New Items Boost Cereals

Coupons Also Help 5% Volume Gain; Kellogg's Lead Slips

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Volume in the cold cereal industry rose an estimated 5% to 2.96 billion pounds last year as a result of new-product introductions, line extensions and continued heavy couponing.

Sales increased around 7.3% to $8.9 billion.

Market leader Kellogg Co. lost share in total pound volume, falling to 34.9% from 36.6%. It appears market share gains went predominantly to General Mills and Quaker Oats Co., though Kraft General Foods' Post division gained on the strength of acquiring Nabisco Foods Group's cereals.

Cereal prices, led by Kellogg, climbed about 3% last year. But in a sharp break from pricing trends in the industry, General Mills in April announced it would reduce prices on its largest cereal brands by an average of 11%, or about $110 million, which translated into about 30 cents to 55 cents a box at retail.

In 1993, Kellogg initiated three price increases, two not followed by the industry as a whole. Kellogg raised prices 6% to 7% overall, about double the average industry increase.

Private label and price brands will pose a more concrete threat than in prior years. More and more consumers have turned to store brands, once reputed to be less than desirable but now providing a palatable taste and a more reasonable price. Ralston Purina Co. has an estimated 70% of the U.S. private-label business, with others including Malt-O-Meal in Minneapolis holding the remaining 30%.

Ad expenditures, monitored by Competitive Media Reporting, fell 1.5% to $810 million. Post was the only company to boost spending in the year, increasing measured-media dollars by 16.9% to $166 million.

Mr. Maxwell is managing director at Wheat, First Securities, Richmond, Va.

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