Cereal thrillers

While growth in the overall breakfast cereal market is barely more than static, it is still a hugely important category with 95% of UK households buying the products, and a range of influences means there have been substantial winners and losers among sub categories. Issues such as the Government’s focus on salt and sugar content and the latest GI (glycemic index) dieting fad, have caused big changes in consumers’ buying habits.

One of the big winners in the market has been PepsiCo’s Quaker brand. With porridge classified as a superfood under the glycemic index, because of the way oats slowly release their energy, sales of hot cereals have grown by 30% year on year, according to PepsiCo trading controller Andrew Dixon. The hot cereals market is worth £84m and Quaker has the number one brands in instant and traditional oats, he adds.

Oatso Simple, a convenience product which can be microwaved and is ready in two-and-a-half minutes, has helped to drive growth, but traditional oats are also growing and Dixon says: “Porridge has come back into fashion.”

But it is not just consumer demands that are changing, but also the way Quaker is being marketed to the independent sector. Dixon says: “The wholesale sector is massively important for PepsiCo, with brands such as Walkers, but historically Quaker cereals have not given it the right level of importance and focus.
“But we have recently taken distribution in-house, following the collapse of Food Brokers which used to handle our distribution, and we have been able to give it more attention and focus.”

He adds: “We have to look at what PepsiCo has done with Walkers in the wholesale channel. We have a gold standard – a great benchmark – in-house, and we will look to replicate that in cereals.”

Dixon believes wholesalers generally do a good job segmenting the cereal category, but he feels many do not understand the seasonality of some products. “When it’s cold, between September and March, we actually call it our hot season because sales of hot cereals increase dramatically. Wholesalers need to be aware of that and should flex their space to take account of it,” he says.

The growth in convenience cereals is another area where wholesalers may be missing out on sales, suggets Dixon. He says: “Convenience cereals are driving growth in the category, and wholesalers have been slow to pick up on that. They need to give them more display and visibility and it is our job to educate the independent retailers.”

Quaker’s activity with wholesalers has tended to follow an annual formula, but this is likely to be developed, says Dixon.
“We have done quite a lot of price-marked activity; for instance a Sugar Puffs 99p promotion twice a year on a ‘once it’s gone it’s gone’ basis, and hot cereals activity in September/October and February. Going forward we want to replicate that gold standard achieved by Walkers on crisps, with secondary siting and nice clear POS.”

In advertising Quaker will be looking to exploit the healthy image of oats. “We are using the Quaker man as an umbrella across oats,” says Dixon. “The Quaker man is synonymous with nutrition and trustworthiness. Going forward we will be developing branding and products around nutrition and better for you qualities.”

Current activity includes press adverts in colour supplements promoting the healthy aspect of oats, and in October TV advertising for Oatso Simple will coincide with the launch of a new raspberry variety.

Healthy options are also a focus for another major player in the market, Cereal Partners UK. A partnership between two global players, Nestlé and General Mills, the company owns some of the best known brands in the sector including Shredded Wheat, Shreddies and Cheerios.

Graeme Foster, business controller, wholesale/independent/convenience/foodservice for CPUK, says: “There is strong value growth specifically in the adult and health sector with franchises such as our Fitnesse brands and Special K showing significant growth. The category has also had strong growth through NPD activity in this sector with the introduction of brands such as Triple Berry Shredded Wheat.”

The increased media focus on health and obesity should be beneficial to the cereal sector, according to Foster. “There is of course an increased interest in health issues and this is an area where cereals can play a major role in helping people improve their nutrition as well as manage their weight more effectively. For instance it is a fact that people who eat cereal frequently have a lower body mass index than those who eat cereal less frequently or not at all.”

To capitalise on this, says Foster, a major programme gets under way this month. “Whole grain products such as Shredded Wheat and its variants have all done well over the past 12 months. The company is building on this health trend and the drive to improve the nation’s nutritional profile by introducing a major initiative across all Nestlé brand cereals that will see the entire range containing wholegrain from this month.

“Furthermore, not only has the wholegrain been included in all recipes, but reductions in sugar and salt levels have also been made to many of our breakfast cereal brands without adversely affecting the taste, as has been shown by research with our consumers.

“At the same time, all Nestlé breakfast cereal packs will start to carry ‘calories per serving’ on the front of the pack as well as guideline daily amounts of total fat, sugar and wholegrain per serving.”

CPUK is backing the initiative with one of its biggest marketing campaigns. The two-pronged programme began in April by targeting the media and stakeholder groups, and follow-up activity aimed at consumers begins this month.

Foster says the wholesale channel is important to CPUK as is demonstrated by its provision of smaller cases and packs specifically targeted for smaller convenience customers and the foodservice market. However, he believes that some wholesalers are failing to maximise sales because the ranges they are stocking tend to be too wide. “Generally wholesalers are stocking a diverse range and they should really concentrate on the top selling brands. Plus there should be opportunistic deals and one-offs if and when they become available in order to add variety and spontaneity to the fixture.”

Cereal Partners runs promotional packs every year targeted at wholesale customers with a mixture of short-count price-marked packs and percentage free packs, and it also ran display incentives in the first quarter of the year utilising the Nestlé field sales team. Foster promises: “We will continue to service the wholesale channel differently to the multiple sector by continuing to offer specific smaller cases and packs that are more suited to convenience operators.”

Like CPUK, Kellogg’s has also been reformulating products to reduce salt content, with a 25% reduction in Corn Flakes, Kellogg’s Frosties and Kellogg’s Crunchy Nut Corn Flakes. Shoppers will recognise the new reduced salt recipe by an on-pack ‘flash’.

Alyson Greenhalgh-Ball, health and wellbeing manager at Kellogg’s, comments: “Although breakfast cereals on average contribute a very small amount of salt in the diet – no more than 5% of the average adult intake of salt – we are committed to helping consumers reduce the amount of salt in their diets in line with government policies on salt reduction.”

Additionally, a Guideline Daily Amount (GDA) counter recently appeared on Kellogg’s packs to help shoppers achieve healthy levels of calories, fat, saturated fat, salt, calcium, iron, total sugars and fibre.

The Weetabix Food Company is also highlighting the health message, with a new advertising campaign promoting the portfolio of products: Weetabix, Alpen, Ready Brek and Weetos.
The ‘What Are You Made Of?’ campaign promotes the benefits of wholegrain and marks the first time that Weetabix products have been marketed to consumers as a complete range. To reinforce the wholegrain message the range’s packaging has been redesigned, extending the Weetabix wheatsheaf motif across the entire brand family, and highlighting the individual brands’ nutritional benefits.

The ‘What Are You Made Of?’ campaign begins this month. Initial TV activity will be supported by outdoor, national newspaper and consumer magazine advertisements. The £10m campaign will run until the end of the year.

As the second largest manufacturer in the cereal sector, the Weetabix Food Company has a 14.6% market share, growing up 5.3% year on year with IRI figures showing Weetabix up 1.8%, Alpen growing by 12% and Ready Brek 14.7%up over the past 12 months.
Ken Wood, CEO of The Weetabix Food Company, comments: “The new campaign represents a real step change for the business. We know our consumers love our products, but they are not necessarily aware that they are part of the Weetabix Food Company. As a well-respected and established manufacturer, Weetabix is committed to producing high quality products that can play a key role in helping consumers lead healthier lives.

“As we move further into 2005 and beyond, the ‘What Are You Made Of?’ campaign will continue to work across the entire range and give the Weetabix Food Company an even stronger presence in the minds of our core consumers.”

Jordans is the fifth largest cereal producer in the UK, accounting for a 3.2% value share of the market with brands such as Country Crisp, its best selling cereal product worth £11.2m, and Frusli, its cereal bar, worth £9.6m.

One area Jordans is concentrating on is the cereal bars market and the company sees the trend towards people having fewer meals and more snacking as moving in its favour. It draws a distinction between breakfast bars, which are a breakfast for those not having time to sit down to eat a more traditional breakfast, and snack bars which offer a boost of energy to keep people going between meals.

Nicky Carlyle, marketing manager nutritious snacks, comments: “Consumers are snacking more than ever before, therefore the snack market is an area that Jordans focuses on and invests in. For example, we have relaunched our two popular product ranges, Break and Frusli, over the past month and we have several more bar products in the pipeline.

“Deskfast seems to have become the new way of living, as consumers are increasingly skipping breakfast. Therefore tasty alternatives to the sit-down breakfast are in high demand.”

Buyer’s Viewpoint
Steven Hodson, Wholesale trading controller, Nisa-Today’s
The ready to eat market is generally static but the Today’s Group is well ahead.

Adult health is a growth area with brands like Special K and Crunchy Nut doing well, but the children’s market has been in decline due to the bad press over recent months, and a lot of manufacturers are reformulating their products to reduce the amount of salt and sugar they contain.

We get a lot of support from the manufacturers. We’ve worked closely with Kelloggs and Weetabix on activity with our retail clubs.

Price marked packs give confidence to the consumer and enable our customers to compete with the multiples on price.

Buyer’s Viewpoint
Shaun Quinton, Trading manager, Musgrave Budgens-Londis

The overall market has picked up slightly since last year, but most of the growth has been down to price increases rather than volume growth.

Weetabix has shown good volume and value growth and hot oats have been doing very well, up 11% in the last year. This has been driven by the newer products like Oatso Simple, but it also seems to have introduced younger consumers to the traditional products so lines like standard 1kg standard oats are also trading up as well.

Promotions are very important and are helping to keep the volume up. Special K multi- buys did particularly well and have been flying.

Top 10 cereal brands by value
1. Weetabix
2. Kellogg’s Special K
3. Kellogg’s Corn Flakes
4. Kellogg’s Crunchy Nut Corn Flakes
5. Kellogg’s Frosties
6. Kellogg’s Rice Crispies
7. Kellogg’s Coco Pops
8. Nestlé Shredded Wheat
9. Nestlé Shreddies
10. Alpen

Source: The Grocer Top Products Survey/ACNielsen 52 W/E Oct 2 2004

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