The 'most important meal of the day' makes a comeback

NEW YORK There is little question that the ongoing recession has reshaped consumer-purchasing habits, particularly, as it relates to areas like dining out and food shopping. With more families eating more meals at home, such categories as breakfast foods have seen a resurgence in recent years as consumers have eschewed the drive-through/dine-and-dash experience in favor of an at-home — or at least, taken-from-home — breakfast.

And at the heart of it all is the ready-to-eat cereal category, which generates nearly 54% of sales of all breakfast foods. While a combination of discounting and tough year-over-year comparisons show the category down more than 2% from its peak at the beginning of the economic downturn, ready-to-eat cereal generated more than 12 shopping trips, according to mid-year 2010 data from the Nielsen Homescan consumer facts panel — that’s more than twice as many as any other breakfast foods category. More than 92% of households made at least one ready-to-eat cereal purchase during that period, with the typical home spending $66.69.

With a rising awareness around healthier-for-you food products, many of these types of breakfast items are enticing consumer trial by marketing against a particular set of additional health claims. For example, sales of items making claims around flax or hemp seed were up 49.6% for the 52 weeks ended Sept. 4 across food, drug and mass, including Walmart, outlets, according to Nielsen; sales of foods making antioxidant claims were up 26.6%, and sales of foods making fiber claims were up 5.3%. In line with these trends, sales of granola/natural cereals like Kashi were up more than 9%, with sales rapidly approaching $250 million for what was once a niche category largely for shoppers of the natural foods channel.

One area of the breakfast foods business that is growing particularly fast is frozen/refrigerated breakfasts, which were up more than 7%, according to Nielsen, generating more than $1 billion, driven by such brands as Jimmy Dean, which has invested considerably in high-profile TV ads to seize the momentum around high-protein/low-carbohydrate lifestyles.

Going forward, trends in breakfast foods — particularly ready-to-eat cereal — will revolve around manufacturers looking to add value both to the consumer as well as the retailer, in the form of products touting additional health claims, compacted package sizes and discounting promotions that drive trips to the store.

“Some breakfast companies are experimenting with smaller boxes, but retaining the same ounce-size,” said Nielsen SVP consumer and shopping insights Todd Hale. Driving the smaller package sizes is the continued push around manufacturer sustainability. However, lower raw material costs associated with less product packaging could benefit manufacturer gross margins a bit, while the added space on the shelf gives retailers more real estate to sell.

One area of concern for the trade might be around continued discounting in the space, Hale warned. “While we do see some slowing of the price declines, we really need to get back to traditional long-term inflationary price growth within the next six months,” he said. “Otherwise, we may see a permanent rebalancing of consumer expectations, and competitive pressures will seriously erode the profitability of these categories for both manufacturers and retailers.”

In the meantime, even as the ready-to-eat cereal category continues to dominate sales of breakfast foods, it appears there is plenty of room for additional growth given the staggering number of consumers that continue to skip breakfast.

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