Despite General Mills' well-publicized announcement in early October that it would convert all its cereals, including kids' sugar cereals such as Cocoa Puffs and Lucky Charms, into whole-grain products and its launch of a subsequent full-scale ad push touting the change, the efforts have had little impact on the marketer's solid and stuck 31.5% share of the $6.1 billion category.
The shift also hasn't helped General Mills push through price hikes at retail, industry analysts argue, and the entire category-despite many players' pushes with a whole-grain message-is still stalled by age-old problems including growing private-label sales and continued consumer interest in more convenient breakfast options.
BREAKFAST BAR FIX
"Consumers haven't listened to USDA guidelines for the last 20 years, but will they this time around? I don't think so," says John Stanton, professor of food marketing at St. Joseph's University. Mr. Stanton says General Mills' addition of whole grains "is good for America's nutrition, but it will not make any appreciable difference in sales." He believes the relative difficulty of eating cereal vs. grabbing a breakfast bar is the category's real problem.
Lehman Bros. analyst Andrew Lazar agrees, saying that various attempts to capitalize on health and wellness over the years have failed to help the category. "The whole-grain approach is moving in the right direction," he says, "but it is only one piece of an overall innovation strategy for Mills and the industry."
Some in the industry are still hopeful. Based on a recent consumer survey conducted by Bear Stearns, food analyst Terry Bivens wrote that "an increase in Americans' consumption of ready-to-eat cereals is at hand." Growth will be fueled by the USDA guidelines, he believes. As a result, Mr. Bivens recently upgraded the stocks of General Mills and Kellogg.
PepsiCo's Quaker likewise expects the new guidelines to boost its signature Quaker Oatmeal, which, a spokeswoman notes, "has been made with whole grain for 125 years."
To tout that fact, Quaker and sibling Tropicana are partnering in print ads that show how one can get halfway toward the new daily recommendation of whole grain and fruit by eating a bowl of oatmeal topped with fruit and drinking a glass of orange juice.
Kraft Foods' Post brand has pushed on the whole-grain varieties within its portfolio, among them Shredded Wheat, and flagged them on packaging as "rich in whole grain."
Kellogg, leader of the pack at 33.4% of market (when adding Kashi's 2.1% share to Kellogg's 31.3%), has touted that more than 50 of its cereals are made with whole grain, and has introduced new products, including Tiger Power, featuring whole grains as a selling point.
In the case of General Mills, Burt Flickinger, managing partner at Strategic Resource Group, says its whole-grain efforts may have had a slight positive effect but any uptick has been more than overshadowed by the marketer's record-high prices and inability to recapture share lost to Kellogg, in large part due to what he calls "spartan spending in media."
Grains are clearly not the Holy Grail.