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Is cereal segment destined for post-COVID sales slump?

11/2/2021  By Jeannie Swedberg

Is cereal segment destined for post-COVID sales slump?
Two marketing insights to keep sales robust

THE NUMBERS

In a recent category overview of the hot and cold cereal market in the U.S. Mintel reported that the $11 billion segment is expected to post a dollar sales decline of 3.8% in 2021, as people get back into their breakfast routines outside the home once again. Long-term market stagnation is expected to continue through 2026, according to Mintel. The silver lining is that sales in 2021 are still expected to be 6% higher than in 2019 as people cling to their hybrid work-at-home situations. This is borne out in data showing 45% of U.S. adults will continue to work remotely at least half of the time through the remainder of this year. (And from my anecdotal research, the hybrid model will continue into next year.)

Residual COVID Impacts

Hopefully, we’re on a rebound from COVID. But that doesn’t mean it hasn’t made its mark on consumers’ behavior in some notable ways.

  • A rise in health consciousness – people are seeking ways to support their immune and digestive health to maintain their overall wellbeing
  • Working remotely reignited eating breakfast-at-home habits
  • Snacking spiked exponentially as people worked and shopped from home

BOOM TO BUST?

Let’s face it, 2020 with all its misery proved to be a boon for the cereal segment. People stuck at home embraced cereal for its convenience and comfort. In fact at times, it seemed like they couldn’t get enough of it. Manufacturers and retailers struggled to keep up with demand. But that was then, and now the segment sales forecast is sluggish. But does it have to be? I’d say, no.

Now that consumers have become reacquainted with cereal and are back in the habit of eating it regularly, it’s a matter of momentum. People like cereal, so we need to give them reasons to continue buying it.

Mintel’s experts suggest disrupting the projected market stagnation in two ways:

  1. Broaden usage occasions with a focus on snacking
    Position cereal as either a healthy or indulgent snack; repackage in portable, single-serve, snack sizes/flavors
  2. Invest in healthy positioning
    Either by improving formulations (e.g., fortify with vitamins/minerals, reduce sugar, add fiber) or recommend wholesome pairings (e.g., whole grain cereal with fresh or dried fruit, muesli with plain yogurt)

Healthy white space

Eight out of 10 parents in households where cereal is eaten agree they’d be interested in cereal formulated for children’s nutrition, and 77% wish there were healthier cereals for their children. Here’s an opportunity to give parents what they want – healthier cereals for kids. Introduce kids’ cereals with a nutritional focus by reducing sugars and adding nutrient-dense ingredients, e.g., protein, fiber, fruit, probiotics or vitamins and minerals specific to childhood nutrition needs.

CEREAL INNOVATIONS OF INTEREST

  • reduced sugar–––––– 45%
  • added protein–––––– 36%
  • added fiber–––––––– 36%

Source: Kantar Profiles/Mintel, July 2021

graphic of cereals and different toppingsWithout reformulation, cereal makers can accentuate the nutritional profile of their products by recommending wholesome pairings. This is another way to appeal to health-conscious eaters and make cereal relevant for them.

A few hot and cold cereal pairing suggestions:

  • Milk
  • Fruit (dried, fresh, frozen, did I mention dried)
  • Nuts
  • Nut butters
  • Yogurt

Break A.M. habits

Repositioning cereal as a snack broadens its usage beyond the morning daypart. As people snack more, cereal can become another option. Many varieties are already well-suited for snacking, so the only really changes would be in packaging sizes, and perhaps, flavor options. Single-serve and resealable pouches make handheld snacking easier. Alternatively, single-serve, savory hot cereal could be eaten as a nutritious, satiating snack or mini-meal. 

Flavor options are endless – from seasonal to comfort to global. You could even coat cereal pieces with pumpkin powder to make them more nutrient dense. Tackle dayparts with energy-boosting formulas for day snacking and indulgent, sophisticated flavors for evening. Cereal snacking can be both nutritious and fun.

CEREAL + FRUIT Beat SALES Stagnation

Here’s my parting plug for fruit. What can I say? Cereal and fruit are just meant for each other. They’re complementary. Fiber-rich, delicious fruit can contribute to a healthier formulation for kids’ cereals, as well as add to the flavor appeal of cereal snacking. Let Tree Top's R&D team help you keep sales momentum going in the cereal sector.  Contact us. Or order a sample today.