RETAILERS ARE WAKING UP TO THE benefits of healthy breakfasts. Now that consumers are more aware of the advantages of eating nutritiously, the cereal aisle has taken on a different look. The old standbys of wheat and oats are sharing shelf space with the likes of spelt, kamut, millet and amaranth, in both hot and cold varieties. And in many instances, cereals' sugar content has diminished. These developments have also been healthy for the bottom line.
“The sales are just there,” said Mike Babbitt, grocery manager at Lamb's Thriftway Garden Home store in Portland, Ore. “With customers being more careful of what they're putting into their bodies, the need has been recognized. The fastest growth in the cereals category is healthy cereals.”
Added Britt Lindemann of Kowalski's, in St. Paul, Minn.: “The category's grown by leaps and bounds in the last three years.”
The percentage of new cereals in the United States claiming to contain whole grains in the past year was close to 58%, an increase of 12% over the preceding year, according to Datamonitor's Productscan Online. “We have found that this is an increasingly popular claim, and that cereals that are high in whole grains also tend to be high in fiber and make other healthful claims,” said Tom Vierhile, director of the online trends database.
What turned the tide in favor of creating this niche? Cynthia Harriman, the spokeswoman for the Whole Grains Council, an organization formed to promote the staple, said that a key event was General Mills' decision in the fall of 2004 to have every cereal in its line contain at least half a serving of whole grain — at least 8 grams.
“That really made a statement,” she said. “With everybody before then, it was throwing in a whole grain or two as a token. To move things around so that the default is whole grains in a lot of people's minds is really a big thing.”
General Mills' action had impact. “The whole-grain cereal market increased 8.3% in 2004-2005, just as this was just gaining momentum,” Harriman said.
Today, the Whole Grains Council lists more than 1,100 products that are registered to use the “whole grains” stamp, and nearly one-third of those products are hot and cold cereals. Harriman is also pleased that consumers are going beyond wheat choices.
“Variety is just as important in grains as it is in any other category of food,” she said, noting an increased interest in quinoa. “One reason we can gauge that is that an increasing number of people are pronouncing it correctly,” she observed. Those converts include Center Store and grocery managers who are being inundated with healthy cereal products like so many flakes tumbling into a bowl.
At Thriftway, Babbitt's No. 1 natural-cereal seller is Kashi, especially its Heart to Heart Oat Flakes and Wild Blueberry Clusters varieties, which have the American Heart Association's imprimatur for meeting standards on saturated fat and cholesterol. “People identify with the Kashi brand,” he said, noting that early on, Kashi occupied only a small portion of shelf space.
“They dominate it now, and since they and other brands have come out with line extensions, there's only so much space.” Babbitt's solution was to rearrange his shelving, taking 28 linear feet from his “mainline grocery cereals, the sweet cereals,” to make room for natural hot cereals.
“I didn't want to take it from the natural side of cold cereal,” he said, of which he has 84 linear feet.
Babbitt's biggest granola seller is from Back to Nature. Hot cereal also does extremely well, with Bob's Red Mill — a local company that produces a variety of multigrain products — being a very popular line that includes the popular muesli, a granola-type cereal. For oatmeal, Babbitt stocks products from Quaker and McCann's, as well as Western Family, a private label from Lamb's wholesaler, that's between 50 and 75 cents cheaper than national-brand offerings.
Babbitt regularly features specials on healthful cereals, such as Optimum Power from Nature's Path. “Consumers will buy a product like that that they've never tried before,” he said. Special sale prices are important, especially because the cost of adding more nutritionally valuable ingredients is driving up the prices of mainstream manufacturers' more healthful versions of their iconic products.
“With mainstream cereal products inching up to that $4 and $5 price, consumers are able to buy a natural one,” said Babbitt. And manufacturers welcome converts.
“Our pricing has always been competitive,” said Maria Emmer-Aanes, director of marketing for Nature's Path, based in British Columbia. But Emmer-Aanes believes that retail integration of Nature's Path cereals into the main store set has done more to expose the brand.
“Our organic products will be next to a conventional product on the shelf,” she said, in contrast to a time when category buyers weren't able to devote “time and resources” to help natural products do well. Nature's Path's top customer is Whole Foods Market, and it sells in large volume to Trader Joe's, Kroger, Wegmans and Costco as well. The company produces Heritage, a traditional flakes line, as well as kid-friendly cereals.
“They contain half the sugar of conventional cereals,” Emmer-Aanes said. But the company's best-selling cereal is pumpkin flax granola, which received a recognition award last year from Consumer Reports magazine.
“Taste is paramount,” she said, noting that Nature's Path uses mostly pure cane sugar and brown rice syrup as its sweeteners, rather than high-fructose corn syrup.
“There are people who eat fairly healthfully the rest of the day, but they grew up eating a certain kind of sugary-type cereal, and it's part of their habit,” said Amy Campbell, a registered dietitian and diabetes educator at the Joslin Diabetes Center in Boston. “We're always pushing more for people to go for higher-fiber, whole-grain cereals,” even though, she conceded, not all her patients are happy with the choices, which they describe as “twigs and bark.” One way her clients handle the transition is to buy lower-sugar versions of the mainstream brands they're used to eating.
What's clear is that healthier catch-up from the big manufacturers hasn't hurt the smaller producers.
“You get a core group of shoppers that stick with Kashi, Back to Nature and the Peace cereal brands, and that hasn't changed,” said Kowalski's Lindemann. “All those brands continue to grow, and you see a lot of companies that realize that. Kraft now owns Back to Nature; Kellogg's owns Kashi. As for the conglomerates that are creating healthier versions of their cereal hits, the conventional shopper gets to try those things by continuing to buy that brand, so that segment grows also. It's almost like a supplement.”
Lindemann's best sellers are the Kashi line and Back to Nature, and he's made room for them. “We used to have an 8-foot section of natural and organic cereals, but we went to 12 feet,” he said. “We've downsized the conventional cereal sections to accommodate the growth of the healthy cereals.”
Arrowhead Mills hasn't been hurt by the penetration of the niche by the big players either, said Dale Hollingsworth, director of purchasing at the Hereford, Texas, company, whose products are 100% organic. With 11 cold and 10 hot cereals, the company has made inroads into mainstream retail since its purchase by Hain Celestial in 1998.
“When the big corporations jump into your field, you know you're doing something right,” he said, adding that most retailers that stock Arrowhead carry about four cold and, according to season, four or five hot cereals.
One of Arrowhead Mills' biggest sellers is spelt flakes, which Hollingsworth attributes not only to the organic aspect but also to popularity among people who are wheat- or gluten-intolerant. Spelt, an ancient form of wheat, “has just exploded in the last five or six years,” he said, noting that a still more distant cousin, called kamut, is another very popular flake variety.
Perhaps more of a surprise is the strong performance of the company's hot, not instant, cereals, especially because most marketing research confirms consumers want convenience. The seven-grain blend includes rye, barley, millet and quinoa — a mix that may override the convenience drawback as health-conscious consumers hear more about the need for variety.
With the Grain
Percentage of new cereals that claim “Whole Grains” as an ingredient on the label:
|2007 (through March):||57.7%|
- Participating in the Whole Grains Council stamp program is an easy way to boost a store's grains reputation.
- Include some smaller manufacturers in the cereal aisle for shoppers unaccustomed to specialized shopping.
- Try posting informational signs about the different kinds of grains found in today's cereals.
- Higher prices on many natural cereals make private label an attractive option.
Beyond the Bowl
The acquisition of many smaller manufacturers by corporate entities like General Mills and Kellogg's has accelerated the development of new products that resonate with consumers. Laurie Demeritt, president and chief operating officer of the Hartman Group, Bellevue, Wash., foresees a drive into portable packaging so moms in a hurry won't have to assemble their own plastic snack bags of healthy treats.
“We've noticed cereal is now being used more frequently as an in-between-meal snack,” she said. Arguably, the healthy choices in cereals will continue to grow and satisfy consumers.
“There are cereals that taste extremely good vs. those from 20 years ago,” agreed Mike Babbitt, grocery manager at Lamb's Thriftway Garden Home store in Portland, Ore. “It's not just the granolas anymore. We're always going to do large business in mainstream, but definitely the profit is better in natural cereals. I get a better margin.”
Cynthia Harriman, spokeswoman for the Whole Grains Council, emphasized that the niche is not about exotic ingredients. Moving to whole grains shouldn't have to be challenging, she said. “Groceries are not in the position of stocking foods that are going to be so daunting to consumers that they're not going to go there.”