Cereal Marketers Race for Global Bowl Domination

As China, India and Brazil Wake up to American-Style Breakfasts, Kellogg, PepsiCo Look to Spread Their Grains

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Source: Euromonitor International. Note: Cereal markets size includes hot and cold.

What travels farther: the Quaker oat or Kellogg's corn flake?

As global demand grows for American-style breakfast foods, cereal marketers are battling to make their brands the top choice in China, India, Brazil and elsewhere, where staples like bread and fish have been the traditional morning norm. The competition is fierce among Kellogg Co., PepsiCo and Cereal Partners Worldwide, a joint venture between General Mills and Nestle. Together these giants control roughly 52% of the nearly $30 billion worldwide hot- and cold-cereal market, according to Euromonitor International.

Opportunities are arising as consumers across the globe are acting more like Americans, the research company said in a recent report: "Breakfast was traditionally a sit-down meal in most markets, but is now often eaten hurriedly or on the go in the form of snack bars or ready-to-eat breakfast cereals."

Credit: Source: Euromonitor

But even as cereal makers leverage their vast global marketing budgets to spur growth, they are finding that breakfast is still influenced by local customs. Indeed, the toughest competition might be from breakfast foods that have been in place for centuries, like a watery rice gruel called congee in China. "Breakfast around the world is probably the meal that is most rooted in tradition," said Gannon Jones, chief marketing officer for PepsiCo's Global Nutrition Group.

And even when foreign consumers eat cereal, they often eat it differently than Americans do.

In Spain, for instance, Kellogg has found that people like to dump All-Bran cereal into their coffee, so the marketer is now advertising it that way. In France, the company has formulated its Kellogg's Extra brand to go with yogurt, while it shows the brand with hot milk across Europe, where cold milk is a less popular pairing. In India, Corn Flakes with saffron is planned.

The strategy looks "at how we can adapt our foods to the local habit, as opposed to trying to change the local breakfast habit," Kellogg CEO John Bryant told Wall Street analysts earlier this year. Leo Burnett handles brand support in North America, Europe and Latin America, while JWT has Asia Pacific.

To be sure, the cereal business remains rooted in the U.S., Canada, U.K. and Australia, which together account for 54% of global consumption despite having just 6% of the population, according to Switzerland-based Cereal Partners Worldwide, which operates in more than 130 countries. But in the U.S. -- where yogurt is taking hold as a breakfast option -- cereal will grow by just 3.6% from 2011-2016, compared with 38% in China and 108% in India, according to a Euromonitor forecast.

Although Quaker has only an 8.9% cereal share globally according to Euromonitor, it dominates hot cereals, which could give it an edge in some markets. In China, for instance, hot cereal holds 54% of the cereal market, compared with 11% in the U.S. In other key markets cold cereal holds the advantage, such as in Brazil, where it accounts for 74% of the cereal market.

Quaker is seeking to boost its international prospects with a new global identity that positions its oatmeal as "healthy fuel," a more universal message than the heart and cholesterol health claims the brand had been making for the past 15 years.

"We became fixated on a narrowly targeted, functional message. We started to lose relevance," said PepsiCo's Mr. Jones, whose Global Nutrition Group is leading the initiative. "Consumers all around the world -- whether you are in China, India, U.S., U.K. -- there's a timeless, universal truth that drives all of them: this notion that starting my day off right sets me up to be my best. And what we also discovered is energy, or lack of energy, is the greatest unmet need."

*As of 2010 (latest available), includes hot and cold. 1-All U.S./Canada; 2-Joint venture of Nestle, General Mills .
*As of 2010 (latest available), includes hot and cold. 1-All U.S./Canada; 2-Joint venture of Nestle, General Mills . Credit: Source: Euromonitor International

The new positioning has been underway in the states for a while, dating back to 2009's "Go, humans, go" effort. But Quaker this year is taking the energy message to other countries in its first global campaign with the tagline "super people eat super grains." The brand is also revamping packaging to give a more consistent look across markets. Even the iconic white-haired and pudgy Quaker man, known internally as "Larry," has gotten a facelift. On packaging, his hair is shorter, he's lost five pounds and his shoulders are shown to "give him a greater confidence," Mr. Jones said. The marketer's global agency is BBDO.

But as Quaker spreads its oats, it is tweaking products to match local habits rather than "try to export a Western breakfast or a Western behavior," Mr. Jones said. In China, it is selling congee infused with oats, which can be made within 10 minutes, compared with the one to two hours it takes to make traditional congee. In India, the marketer is exploring adding oats to poha and upma, two popular grain-based breakfast meals.

Of course, old habits die hard, which is why marketers are supporting their offerings with significant campaigns. Cereal Partners Worldwide, whose brands include Fitness, Nesquik and Cheerios, runs ads touting the nutritional benefit of cereal over traditional breakfasts. In Turkey, one ad says cereal has as much calcium as two servings of feta cheese, and the iron of four eggs. In some countries, Cereal Partners actually shows people how to eat cer-eal. At a "smart start" event in Jakarta, Indonesia, cereal kits were distributed, including a plastic bowl, cereal pouch and spoon. CPW's agency is McCann Worldgroup.

At the same time, the companies must fend off competition from local cereal brands, which are typically cheaper, said Deborah Cross, global food-industry analyst for Euromonitor. While Western brands are more trusted, they are also "quite hard for some consumers in these developing countries to afford," she said. So marketers are testing less-expensive products. Kellogg, for instance, is launching Corn Flakes Porridge in South Africa, aimed at low-income consumers, Kellogg International President Paul Norman recently told analysts. The idea, he said, "is to help them bridge into a brand they aspire to buy but can't always buy today, but in the future we expect them to buy."

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