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

Facebook Advertising. P&G Failure.

Facebook AdvertisingI just read an interesting article in the Wall Street Journal about P&G (the largest advertiser on the globe) and its experience placing Facebook advertising in front of a highly targeted audience.

It seems that Proctor and Gamble had very limited success with the venture so far. It seems counterintuitive that it would not work as expected. Consider this:

P&G Facebook Advertising

The P&G brand Pampers is able to target new moms and pregnant women on Facebook. The very audience it NEEDS to excite to purchase. Feels like a no brainer. But P&G found the resulting sales less than exciting. As a result, while not giving up on Facebook, P&G is going to increase its TV advertising next year.

What is missing in Facebook advertising?

In other words, Proctor discovered that broad based rather than strictly targeted ads work better. What it is not grasping fully is WHY.

For most of the marketing world, P&G wrote the book on branding. In fact, it doesn’t really understand brand very well. What it invented and took to the level of a science is brand management. The entire marketing focus is on brand teams and the tight relationship between the brand managers and the product.

The reason the Facebook initiative is not working all that well is because the types of advertising that marketers create on Facebook turn out to be product ads and not brand advertising. The snippets are akin to billboards. They focus on efficacy and pricing, not on branding.

I say this because contrary to what P&G has made into its culture, branding is not about the product or HOW it works. Branding is about WHY it matters to the target audience.

Jif Facebook AdvertisingBranding works

The greatest brands in the world are, at their core, a reflection of the customer they need to influence. The greatest promise that Pampers can make is not how dry the baby is when you use Pampers (after all, every disposable diaper keeps the baby dry). It is about WHO the mom IS when she uses Pampers. How a Pampers mom is different and better than those that use a different brand.

Think of Jif peanut butter. Sure it promises that it tastes more like fresh peanuts but the brand promise that choosey mothers choose Jif is the driver of preference. That’s the sort of brand message I am speaking of.

To make Facebook advertising work for marketers, they need to have a MORE emotional message than they do in virtually every other medium. Facebook users have the attention span of a gnat and you must grab them in the gut to get them to invest in a message more intrusive than a billboard or coupon.pampers Facebook Advertising

If the medium is the message, then P&G must be better at selling the brand and not the product. It’s a brave new world of marketing and traditional advertising is becoming less effective. Advertisers struggle to become more effective and targeting sounds like the answer. It is.

But it requires a rethinking of what branding IS. The halls of P&G must stop harping on the agencies in the Proctor tent with the uniform call of “where is the demo” to an up-to-date demand of “where is the prospect’s emotional needs?”

Affinity programs and why they fail.

Affinity Programs Rarely Create Affinity

Almost all businesses from retailers to transportation companies have affinity programs designed to foster brand loyalty. Most work very poorly and often are simply a table stake in the category. Retailers, manufacturers and airlines will often find that their customers belong to a host of affinity programs that most certainly includes their competitors. (Affinity programs are an extension of CRM. Read an article on CRM here)

Affinity programs are similar to coupons

In many ways, discount coupons can be part of the affinity programs because they are all aimed at fostering trial and gaining repeat business.

As retailers know all to well, this sort of affinity program has severe limitations because consumers all begin to regard the couponed price as the real price.

Affinity programsAs a result, a business built on couponing lowers the standard price point significantly and reduces margins. P&G (Proctor & Gamble) are victims of this game. As margins reduce so do advertising dollars. What these packaged goods giants are left with is poorly supported brands that rely on a discount price for business success. Not a very good model to say the least.

I have written extensively about the airline industry in the past. Nowhere are affinity programs more a part of day-to-day business and many are utter failures. Often times the programs seem more like a criminal sentence rather than a benefit. Let me give you a personal case in point.

Airlines use affinity programs as a cornerstone of customer relationships

I have frequent flyer accounts on a multitude of US airlines. These affinity program accounts promise advantages on international carriers as well because of the alliances (like the STAR Alliance, SKYTEAM or ONEWORLD Alliance). I am a perfect example of a prospect who belongs to a host of competing programs. How then do the airlines try to compete for my business? In a word—Status.

United Airlines affinity programsWhen you fly as much as I do, gaining status on one or more airline is not that difficult. The key number to remember is 100,000 miles. Generally, at that threshold your status is considered premier. Don’t confuse this with PREMIER STATUS, which is an industry designation. I am speaking of having gained a premier position in status over other flyers. And this is where the trouble begins. The promise of status is very different from the reality.

I have flown over 2.5 million miles on United Airlines. As a result, I earned their top tier status. I am officially known as a Star Alliance, 1K Gold Member. This means I have flown over 100,000 miles in the previous calendar year. Sounds impressive on the surface but the system really falls apart after that.

Global Services. The Pinacle of Affinity Programs

On United Airlines they have a special status known as Global Services. If you have ever waited in your designated line at a United gate you have probably heard this group called to board the aircraft after people with disabilities that need extra time to board and in conjunction with military service people in uniform. United does not disclose how they formulate the invitation to Global Services but there are plenty of blogs around that speculate in a revealing if not an accurate way on just how they do it.

Global services is the ultimate affinity programTwo years ago, United awarded me with a Global Services member invitation. Benefits included first on the aircraft boarding, upgrades to first class 72 hours before your flight based upon availability. A separate phone line to call to speak with a Global Services representative. No fee charges to change a reservation. Hotel rooms paid when needed —regardless of the reason (including weather). And if possible, they will even pick you up at a connecting gate with a tight connection and whisk you off directly to the next gate in a company automobile. I have even had them bump a fellow traveler from a flight in order to guarantee me a seat in a last minute change.

Affinity programsSounds pretty good. And it can be. The problem is in how United manages the Global Services membership. It turns out that Global Services status is not based upon miles flown but rather the revenue you generate for the airline— in comparison to your peers.

This past year, for example, I flew my usual 100,000+ miles on United. I also have a United credit card upon.which all of my travel is booked. My Hilton Honors program is linked to the United account (Hilton touts it as double-dipping) and even my Hertz rentals get logged into my United Mileage Plus account.

This year, United took away my Global Services status. The reason? Because their revenue was down on my total spend. I’m now just a 1K flyer.

I know, who am I to complain. Well I’m going to complain and I’ll tell you why. I am a human being and we all feel about our privileges in the same way we feel about a coupon price being the REAL price. Once we have it we feel punished without it.

How should affinity programs measure affinity?

What United did not recognize was the value of my long term business with them. They have no metric for understanding it and as a result will be the ultimate loser in this game.

American Airlines affinity programsAs a 1K, I’m on upgrade lists but I rarely get them because they continue to discount the first class seats up until the time of departure and award the remaining seats to any and all Global Services members. I no longer have a designated customer service rep to help me sort through the myriad of travel issues that accompany this many flights per year. On top of this, no one cares if my connections are tight or that I miss flights because of delayed connections. Well, almost no one because my clients and I care. It’s just that United does not.

Affinity programs

What United does no know is that I also have a premier status on American Airlines. I am an Executive Platinum with American and United just said goodbye to  all of my business.

Here is a bit of history. My local airport is a small regional one in Greensboro NC. Aside from a few select destinations like New York, Chicago, DC, Atlanta, Philadelphia and Dallas all flights require a connection. Many years ago I started flying with US Airways because they had the most connections out of Greensboro. I could get almost anywhere in the nation via a short 20 minute connecting flight through Charlotte NC.

As my international business grew, I began to fly more and more on US Airway’s STAR Alliance partner United Airlines because they had great connections internationally through another partner airline Lufthansa. Over the years, I flew more and more connections through United as opposed to US Airways because the hubs of Dulles, O’Hare and Newark worked as well for me as connections from Charlotte.

This seems to happen to everyone. Affinity Programs lose relevance.

What happened to me, as often happens to frequent flyers, is that my status with United grew and I tried to consolidate more of my flights with the airline to gain greater status. In an odd twist, United began to cut service from Greensboro at about the same time they acquired Continental Airlines.

United eliminated direct flights to Houston (a Continental staple flight), took on the Newark connection route and eliminated all real United flights from my airport. In its place they flew only United Express flights from GSO (as Greensboro is known) which utilizes small regional jets and are owned by companies like GOJet and other regional carriers. These flights were smaller and more cramped but the longest leg of the connection was Newark and you can put up with anything for an hour and a half.

Affinity programsThe next shoe to drop occurred when US Air merged with American Airlines, thus eliminating the option of any connecting flights through Charlotte. American is part of the ONEWORLD Alliance and not the STAR Alliance. At the same time as this merger, United stopped flying jet aircraft between GSO and Dulles and replaced those flights with a turbo-jet WW2 throwback that added 20 additional minutes to the flight.

Then United cut back on the frequency of flights eliminating the possibility of caching an afternoon flight out of DC for any international flights. Reliability of the on-time arrival of the connections was so bad that I took to always taking the earliest flight. Regardless of the length a layover I flew early because I was consistently missing my connections on United Express from Greensboro. To be safe, the best bet was first flight out in the morning on flights that originated from GSO.

Affinity programsThrough all of this turmoil, I remained loyal to United because of my Global Services status. They bailed me out of many a tight squeeze by meeting me at the gate and shuttling me to my connection. They provided me with the flexibility of flights by booking me on competing airline flights when the connection failed to work as planned. They treated me as if I mattered. As a result, everyone in my company flew United because often my colleagues fly with me. United failed to measure this value.

Affinity programs and the nNFL Baltimore ColtsThis past January, when United dropped me back to 1K status I gave up my loyalty. The reduction in status did not make me want to try to book more flights with the airline in an attempt to regain status. It had the exact opposite effect. It made me angry with them. I felt like a Baltimore Colts fan who had an emotional connection to a team that left me stranded in the middle of the night.

Suddenly I realized that my belief that I mattered to them was a figment of my own imagination. The affinity program was completely one-sided. They had no affinity for me.

In measuring my value to the airline, they failed to take into account the sacrifices I made to remain loyal. They also failed to calculate the value my fellow employees brought to United by flying with me. They completely missed the point. Affinity must work both ways or it simply does not work.

The brand opportunity for affinity programs

Here then is the brand effect of affinity programs; the value of a member needs to be calculated as a lifetime benefit not a short term measure. Once a benefit is granted it should be considered long term because anything less than that is viewed as a punishment. So the threshold of premier benefits needs to be a bit higher and the forgiveness of not meeting that criteria once gained needs to be significantly lowered.

Cvs affinity cardIt is possible that all affinity programs are incomplete or failed attempts at fostering loyalty. Often they begin to feel more like handcuffs than they do a life-line. The very act of specialness always requires that many be left out.

Think about this for just a moment. How special would it feel to be a premier member only to find out that everyone had the same status and boarded at the same time? You see the conundrum. Signaling out specialness is a double edged sword. It must cut a bit but not so much that it hurts.

Affinity programsThe airlines are in deep trouble. Currently, their revenues are up but that is due only to the dropping cost of fuel. They have never understood the costs of doing business and they continue to miss the value of customer loyalty. For the airlines the battle is defensive not offensive. They struggle to maintain loyalty and have very little to offer in the battle to steal market share.

To make up for this they have created affinity programs that express no love for the customer or prospect and reward only short term investment. They have never developed a metric to understand real value and fail to measure and reflect the sacrifice the member has made to remain loyal.

We have many choices in today’s world and most of us chose based upon short term values. Businesses, or rather brands must have a longer horizon. If they do not they become prisons rather than coveted havens.

 

Airlines and thier markets

The retail category market study

The worst marketing. Airlines.

Brand names and brand naming

Brand names to increase preference

Brand names and brand namingOften as not, rebranding involves a new name. This is because most existing brand names arise organically. They were product, corporate or brand names created to reflect a value or need that existed at the time of the brand’s founding. Often, when we look at the names, they seem like a time capsule reflecting an earlier epoch.

Think about a few of these brand names and you will see exactly what I mean. Electrolux, Jiff, Tang, Duncan Hines, Aunt Jemima, Polaroid, Tupperware, Wonder Bread and Pepsi are all brands whose name alone indicates the era the brand name found its way to the market. Some feel dated because we are less familiar with them. Some, like Pepsi, are so familiar that the brand name is not given a second thought in terms of intrinsic meaning. Electrolux (including its logo script which was recently updated) looks so dated that it has a slight resurgence of cool.

Brand names and PampersWhen we create a brand name we think more about the emotional importance of the product to the target audience than we do with any form of corporate identity. This is because our understanding of the emotional properties in brands and brand naming has changed.

Today, we know that brand purchases are all a part of the customer’s self-identification. We all tend to favor brands that in some way reflect back to us an image of ourselves. The most powerful brands allow us to find ourselves in that value. Simply put, we like to buy things that are in concert with our own expressed values and precepts. We appreciate brands that reinforce our ability to say to ourselves (as opposed to showing off to others), “Yes, I want to be THAT.”

Brand Names in the Diaper Category

So let’s take a look at the disposable diaper category (called Nappies in Europe). This category dates all the way back to the 60s and, in some ways, the brand names reflect that. However, the naming tried to own an emotional intensity that best described the value and self-description of the target market.

For anyone who has had a baby, you know first hand the emotional changes that arise. Suddenly, your own life is less important and the care and nurturing of that little infant becomes your life’s highest emotional intensity. (This is before they become teenagers and you want to kill them!)

So it made sense that diaper brand names should reflect this highest emotional intensity.

Think about this: Pampers, Luvs and Huggies all represent a hook into that emotional chord. Of course, the purpose of the brands in those days was not stealing share from one another but in the conversion from cloth diapers to disposable ones.

brand names and huggiesIn many ways, the early converts had to battle the cognitive dissonance of leaving a labor-intensive process (collecting the used diapers in a pail, washing the cloth diapers, disinfecting them and, in many cases, boiling them) with simply opening a package and then throwing a soiled diaper away. Process often is translated in terms of importance and it took years for dependence on cloth diapers to go away.

brand names and  LuvsThe names are interesting. Pampers was a very intelligent means of telling the purchaser that they were in fact pampering their child (meaning taking better care of them than the cloth standards). Huggies, which came along after Pampers, was an attempt to equate the disposable diaper with hugs and kisses (similar to the Pampers story). Luvs needs no explanation but is certainly a dated name that sounds rooted in the 60s and 70s.

The problem these brands face today is that the purpose for which they were created is no longer viable. None of them need to convince cloth diaper users to switch. Instead they need to steal share from competitors and this is difficult when all the brand names claim the same turf.

I believe it is high time for a flanker brand to be launched by either Kimberly Clark (the makers of Huggies) or P&G (which makes both Pampers and Luvs) to reflect this new market flux. I believe a newly branded flanker in this category could increase its relevance and therefore gain preference on an aging category.

Today, parents do not need to be reminded by a diaper that they love their baby. Instead they need to find an emotional reason to choose a brand beyond just price, fit and dryness.

What do you think? What do the brand names mean to you? How are you choosing between diaper brands?

Read an article we wrote about diaper market share here

Doritos-flavored Mountain Dew — Really?

There’s an age old adage I am fond of: “Because you can, should you?”

The phrase itself implies that you shouldn’t automatically do everything you might be thinking of doing. The result is not always beneficial nor additive.

And so, when I read that PepsiCo is trying out Doritos-flavored Mountain Dew on college students as a possible future blend, one of my favorite lines quickly came back to mind.

Aw, hell. Let's just combine the two and get it over with.
Aw, hell. Let’s just combine the two and get it over with.

It’s not that I don’t like Doritos while watching the game, or a Mountain Dew here or there (okay… I’m not a big fan of the soda). But really, mixing the two sounds revolting.

Said the folks over at PepsiCo: “We are always testing out new flavors of Mountain Dew, and giving our fans a voice in helping decide on the next new product has always been important to us.”

Okay, but is a concoction like this — one that is a worthy rival to say, “Freckle Juice” – worthy of any time or money at all? I mean seriously. I like beef jerky and root beer but I know better than to mix the two. I’d hope PepsiCo may have had the brains to realize that as well.

Added PepsiCo: “We opened up the Dew flavor vault and gave students a chance to try this Doritos-inspired flavor as part of a small program at colleges and universities.”

Thank God I am long out of college. I’d want no part of this taste test.