OAT BRANDS SET TO REHEAT CEREAL SALES;FDA'S APPROVAL IS EXPECTED FOR MAKING HEALTH CLAIMS RELATED TO SPECIFIC FOODS

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Cereal marketers are poised for a potential oat revival as the U.S. Food & Drug Administration nears a precedent-setting approval of the first health claim tied to a specific food.

An FDA decision is expected after April 3, and an approval would not only breathe life back into the flat $8 billion ready-to-eat cereal industry but revitalize ad spending and new products, industry observers said.

`LONG OVERDUE'

"The only manufacturers who won't be increasing their ad spending as a result of this claim will be those asleep at the switch," said Gary Stibel, principal of the New England Consulting Group, Westport, Conn. "All the smart marketers are going to be looking at their ad messages and at their budgets, trying to take advantage of a long overdue approval by the FDA."

Quaker Oats Co. has already launched advertising touting the proposed change, from Jordan, McGrath, Case & Taylor, New York. The print ad is running in major newspapers including USA Today, and features a container of Quaker Oats with the headline, "Why is this man smiling?" alluding to the well-known Quaker character on the label.

Copy goes on to explain the FDA proposal, encouraging consumers to give the federal agency comments before it makes a decision.

Quaker, one of the companies that fired the first shots in the oat bran wars of the late 1980s, got the ball rolling again last March with a proposal to the FDA to allow claims that oatmeal can reduce the chance of heart disease. Among the proposed wording now being considered: "Eating oat bran or oatmeal daily may reduce heart disease risk."

Such a precedent-setting action, aimed now specifically at oatmeal and oat bran, could also later expand to touting healthful attributes for other food products, such as cranberry juice, red wine, garlic and soybeans, say food consultants and analysts.

The FDA approval would break new ground on two fronts: allowing a claim for a specific food (health claims currently can only be attributed to ingredients like soluble fiber) and making a simplified claim (most companies and outside observers believe that health claims now are wordy and confusing for consumers).

The oat bran frenzy that began in 1988 sparked a war among marketers including Quaker, General Mills, Kellogg Co. and Ralston Purina Co., now known as Ralcorp. These companies pounced on consumer interest in oat bran by introducing a flurry of new products such as Quaker Oat Bran, Kellogg's Common Sense Oat Bran and Ralston's Oat Bran Options. The craze came to a halt when a report in the New England Journal of Medicine questioned oat bran's health benefits.

CEREAL AD CUTBACK

Since that craze fizzled, marketers have cut back on ad budgets for oat cereals. Quaker spent $16 million on both instant and standard oatmeal products during 1988 in its "Right thing to do" campaign, more than double the $7 million it spent in the first nine months of 1995, according to Competitive Media Reporting.

General Mills, which pitched Cheerios via Saatchi & Saatchi Advertising, New York, as "an excellent source of oat bran" in 1988-89, spent $68 million advertising the brand in '89; in the first nine months of '95, Cheerios was backed by $17 million in media support, according to CMR.

Timothy Ramey, a food industry analyst for C.J. Lawrence Inc., said that along with Quaker oatmeal, Cheerios would initially benefit most from being allowed to make a health claim.

COULD USE BOOST

And Cheerios could use the boost. Since 1990, it has lost its No. 1 ready-to-eat cereal position to Kellogg's Frosted Flakes and sales have fallen 5.6% to $299 million. Quaker oatmeal also saw a big drop for 1995, down 5.5% to $403 million for the year ended Sept. 9, according to Nielsen Marketing Research's ScanTrack.

"Right now, we are trying to decide what we are going to do from the advertising front, but we are going to advertise around this should the claim be ratified by the FDA," said John Sommerville, marketing manager for Cheerios. "We are right now looking at our...options in both TV and print."

He also said it was a possibility that General Mills would increase the ad spending it put behind the Cheerios brand.

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