Another bad winter could mean good sales for instant hot cereal in packets.
According to grocery retailers and wholesalers, weather -- the more inclement, the better -- is a true driving force behind hot cereal sales. And these days, the instant packet is the driving force among hot cereal products.
Given a winter with cold temperatures comparable to last year's, oatmeal packets and other hot cereal products should move briskly, and especially quickly if they are aided by hot price points.
Sales of instant hot cereals rose 6.9%, bringing in $367.6 million, in the 52-week period ended last September, according to Nielsen North America, Northbrook, Ill.
As winter officially kicked in last month, however, the impacts on the category were looking rather iffy. Retailers said mild weather early on and only flurries of promotional support from
manufacturers have left the hot porridge category sluggish.
Buyers also pointed to recent declines in some cold cereal prices as another hurdle for the hot component to circumvent.
Still, some operators said they remain optimistic. Muskegon, Mich.-based Plumb's is one retailer that's expecting to exceed last year's sales of hot cereals.
Nick Wedberg, Plumb's vice president of sales, said he'd already done an ad item on instant hot cereal in December, and was running a coupon on the category during the first week of January.
"Initially, we're definitely planning on doing more promotions with them this year," Wedberg told SN.
He said during the winter season, from October through February, the instant packet products segment represents 75% of the hot cereal category sales. The packets continue to sell throughout the year, but their portion of category sales drops to around 30% in warmer weather.
"It's a pretty high figure, because winter is the key time; everybody wants something warm for breakfast," Wedberg added.
"It's a growing segment," said Pat Redmond, grocery merchandiser at Rosauers Supermarkets, Spokane, Wash. And what makes the instant packets a nice fit in the department is they bring in incremental sales. The regular, big box of oats is still a viable item in winter, he said.
But whether its packets or bigger sizes, much of the category's sales depend on how chilly it is outside. Hot cereals are mostly considered a strong category in Southern areas as well, but do not get as much attention in ads and on the shelf.
For instance, Bert Motley, category manager at Piggly Wiggly Carolina Co., Charleston Heights, S.C., reported that instant cereals generally move well, "considering South Carolina is not a cold weather climate."
For this reason, Motley keeps merchandising down to a minimum. On the other hand, displays and aggressive merchandising are more popular with operators in colder regions -- because, they say, it plays up the cereal more and may encourage impulse sales on frosty days.
"When we have them on promo, we normally have a display that coincides with the ad," said Wedberg at Plumb's in Michigan. "Even when they're not on promo, it's a good display to have out anyway.
"Usually they're on deal during the winter and we can make some extra profit by selling them at the good price. And the consumer gets a good value on them because we normally discount them a little bit," Wedberg said.
"Off-shelf displays help sales the most -- and then ads," said Wayne Schnayer, a grocery buyer at Fairplay Foods, Chicago.
Rich Ehrhart, a grocery buyer at Fleming Cos.' division in York, Pa., said he's discovered that "bringing it out throughout the season and keeping an [everyday-low-price program] has an impact on sales.
"During the past couple of years, you see more and more of that with technology. Everybody wants an everyday low price to compete with these [other classes of trade] who are giving everything away," said the wholesale buyer.
Generally the cereal retails for under $3 when on special, added Ehrhart, whose division of Oklahoma City-based Fleming services retailers in major East Coast metropolitan areas.
Manufacturer promotions play an important role in category performance, retailers said.
"Quaker, who is the key player in this category, normally deals those [hot cereals] over the winter period," said Plumb's Wedberg.
"Quaker is offering more buy-one-get-ones, which started last year. You're starting to see a big increase in that type of promotion," said Fleming's Ehrhart.
"You have your loyal people buy it, and then you have people who will buy it when it's on sale. But with buy-one-get-one, people will pick it up just to have it, especially if they have children. The packets are easy for kids to eat -- throw in some water and off they go."
"Weather drives the sales. But people will also buy if the price is right," said Craig Carlson, a grocery buyer at independent operator Home Quality Foods, Linstrom, Minn.
"We run buy-one-get-one-free promotions, and that will move the product," even if it is warmer outside, said Carlson. While retailers agreed that these types of manufacturer promotions are successful, some said they are wondering if the support will be as bountiful this winter, based on what's happened so far.
"We've seen a lot less promotional monies offered from people like Quaker; we have not had the offering on the hot cereal that we have had in the past," said Rosauers' Redmond.
"Last week, I had some deals that came in for February, but that's the first that I've seen from manufacturers and it wasn't major; it was a deal on instant oats with coupon," Redmond said.
Piggly Wiggly's Motley said internal storms may be the cause of delays from some manufacturers. "Because of the restructuring at Quaker, they haven't told us what kind of deals to expect this year," Motley said.
Meanwhile, though Quaker may own the lion's share of the business, with or without bountiful deals, retailers said private-label sales of instant packets are showing some impressive gains.
"Private label seems to be gaining every year," said Fleming's Ehrhart.
Indeed, Nielsen North America reported private-label sales in the category jumped nearly 17% last season over 1993, hauling in $35.3 million.
If there will be any threat to the continued growth of the category -- besides a balmy winter -- it would be in-aisle competition for the cereal dollar.
"Cold cereals have been such a value," said Rosauers' Redmond. "I think they have taken away sales from the hot cereals. When you can buy all these other cereals for 30%, 40% or 50% off, hot cereals aren't a good value."
"Price is big with the consumer," echoed Fairplay's Schnayer. "It's got to be a great price for the consumer; otherwise they might not grab [the packets] as fast as they would regular cereal."
When all conditions are right -- that is, when it's freezing outside and the packets are being sold at a competitive price -- retailers said consumers tend to favor flavors such as maple and brown sugar, peaches and cream, strawberry and cream, and the products marketed toward children.
Unfortunately for hot cereals, it was relatively warm outside through November and December in most parts of the country.
"We've had unseasonably, really warm weather," said Sherry Free, a grocery buyer at Harvest Foods, Little Rock, Ark. "It hasn't dropped and gotten cold, so there hasn't been a very big increase in hot cereal packet sales. So right now, it's a stable business, not growing."
But if it's cold enough outside, people will pay less attention to the price, said retailers.
"I think it's more weather than price; it's just strictly when the cold weather hits," said Bob Lamb, a buyer with John C. Groub Co., Seymour, Ind. "If we get cold weather in the next month or two, I would expect sales to jump up considerably. And it wouldn't have anything to do with the deals."
Fairplay's Schnayer agreed. "The trend goes on how cold it is outside, and then on price. Nobody eats those cereals when it's warm."