The majority of households report consuming breakfast cereals, but retaining core customers and offering new usage suggestions will be key to the category’s future growth.

By Eva Meszaros

With a household penetration rate in excess of 90 percent, breakfast cereals generated $10.2 billion in total U.S. sales for 2011. The category, however, has been in decline since 2009, possibly due to challenges in attracting new consumers. Mintel’s 2012 report “Breakfast Cereals—U.S.” notes the importance of manufacturers and retailers retaining their core cereal consumer base, of which households with children are a key component, and developing new usage such as snacking. Mintel’s report defines breakfast cereals to include ready-to-eat cereal and hot cereal for at-home consumption. RTE cold cereal includes any cereal (e.g., corn flakes, shredded wheat, toasted oat cereal) that is consumed dry or with dairy/non-dairy milk. Cold cereal is further divided by sugar content: low sugar (0–9.9 percent of recommended daily intake of 40 grams), medium sugar (10–15.9 percent of RDI), medium-high sugar (16–25.9 percent of RDI) and high sugar (26 percent or more of RDI). Hot cereal includes oatmeal, instant oatmeal, hot wheat and other grain products that must be heated before eating.

Key Points

  • At an estimated $10.2 billion, total U.S. breakfast cereal sales saw a decline of 1.8 percent (inflation-adjusted) from 2010—still, a marked improvement over 2009–2010’s 6.3 percent decline.
  • The hot cereal segment posted a slight growth of 2.1 percent since 2010, at current prices, with estimated total U.S. 2011 sales of
    $1.2 billion. Mintel forecasts that hot cereal will experience faster growth than cold cereal and reach $1.4 billion in sales by 2016.
  • Cereal usage is nearly universal (97 percent) among households with children; however, the number of households with children has been declining since 1999. And as children, the prime users, age, the market may be at some risk over the next decade.
  • Mintel forecasts that under a best-case scenario, the breakfast cereal category will grow to $11.2 billion by 2016; less optimistic models project gradual and even significant declines. Various factors, such as rising food prices and cereal’s high household penetration, make the positive development more likely.
  • Cold cereal brands that posted strong 2011 sales gains tended to have a Better-for-You nutritional profile. Private label collectively posted the largest sales gain, boosting its share to 12.2 percent and overtaking the Quaker Oats Company as the third-largest cereal
    manufacturer for the Food, Drug, Mass Merchant (excluding Walmart) segment.
  • Recommendations for manufacturers include: promoting non-breakfast cereal consumption to boost usage occasions, and highlighting
    better-for-you attributes as aligned with the latest dietary guidelines or through fitness partnerships, such as Kellogg’s Heart Healthy.

*mixed multipacks with one SKU, and multiple SKUs under same brand name, etc.
FDMx Sales of Breakfast Cereal by Segment and Subsegment, 2009–2011
Source: Mintel/Based on SymphonyIRI Group InfoScan Reviews

With nearly 90 percent of breakfast cereal sales in FDMx outlets, cold cereal significantly outsells hot cereal. Higher sugar also means more sales: The high-sugar segment accounted for 41 percent of all cold cereal estimated 2011 FDMx sales.

Breakfast Cereal Product Launches by Top 10 Claims, 2007–2011
Note: Share percentages don’t sum to 100 as products can have more than one claim.
**Jan. 1–Dec. 21, 2011
Source: Mintel’s GNPD

Among cereal launches, kosher was the most prevalent product claim during 2007–2011. Ethical/environmentally friendly packaging–related launches, however, saw much more growth than any other product claim.

The Consumer:Key Points

  • Based on Mintel’s consumer survey, breakfast is eaten on average 5.2 times per week, more so with breakfast eaters age 65 and older (5.9 times) and less so with 18–24s (4.7 times). The average number of times breakfast is eaten on a weekly basis increases with the number of children in a household. However, childless households average nearly as many breakfast occasions as households with three or more children.
  • Based on the survey, cold cereal is the most popular breakfast option among breakfast eaters, followed closely by eggs. Hot cereal is the fifth most popular breakfast food type. Based on eating frequency, cold cereal users tend to favor cereal with a variety of textures (e.g., flakes, clusters) or one primary type (e.g., Grape-Nuts) over granola or muesli; hot cereal users slightly favor traditional oats over flavored instant-oatmeal packets.
  • According to the Experian Simmons National Consumer Study, cold cereal usage is nearly universal among U.S. households (92 percent) and much higher than what is seen for hot cereal (68 percent). Weekly household consumption of cold cereal averages 12.5 servings compared with 4.8 for hot cereal.
  • High fiber content and whole grains matter to more cereal users than any other attributes. Gluten-free ingredients matter to the fewest cereal users overall. Only 29 percent of cereal users say that organic cereal is important to them; however, interest among organic food buyers is high, as breakfast cereal ranks third behind yogurt and meat/poultry in terms of household usage.
  • Cereal is not eaten exclusively at breakfast. Some 46 percent of cereal users sometimes eat it as a snack and 42 percent sometimes eat it for lunch or dinner. These findings reinforce the concept of cereal as a portable snack, especially for 18- to 24-year-olds.

Reasons for Cereal Consumption, November 2011
Base: internet users age 18+ who eat cold and/or hot cereal | Source: Mintel

Among cereal users, the fact that cereal is a quick breakfast option is the most common reason for its usage by a wide margin, especially among 18–24s. Further research shows that younger cereal users (18–44s) are the most likely to choose cereal because it is their favorite breakfast food; users age 25–44 are the most likely to be interested in taking cereal to work or school.

Attitudes Toward Cereal, November 2011
Base: internet users age 18+ who eat cold and/or hot cereal | Source: Mintel

The majority (59 percent) of cereal users consider cereal to be a good value, and this over-indexes among households with three or more children. A sizeable 37 percent consider it too expensive, which is driving interest in private label, less expensive cereal and bulk-size options.