By Denise Purcell

Shifting consumer lifestyles are hurting the mature breakfast cereal market, reports Mintel International. Increased demand for on-the-go foods as alternative breakfast and snack options has tailspinned the $8.9-billion cereal category to a 7 percent sales slump in inflation-adjusted figures from 2000-2005.

In sharp contrast, specialty cereal sales have exploded, up 23.4 percent between 2002 and 2004, according to Specialty Food Magazine’s 2005 State of the Industry Report. Specialty cereals recorded $590 million in sales in 2004, representing 6.2 percent of the total cereal industry.

The cold cereal segment—accounting for 88.6 percent of sales in food, drug and mass merchant (FDM) channels—dropped 1.8 percent from 2003 to 2005. Hot cereals, however, rose 1.9 percent during the same time period.

Cereal’s near total market penetration makes future growth unlikely unless the focus moves to a new consumption pattern, possibly as a healthy snack. This track may benefit specialty food manufacturers and importers who concentrate on niches such as granola.

Cold cereal accounted for an estimated $6.2 billion in sales in 2005. The largest sub-segment, cold cereal with high-sugar content, has experienced a 0.7 percent sales drop since 2003, impacted by changes in food pyramid guidelines emphasizing whole grains and decreased sugar. Those same guidelines may have boosted movement of medium-sugar cereals, which grew 3.3 percent. Sales of low-sugar cereals also slipped, hurt by portable breakfast alternatives such as cereal bars. Hot cereal, meanwhile, demonstrated favorable movement.

Hot cereals are displaying promise following a slump during the reign of low-carb diets. A shift toward an aging population is good news for the segment: Older people choose hot cereal over cold, having grown up on it and liking its cholesterol-lowering claims. Products that offer something extra pique consumer interest. For example, Quaker’s Take Heart Oatmeal has soluble fiber from oats to help remove cholesterol, antioxidant vitamins E and C, plus B vitamins. Innovations that stress convenience, such as Kraft’s Cream of Wheat Hot Cereal on the Go!, are also boosting the segment.

Supermarkets dominate cereal sales, accounting for nearly three-quarters of the market. Since 2003, however, supermarkets have lost sales and market share due to increased challenges from other outlets. Health food stores, with a 3.8 percent share, saw sales rise 6.3 percent, to $335 million, in 2005. Specialty producers may benefit from the growth within this retail channel.

New Products
Recent product innovations surround the inclusion of real fruit in cereals, such as General Mills’ Total Whole Grain Cereal with Strawberries. There is also an increasing trend of positioning low- or reduced-sugar cereals toward children to please both their tastes and parents’ nutritional concerns.

Denise Purcell is managing editor of Specialty Food Magazine.