Retailers are crying foul over the recent accusation of antitrust activity in the cold cereal category, but it appears consumers are remaining mum.
Supermarket executives contacted by SN reported no consumer uproar after a pair of congressmen urged the attorney general to conduct a pricing investigation of the top four cereal manufacturers.
Some savvy chains are using this breakfast cereal brouhaha to reiterate the economical benefits of private-label products.
"We are telling consumers that if they're at all concerned [about prices], they should purchase private-label products, oatmeal or fruit bars," said Barry Scher, vice president of public affairs for Landover, Md.-based Giant Food.
"People have a choice," said Ned Meara, corporate grocery merchandising manager for Grand Union Co., Wayne, N.J. "They can buy private-label cereals, which are available in just about every supermarket in America, and save an awful lot of money."
While the attack leveled by Congressmen Charles Schumer, D-N.Y., and Sam Gejdenson, D-Conn., was primarily aimed at the four manufacturers that account for 85% of the category's volume -- Kellogg Co., Battle Creek, Mich.; General Mills, Minneapolis; Quaker Oats, Chicago, and Post Co., White Plains, N.Y. -- supermarkets did not escape unscathed. The congressmen claimed retailers downplay private-label and generic brands by displaying them on the bottom shelves or at the end of the aisle.
This raised a collective eyebrow from the retailers contacted by SN.
"Speaking for our company, that's not true. Our Grand Union is immediately to the right of the national-brand product," said Meara.
"We certainly don't bury private label," echoed Sue Hosey, vice president of consumer affairs for P&C Food Markets, Syracuse, N.Y. "We want it out there; we want people to buy private label."
Not surprisingly, the manufacturers in question issued statements denying any collaboration on pricing. Under the umbrella of the Grocery Manufacturers of America, the manufacturers and GMA issued a list of facts and myths about cold cereal pricing and promotion.
One item focuses on retailers as the final dictators of price, since wholesale list prices are uniform.
Charles Collings, president and chief executive officer of Raley's Supermarkets, West Sacramento, Calif., said, "I am surprised by that. I hope manufacturers realize that we're partners in this whole thing. We recognize that manufacturers have to price to make the bottom line profit. So do retailers."
"I'm a little disappointed that GMA would say that; the retailers have to price off what it costs," said Hosey. "If GMA is suggesting we should give it away . . ." Jack Ryder, president of Cannondale Associates -- a grocery industry consulting company based in Wilton, Conn. -- doesn't think blame should be placed on the retail community.
"By and large, [retail] profit margins on cereal aren't nearly as good as they are on a lot of smaller categories like specialty foods, or even some of the other big categories like pet food, potato chips, cookies and crackers."
Those contacted by SN said that while national-brand cereal prices seem high, there are legitimate underlying reasons for those prices. Furthermore, they added, given the heavy amount of promotions in the competitive category, very few consumers actually pay the shelf price. "I know the industry," added Ryder, "cereal is one of the most competitive categories in the store, so it's hardly a monopoly. These guys are cutting each other's throats every day."
"My suspicion is that the consumer is not paying the [full] price, at least in our marketing area, because the cereal manufacturers are doing all kinds of promotional activity," said P&C's Hosey.
"We're doing a lot of demos, a lot of buy-one-get-one-frees, a lot of half-price sales. We've got coupons in our ads plus the freestanding inserts. And we're a double-coupon market, so the impact of that is double," she noted.
"And that's why it's much to-do about nothing," concluded Raley's Collings. "Our buyers pointed out that an awful lot of the cereal that's being sold today is being sold on special; it's almost 50% off.
Many in the industry who are questioning whether Schumer and Gejdenson have a legitimate beef or if it's politics as usual. One industry insider even speculated it was all an attempt to keep Kraft General Foods cereal jobs from migrating from New York to Chicago.
To date, the Justice Department reported it is still reviewing Schumer and Gejdenson's findings and has not made a decision.
