Declining Share: Rivals back $50 mil cereal campaign

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To stem category decline, the top four cereal marketers are pooling $50 million or more for a generic campaign modeled after the milk effort.

General Mills, Kellogg Co., Kraft Foods' Post division and PepsiCo's Quaker unit have formed a consortium dedicated to building awareness and sales of the now $6.7 billion ready-to-eat cereal industry. Once a staple of consumers' morning ritual, cereal has been hit hard in past years, losing more than $500 million in sales since 1997, according to Information Resources Inc.

"This [effort] is clearly a case of when all else fails," said John McMillan, food analyst with Prudential Securities.

The catalyst for the effort-said to have been awarded to Interpublic Group of Cos.' Suissa Miller, Los Angeles, after a pitch including Rubin Postaer & Associates, Santa Monica-was Jeff Manning, executive director of the California Milk Processor Board. Suissa Miller declined comment; Rubin Postaer could not be reached for comment at press time. Mr. Manning created "Got milk?" in 1993 along with Omnicom Group's Goodby, Silverstein & Partners, San Francisco.

"I went to the four cereal companies ... and said, 'Twenty-five percent of our business is in your bowls, so I think it would be neat if we could grow the cereal business,'" said Mr. Manning, who licenses the ubiquitous "Got milk?" strategy to the national milk boards for their $180 million annual marketing program.

'Limited scope'

After negotiating for the past 18 months, an initial campaign is expected to break by early spring, said executives close to the situation. Mr. Manning, as spokesman for the consortium, said, "The group has limited its scope to developing and evaluating communications programs with the goal of increasing cereal and milk sales." He would not be specific as to how. A spokesman for General Mills characterized the effort as a test with "no specific market or agency yet chosen."

The national milk push, handled by Interpublic Group of Cos.' Bozell, New York, has not grown the market-per capita sales of fluid milk remain in slow decline. But Sal Taibi, senior partner-director of account services at Bozell, said the program has prevented sales from eroding even more. "If [the milk boards] hadn't done anything they'd be in a worse position right now," he said.

Unlike the milk business, which has had little to no national efforts from single manufacturers, cereal marketers individually have tried a host of ideas-from cereal/milk kits and snack cannisters to cereal diet programs-to jumpstart their brands.

Mr. McMillan believes that the creation of the consortium reflects the new leadership of Carlos Gutierrez at Kellogg, the long-time category leader, now a close No. 2 to General Mills. "Previous Kellogg management would not have been open to group efforts," he said, adding that in fact the prior regime contributed greatly to the decline in the category with their decision to reduce Kellogg's advertising by 40% from 1994 to 1998.


Kellogg's ad budget, like those of its counterparts in the category, has declined significantly in the last five years. According to Taylor Nelson Sofres' CMR, Kellogg spent $278 million in measured media on its cereal brands in 1997 compared with only $151 million during the first 10 months of 2001. Big G's ad spending dropped from $143 million in 1997 to $112 million during the same period while Post's outlay fell from $150 million to $86 million. Quaker's spending slipped less; it dropped only $8 million since 1997.

The aggregate spending by the top cereal players is enticing to retail executives. "I think it would be a great idea because the category is in big trouble," said a Northeast grocery buyer. "People need to get reminded of cereal, and I'm loving life-living large-if it doesn't come out of my money."

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