The US cereal category pulled in sales of $11bn in 2014 but sales were down 1.5% from the previous year, according to Euromonitor International.
While hot cereals stayed in growth (up 2.5%), cold ready-to-eat cereals - which represented $9.7bn - dragged down category growth with a sales decline of 2.1%.
Ken Powell, chairman and CEO of General Mills, said that despite difficulties in the breakfast cereal category, retailers were still keen to stock innovative products because of the impressive net worth of the total category.
“Cereal is (…) very, very large and, as you know, it’s been declining for the last couple of years but it’s still very, very large and still about a third of all breakfasts include cereal.
“…It’s very, very important to the retailer and basically what they want from us is innovative ideas that will drive growth in that category,” he told analysts on the company’s Q4 earnings call last week.
Gluten-free thumbs up
For example, Powell said gluten-free Cheerios – announced back in February and set to be introduced across the US this summer – had been particularly well received by retailers.
“They are highly enthusiastic about that initiative and it will get a lot of support because they see it as great news for the whole category.
“… We know that 30% of US consumers are interested in gluten-free foods and that a number of them have left the cereal aisle as a result.”
General Mills will roll out five gluten-free Cheerios varieties – Original, Honey Nut, Multi-Grain, Apple Cinnamon and Frosted and Powell said the company would also shift its Lucky Charms brand into gluten-free territory later this year.
Other NPD trends
Powell said moves into protein, granola and muesli had also been well-received by retailers.
“That’s exactly what our retail partners want – they see those trends as well in other parts of the store; it makes sense to them,” he said.
Innovations around these trends, he said, had led to growth. Granola, for example, was performing well and General Mills expected muesli to perform equally well, he explained.
“Nature Valley Protein granola has been a big success since it launched two years ago. This year, we are introducing two varieties of Nature Valley Protein soft baked granola bites – a portable granola for consumers on the go. Muesli is another cereal form that has been benefiting from consumer interest in less-processed foods. To capitalize on that trend, we have recently launched new Nature Valley toasted oat muesli in original and blueberry flavors.”
In addition, Powell said General Mills’ pledge to remove all artificial colors and flavors from its cereals by 2017 hit on consumer demands.
“Nearly half of US households are making an effort to avoid artificial flavors and colors and we are responding – 75% of our Big G portfolio will meet this claim by January with the remainder targeted by the end of calendar 2017.”
“…We think we have a very good understanding for the new preferences that consumers have for breakfast and we have talked about this with you many times for products that are simpler; products that are more filling; products that taste good; products that address very specific issues that consumers have like gluten and artificial colors,” Powell said.