In recent years, the U.S. breakfast cereal market has been experiencing a significant downturn, marking a decline that stretches over several decades. This trend has gained renewed attention with the announcement that the Ferrero Group, an Italian confectioner, plans to acquire WK Kellogg, the manufacturer behind iconic brands such as Corn Flakes, Froot Loops, and Rice Krispies.
Sales figures reveal the stark reality of this decline. According to market research firm Nielsen IQ, in the 52 weeks ending July 3, 2021, Americans purchased nearly 2.5 billion boxes of cereal. However, this number has dropped by over 13% in the same period this year, falling to just 2.1 billion boxes. Experts attribute this decline to several factors, including the rise of more convenient breakfast options like Nutri-Grain bars and Clif Bars, which gained popularity in the early 1990s. These portable alternatives have made it easier for busy consumers to grab breakfast on the go.
Another significant factor contributing to the decline in breakfast cereal sales is the growing concern over food processing and sugar content. For instance, a single cup of Lucky Charms contains 24% of the daily recommended sugar intake. Tom Rees, global insight manager for staple foods at Euromonitor, points out that cereal struggles to shed its image as an overly processed food item. "It can’t escape the fact that it doesn’t look like a natural food," he explains.
In response to these concerns, cereal manufacturers have historically focused on fortifying their products with vitamins and minerals to enhance their health appeal. However, contemporary consumers are increasingly favoring simplified ingredient lists. Additionally, artificial dyes, such as the petroleum-based colors used in Froot Loops, have come under scrutiny. Last fall, a protest outside WK Kellogg’s headquarters in Battle Creek, Michigan, saw dozens of activists calling for the removal of artificial dyes from their cereals. In light of consumer demand, both Kellogg and General Mills have committed to phasing out these artificial colors.
As consumer preferences evolve, the concept of breakfast is also changing. Traditional breakfast items like bacon and eggs are being replaced by options such as yogurt and smoothies. Kenton Barello, a vice president at YouGov, highlights a notable trend among Generation Z, who prioritize vegetables over traditional breakfast foods. Polling data from YouGov indicates that while Gen Z consumers are less likely to eat breakfast, they still purchase ready-to-eat cereal, often consuming it as a snack or for meals other than breakfast. "Younger generations are approaching breakfast differently than Millennials, Gen X, and Baby Boomers," Barello notes.
The ongoing struggles in the cereal industry have contributed to significant changes within major companies. In 2023, the Kellogg Company underwent a major transformation, splitting into two separate entities. Kellanova retained popular snack brands like Cheez-Its, Pringles, and Pop-Tarts, while WK Kellogg focused on cereals for the U.S., Canada, and the Caribbean. Meanwhile, M&M’s maker Mars Inc. announced plans to acquire Kellanova for over $30 billion, a deal that has cleared U.S. regulatory hurdles but awaits approval in Europe.
Despite the challenges, the acquisition of WK Kellogg by Ferrero does not spell doom for cereal aisles in supermarkets. Experts like Tom Rees believe that food companies can turn around their cereal sales. One promising strategy is the introduction of product lines like Kellogg’s Mashups, which combine popular brands like Frosted Flakes and Froot Loops into a single box, appealing to younger consumers who enjoy unique flavor combinations.
Looking ahead, Rees suggests that cereal may have a fragmented future, with different consumer segments seeking distinct flavors. Younger buyers may gravitate towards sweet-and-spicy options, while older consumers might prefer Keto-friendly cereals. "The era of one brand serving everyone may be over," he asserts.
As the number of children in the U.S. declines, food analysts like Julia Mills see an opportunity for cereal makers to explore more sophisticated flavors and innovative packaging. Cereal could be marketed as a gourmet topping for yogurt or as a fiber-rich option that supports gut health. Some niche brands, such as high-fiber Poop Like a Champion and high-protein, zero-sugar Magic Spoon, are already capitalizing on these trends.
However, legacy brands refuse to be sidelined. Jeffrey Harmening, CEO of General Mills, indicated that the company considered acquiring Magic Spoon but opted instead to develop high-protein versions of Cheerios, which have now surpassed Magic Spoon in sales. "The key to long-term success is giving consumers more of what they want," Harmening stated during an investor conference call in March.
