Fixing what’s wrong in cereal: General Mills and Kellogg discuss their plans
Getting back to growth at Kellogg
At Kellogg, CEO and Chairman John Bryant expects the company to “get back to growth” in 2016 and beyond. After some recent down years, Bryant believes the transformation of the company from a cereal behemoth to a cereal and snacks two-headed monster will help business rise across the world.
Although Bryant noted the US cereal market has been tough over the last few years, he believes the business is starting to improve its performance on the back of healthy cereals, such as Special K and Kashi.
The US doesn’t need to see a big growth in cereal for the company to be successful, he said, but there will need to be a continued growth across the world.
“If you go to outside markets, it is absolutely a growth category,” he said during the Barclays speech, citing growth in Latin America and Asia as key for Kellogg’s growth. “We are very aggressive in our emerging market growth plans.”
Across the world, Bryant wants Kellogg to win “where the shopper shops,” meaning he wants brands online in eCommerce stores, in smaller shops, and any other investments needed to help fit into the new reality of retail.
Chris Hood, president of Kellogg Europe, noted that while Pringles has been the main reason Kellogg has grown in Europe over the past 15 years, the company places a high priority on “winning in breakfast.” This may be through additions in muesli and hot cereal, such as porridge, as well as further growth of snacks, such as Pringles.
“Investing in growing brands, growing segments and growing geographies is at the core of what we’re trying to do in breakfast,” he said. “We’re only just scratching the potential of what we see in Europe, as well as the world in general. It’s a huge opportunity for us, both in terms of cereal development as well as driving our snack business.”
Hood said there are 1bn potential consumers to serve in Europe and it only reaches 400m right now. He calls this a “massive opportunity to develop our cereal category.”
Putting the consumer first at General Mills
General Mills is another cereal giant looking to make a comeback. With $2.3bl in retail sales in cereal over 2015, the company doesn’t want to see anymore down quarters in the cereal market.
Jeff Harmening, executive vice president and chief operating officer for US retail at General Mills, said at Barclays that the increased effort in understanding what consumers want will help them reverse the trend. He believes the company will see a net growth for cereal in 2016.
Harmening believes the three key points to helping cereal grow are renovating brands to keep them relevant, bringing new innovation in areas of customer interest and increasing investment to grow cereal’s shared voice versus other breakfast items.
“One reason that I’m confident that cereal can return to growth is that cereal remains popular with growing segments of US consumers,” Harrmening said.
“Household penetration of cereal is more than 90% of older adults and Hispanic consumers and 98% in households with kids … We believe the key to renewed category growth is more relevant renovation and innovation and stronger levels of investment from branded manufacturers.”
Gluten-free is the first step toward this, he said, as they have created gluten-free varieties of the company’s five largest Cheerios brands. With many varieties of Chex being gluten-free and Lucky Charms adding a gluten-free variety later this year, he said more than half of the company’s cereals can be sans-gluten by 2016.
The second step toward helping cereal regain its footing has been the promise to remove artificial flavors and colors from General Mills cereals, something Kellogg has announced it will do as well.
“The real magic is removing [artificial colors and flavors] and still delivering a product that consumers love,” he said. “I am confident we will be able to meet that challenge.”
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