar and think health. It is, in fact, Rice-Krispy’s cereal congealed with marshmallows. The same can be said about Golden Graham bars and the like. However, Clif Bars have a reputation of being a healthier choice. Where the line is blurred is in a bar like Nutrigrain bars where they are still high in sugars and high-fructose corn syrup but do not reside on the same unhealthy level as the ilk in the Rice Krispy bar category.

From a positioning perspective, there are only a couple of basic positions bars occupy: snack/side item or meal replacement.

On the snack side, you have the unhealthy Rice Krispy bar, Lucky Charms Treats and the like to the healthier granola bars, Nutrigrain bars, and Nature Valley.

Many of the bars are positioning themselves against cereal and breakfast in general. Bars like the Cinnamon Toast Crunch Milk and other cereal bars (Cocoa Puffs and Honey Nut Cheerios also have a version), by their very nature, go against traditional cereal. In effect, they are saying, “When you don’t have time for a bowl of Cocoa Puffs, take it on the go with you.” Even Quaker’s cereal bars are similarly positioned.

On the meal replacement side, there are a whole host of protein, energy, and fiber bars. This is the area with the most potential of the growth. As healthy and on the go continue to converge, Clif Bar is even promoting its new Mojo bar to “Energize your day,” which clearly is an allusion to “Eat me for breakfast.”

In general, the meal replacement bars seem to be healthier and, as such, they tend to be more serious in imagery and tone in advertising, web and point of purchase. The more “snacky” you get, the less serious it becomes.

The reality is that even the cereal producers have noticed the trend of “on the go” and are capitalizing on that. But what does that mean for the future of regular, ole cereal on the breakfast table?

Yogurt

While the popularity of breakfast cereals has been on a steady decline, according to the NPD’s National Eating Trends, the consumption of yogurt in the United States has “more than doubled over the past ten years, and now nearly one in three people in every country eats yogurt.”

Yogurt is for breakfast, lunch and snackingThe steady increase in yogurt consumption is rather remarkable, and can be attributed to several key reasons: it appeals to both a younger and older audience, it can serve as a replacement meal for any breakfast item (or lunch for that matter) and can also be viewed as a dessert, and it is chalk-full of healthy benefits. These are three big reasons why yogurt is becoming an ideal replacement meal over cereal.

Let’s examine each of these reasons.

Yogurt appeals to specific demographics

In its extensive study on the yogurt industry, the NDP Group pinpointed the key demographic of yogurt eaters being between the ages of 18-34. What makes this group such fervent yogurt lovers? One key reason is they have grown up with it. Parents of this generation were introduced to yogurt as a healthy breakfast alternative in the early 60’s. For the kids of these parents (who are now in that 18-34 demographic), it is natural to have a yogurt for breakfast, rather than a bowl of cereal. The numbers don’t lie. The NPD group reported that, “These trends alone have led to 200 million extra servings of yogurt being sold a year.”

The other demographic that yogurt has appealed to strongly is the 60 and older age range. This group of consumers tends to find yogurt a safe bet in living a healthy and a less calorie-riddled lifestyle.

It’s an easy breakfast item

Let’s face it, traditional breakfast cereals take time to eat and can’t be brought with you in the way a container of yogurt can. It’s small, quick and all you need is a spoon. More than that, however, is yogurt’s ability to work as a meal (or snack) for breakfast, lunch or even dinner. It’s a simple yet nutritious meal. In Consumer Corner’s October, 13th retail study on the yogurt industry, it was noted that, “Refrigerated yogurts are the eighth largest selling subcategory in food, drug and mass market” and has become a growing option as well within the food service industry as a menu item.

Specifically, 45% of yogurt eaters consume it for breakfast, while 32% consume at lunch, or in the late afternoon (32%), late morning (25%) or late night (25%). With such widespread appeal, yogurt has clearly become the safe bet for breakfast eaters.

Yogurt is healthy

Here’s where Greek Yogurt comes into play. Package Facts noted that, “The U.S. market for yogurt sold at retail to be $7.3 billion in 2012… this group is attributed to sub category: Greek Yogurt.” Greek Yogurt stands out from other styles of yogurt as it’s considered to be rich and creamy in its texture. What’s more, the health benefits are abundant: there is more protein because the yogurt is thicker. Plus, when the lactose is strained, the yogurt loses some of its sugar and carbohydrates.

Let’s consider a few of the Greek yogurts

Chobani

Perhaps the most well known name of Greek yogurt (or strained yogurt) is Chobani. An Americanized version of a universally European term that means, “shepherd,” Chobani boasts the largest processing plant in all of the United States, located in Boise, Idaho. In fact, Chobani is pulling in close to $1.3 billion a year and have even started the Yogurt Bar concept in Soho, NY.

Greek yogurt has taken over the yogurt marketAccording to its owner, Hamdi Ulukaya, what’s made Chobani such a success is the company’s manufacturing process. For example, the company opted to never outsource any of the Chobani product line. Moreover, Ulukaya set the price point of the yogurt a little higher than the competition to meet future price projections.

That has been a wise move because there is a general belief among consumers that you always get what you paid for. We, at Stealing Share, have tested that belief with target audiences and it always comes back emotionally intensive no matter the category. Being priced slightly higher than the competition tells the audience you are a little bit better.

It’s working for Chobani. Business Insider recently shared that “[Chobani] now produces 2.2 million cases of yogurt a week, Ulukaya said, and has passed $1 billion in sales. When they started, Greek yogurt made up 0.2% of the yogurt market in the U.S. Now it makes up 50%, and Chobani has at least half of that market share.”

Kid’s yogurt

Outside of the Greek Yogurt movement, kid’s yogurt brands are also on the rise. From brands available for infants (YoBaby) to drinkable yogurt smoothies (Danimals) to squeezable bags (Plum Organics, Yogurt Mashups), and craziest of all — cereal flavored yogurts (YoPlait Trix), yogurt is being branded as the healthiest and quickest breakfast alternative for children.

Kid’s yogurt is filled with nutritional benefits. It can provide a quick serving of calcium, protein, and a litany of the necessary vitamins and minerals necessary for a growing body. With such benefits, it isn’t surprising that children ate “yogurt on 23 more occasions in 2012 than in 1998” according to a study by USA Today. With so many options to choose from, it wouldn’t be surprising to see that trend increase in the years to come.

Conclusion

The fact of the matter is that breakfast cereal may never recapture the prominence it once held. They will still hold the top spot, but the time has passed when they see their market share rise again.

Who will win in breakfast cereals?
Opportunity exists at junctures of change

That’s because we have changed as people. We are on the go, and have learned from technology (think your smart phone) that everything can be taken on the run and we don’t need the sit-down meal while we’re getting ready for work and getting the kids off to school.

And it’s not just adults who have changed. Children have too. They have also been taught by technology that’s it is an eat-in-your-car era and cereal, especially for pre-teens and teens, can seem childish or old-fashioned.

We are also a healthier bunch, living longer by watching what we eat. Fewer parents are willing to give their children sugary cereal that makes them obese. And, even those who are willing may opt for fast food in today’s fast-paced world.

In the face of that, what are traditional breakfast cereals to do? For one thing, they need to get better about branding. The model they have followed, especially for the sugary cereals, is basically the same as it was decades ago: Feature a cartoon character, emphasize the fun, and promote the taste. The strategy being that kids will clamor for it.

The problem is that there is little differentiation. They are all sugar. The characters are interchangeable from each other. And the cereal manufacturers are struggling to understand their consumers and, more importantly, the consumers who do not choose them.

There is a process to understanding those consumers, based on belief systems and switching triggers, that Stealing Share has developed that can get into what drives those consumers of cereal that goes beyond taste and even health.

We’re talking about emotion.

In this way, a breakfast cereal can better define its brand so that it is coveted by adults and children alike. Right now, many of the cereals – even the most successful ones – look out of touch. If they don’t update their brands, many of them could go the way of Life, Rice Krispy’s and Corn Flakes as brands that are falling at a rapid rate.

breakfast cerealsThis also goes for the market as a whole. Using those powerful triggers, the manufacturers can sell the category of cereal as being relevant in today’s world. That would raise the waters for all, although it may never regain its peak. But it can stop the bleeding.

But there is a more important factor for the food providers to consider. Trends are just that. They are trends. Meaning, that if the yogurts and bars don’t learn the lesson of the cereals, they’ll see their own market share dwindle. Yogurts are riding the crests of a new wave, but the individual brands also look and sound and taste alike. If they don’t differentiate themselves – especially in using the emotional triggers of the consumer – they will become just trendy.

So be warned, yogurts and breakfast bars. While you’re riding high now, you have also neglected to build meaningful brands – which means you are just as vulnerable as the cereals were when you took their market share.

Honey Nut Cheerios Healthy Hearts

 Kashi is an interesting player.

Kids are difficult to influence

A healthy Taco Bell is not believable

If you look at the fast food marketplace, the brands – McDonalds, Burger King, Wendy’s, Taco Bell, etc., – are in chaos.

And that’s being kind.

They are fighting with every last bit of strength to reposition themselves in the marketplace as sales are dwindling.

McDonalds, for instance, is offering its breakfast menu all day. Now, you can get that Egg McMuffin as a midnight snack, which I’ve described as just a Band-Aid.

The new move by Taco Bell.

The new trend in fast food is to provide food that’s healthier for you than what chains normally offer, even though studies have proven that consumers usually still opt for the fatter foods. In fact, the main problem is that fast food chains don’t have the permission to be accepted as healthy by consumers. Even McDonalds failed to gain traction going that route, potentially damaging its brand.

Healthy Taco Bell
Yeah, cage-free eggs will make this healthy.

Taco Bell has now announced it is committed to using cage-free eggs in the menu items at all of its 6,000-plus restaurants by this time next year. Let’s just assume that cage-free eggs are healthier, does the Taco Bell customer care? More importantly, will the cage-free eggs get someone who thinks of Taco Bell food as worthless crap into the store?

I feel resolute in my belief that one will never believe in a healthy Taco Bell. No amount of cage-free eggs will change my assumption nor the assumption of many others.

When you order a Biscuit Taco Combo, does it matter what kind of egg you’re eating? Nope. Each bite of that 870-calorie monstrosity isn’t anywhere near being healthy. Don’t fool yourself.

Think about this: The fast riser in the industry is Hardee’s (or Carl’s Jr., depending on where you live). It has positioned itself as the opposite – “Eat it like you mean it” – and it’s doing wonders for the brand.

I’m not saying others should follow that example, except that the message is a brand one. Cage-free eggs is a menu item and chains that attempt to out-menu their competition will find themselves changing to something else down the road.

McDonalds fails to be believable

McDonalds fails. Brand problems.

McDonalds Fails
McDonalds Fails is a statement no one believed could happen

McDonalds seems to be losing share to other fast food and casual restaurants. Not too surprising from my perspective because the amount of competition has increased beyond belief. The choices for quick and other poor food choices has exploded.

There is even a new major player in a gas station (Sheetz). The category is rife with new entries and new day parts. It seems that everyone has entered the breakfast category.

One chain tried to create a Fourth Meal category, hoping to attract the morbidly obese. Some chains are now available 24 hours a day for the sudden need to get a burger and a thick and frosty drink after you unexpectedly wake up to pee at 3:30 am.

So what is the news for today? McDonalds fails is the news. McDonalds is repositioning itself as vegan. You think I am kidding? Well, actually I am because it would be absurd for McDonalds to claim such a position. They are actually moving into a position of quality ingredients.

To my thinking, it might just as well say it is vegan. But the truth about how McDonalds fails is almost as absurd. (Read another recent blog on McDonald’s here)

The art of branding with importance is a subtle formula. What you claim must be of highest emotional intensity to the target audience you wish to influence and you brand has to have an innate permission to claim it as true. I’m not sure of the validity of either support points for McDonald’s new position de jour.

McDonalds Fails Again

McDonalds fails. Ronald McDonaldRemember when McDonalds was about herd mentality? When the golden arches told us how many millions of our fellow foodies had been server?

How about when McDonalds was all about kids? Ronald McDonald and the Hamburgler all got their start here.

Hamburgler. McDonalds fails
The Hamburgler is trying to grow up

(Read an interesting update on the Hamburgler here). Happy Meals replaced the Big Mac as the signature dish. Playgrounds sprung up at the front of nearly every store.

Then McDonalds decided to try a dual strategy and excite adults with its Arch Deluxe burger.

McDonalds Fails Arch Deluxe
The Arch Deluxe was a monumental failure

In the past, a statement like McDonalds fails would have been absurd in itself.  No one REALY paid attention to the changes because McDonalds was the 800-pound gorilla who, it seemed, could do no wrong. It just ate everyone else’s lunch (pun intended).

But more scrutiny is on the aging chain now as its market share continues to slip. Operations and process improvements won’t save it this time. Possibly all McDonalds has going for it is a menu like everyone else but better locations.

McDonalds fails and Papa JohnsHopefully, McDonalds has great research indicating that better ingredients is the highest emotional intensity in the category.

I doubt that it is.

After all, The forgettable Papa John’s brand has been claiming the same thing for years with a massive TV spend that has the founder and owner in our face repeating the inane line at every turn.

Papa John’s spends more than any other pizza chain and yet it has never been able to get out of the less than $10 pizza wars. In other words, Papa John’s still competes on price. That is all it has going for it.

McDonalds Fails— Unbelievable Claims

mcDonalds failsThe problem for Mickey Ds is that the claim is unbelievable in its current brand’s permissions. No one thinks it has better ingredients and quality food.

We all believe it is mass produced hockey puck-like food. What’s in those shakes (that they can’t call milk shakes)? How many beaks and chicken feet are ground up and reformed into nuggets? What’s a McRib? What part of the sow does that come from? The ribless part?

Once you lose the brand myth from those that identify with you… well you have lost all of your equity. McDonald’s needs a brand makeover and not the costume festooned Halloween-like change it is proposing now.

Taco Bell, breakfast defectors

Taco Bell, which has a disadvantage in entering the breakfast daypart, is taking that disadvantage head-on with its new campaign asking consumers to be breakfast defectors and eat something different at Taco Bell.

The disadvantage is that Taco Bell does not have brand permission to enter the breakfast segment because of its name and brand equity. It is about cheap Tex-Mex food, usually eaten by night owls on their late-night visits.

That has been enough to make the fast food chain a success. But, as I’ve explained before, the only daypart with opportunity in the slipping fast food industry is breakfast. That’s why you’ve seen more of the chains target their marketing dollars to getting more customers for breakfast.

Taco Bell has struggled in this area because of its lack of brand permission, but the new campaign is interesting because it is positioned against the rest of the market while leveraging its own equities.

That’s one of the tenants of any brand marketing. (Or any kind of marketing, for that matter.) To be a true choice, you must be positioned against the other options in the market.

The Taco Bell Breakfast Defector campaign relies on a belief

What Taco Bell is doing here is aligning itself with a belief, that all fast food breakfast is basically the same, and using its own brand equity to say what it has is different. Defect from breakfast and choose differently.

It must be working because, even though Taco Bell has been serving breakfast for more than a year now, market-leading McDonald’s has recently taken to social media by offering consumers (at least in some selected markets) a free Egg McMuffin if they bring in their Taco Bell breakfast receipt.

McDonald’s has been having its own problems, which are reflective of the industry itself. Sales all across the board are down and McDonald’s is responding by paring down its menu to offset what had previously been an industry trend: Adding more and more menu items in an attempt to stave off lost market share. But in doing that, chains have lost whatever equity they’ve had.

The major problem most of the fast food brands have is that they don’t know who they are for or what their brand means. The brands basically stand for cheap, quick food today because the expanded menus told consumers that.

At least Taco Bell has an understanding of its brand, even though I suspect its lack of brand permission will prevent it from being a market leader. The chain also understands the customer base (tired of the same old thing for breakfast) and that what it offers that is different.

Fast food brands should take notice because breakfast consumers are defecting.

What Kellogg cereals (and others) need to do

On this snowy and cold North Carolina Friday, I wanted to point out a story in Bloomberg Business about the rise and fall of Kellogg, the top cereal-producing company in the U.S.

As we’ve noted in our own study of the cereal market, the industry has bottomed out as consumers have, ironically, found healthier and more convenient ways to eat breakfast.

I say ironic because when W.K. Kellogg first founded his company, it was to give consumers a healthier and more convenient alternative to the leftover meats they were eating in the early 1900s. Now, with Kellogg’s top-selling cereal being Frosted Flakes, the cereals are less healthy and convenient than simply grabbing a yogurt or breakfast bar on the way out the door.

Fewer and fewer people are having this for breakfast.
Fewer and fewer people are having this for breakfast.

What is interesting about the Bloomberg article, which tells the inside story of Kellogg cereals, is how much Kellogg has lost its way as a brand. You see, brands aren’t just marketing endeavors. They are also the compasses that direct everything you do, from product development to marketing to what you stand for (and who your customer represents).

In Kellogg’s case, it went so far into the unhealthy, sugar cereals that it got on the wrong side of history. It didn’t help that it tried to enter the health market by buying Kashi – then transforming the brand into Kashi Chocolate Almond Butter cookies and even Kashi frozen pizzas.

Talk about not understanding the brand.

But the problems of the cereal companies are larger than how to handle its individual brands. What Kellogg and its competitors (such as General Mills, which has had tremendous success with its Cheerios brand) need to consider is what they should own.

Right now, they own that spot where dying brands like Radio Shack, Blockbuster and others were several years ago. They look archaic and completely out of step.

What they should own is breakfast. We’ve seen a few attempts at it, as referenced in our study. But with each passing day, fast food restaurants and other outlets are owning that daypart and no cereal company is going to out-product its way out of the dilemma.

If one of those cereal companies wants to know how to turn around its fortunes, call me.