Cos. milk new products in struggling sector
Rising commodity costs and brutal competition have been squeezing profits from the ready-to-eat cereal category. Dollar sales for the 52-week period ended Dec. 26, 2010, were down 3%, according to SymphonyIRI Group. Sue Viamari, editor of SymphonyIRI’s Times and Trends, said the category has been in decline during the past several quarters, and there was a 0.7% decline in price per volume during the same period.
To offset rising production costs, some manufactures passed costs on to consumers, while others have held prices and decreased package sizes. Offering coupons and deals has been a given for the past few years in the cereal aisle, limiting private label’s gains.
Viamari said sales also are being impacted by consumers cutting back on portion sizes and purchasing one cereal for the whole family rather than purchasing several “special request” brands for different members of the household.
Growth in the category remains a challenge. Cereal has a high household penetration. About 93% of consumers purchase cold cereal, according to Mintel. The trick for manufacturers is to increase sales without cannibalizing existing products.
New products still fuel the category. General Mills’ new chocolate Cheerios should deliver first-year sales of $65 million to $70 million, and Wheaties Fuel, the first cereal created for men, looks successful.
Kellogg’s is adding a fruit-filled Frosted Mini Wheats product to its lineup and bringing its Crunchy Nut cereal to the United States. More new products are likely in the Kellogg’s pipeline; Kellogg’s president and CEO John Bryant has said the company needs to “ramp up innovation in the cereal aisle.”
The article above is part of the DSN Category Review Series. For the complete Cereal Buy-In Report, including extensive charts, data and more analysis, click here.
Kellogg’s emphasizes fiber-rich cereals
BATTLE CREEK, Mich. — Kellogg’s is emphasizing its fiber-rich cereals, following the release of a study that examined the link between dietary fiber from grains and the lower risk of death from certain diseases in both men and women.
The study, published in the Archives of Internal Medicine, examined the diets of more than 388,000 adults (ages 50 years to 71 years), who were participants in a nine-year diet and health study conducted by the National Institutes of Health and AARP. Researchers noted that those with high-fiber diets were at a lower risk of death from heart disease, infectious and respiratory illness and, in the case of men, certain cancers. The risk of dying from these diseases was reduced by 24% to 56% in men and 34% to 59% in women with high-fiber intakes.
In response to this, Kellogg’s is highlighting its breakfast cereals that boost high fiber content, stating that the research "should serve as wake-up call to all Americans to start making some small changes to their diets to ensure they are getting enough of this nutrient so important for overall health."
"Kellogg has long understood the important role fiber plays in overall health, and is committed to helping Americans increase the fiber in their diet through foods they already eat and enjoy. This study is further proof of the significant contribution of fiber to the diet," said Lisa Sutherland, VP nutrition for Kellogg North America.
Kellogg’s lineup of fiber-rich cereals includes All-Bran, Kellogg’s Nutri-Grain cereal, Kellogg’s FiberPlus cereal and more.
More information on the benefits of fiber and Kellogg’s efforts to increase fiber in foods can be found here.
Dr Pepper Snapple Group reports Q4 results
PLANO, Texas — Earnings per share for Dr Pepper Snapple Group increased 5 cents to 49 cents, compared with the year-ago period, thanks to an increase in consumer spending and new licensing agreements with Coca-Cola and PepsiCo.
Net sales totaled $1.4 billion, a 4.2% increase from fourth quarter 2009. DPS said the increase was attributed to sales volume growth, positive pricing and deferred revenue from its licensing deals with Coca-Cola and PepsiCo. Under these agreements, PepsiCo began distributing Dr Pepper, Crush and Schweppes in the U.S. territories — brands that were distributed by the Pepsi Bottling Group — while Coca-Cola began distributing Dr Pepper in the United States and Canada Dry in the northeastern United States, where the products previously were distributed by Coca-Cola Enterprises.
For its volume, DPS experienced a 3% increase, while its "Core 4" brands declined 1%. Crush and Canada Dry grew double digits. Sunkist soda declined high-single digits, 7UP declined mid-single digits and A&W declined low-single digits. DPS added that Snapple and Hawaiian Punch volumes were up 3% and 4%, respectively.
Looking ahead, DPS said it expects full-year reported net sales to increase 3% to 5% and diluted earnings per share to be in the $2.70 to $2.78 range.