Consumers are seeking more economical breakfast solutions, which is driving sales of larger pack sizes in some center store categories, as well as increased sales of private label alternatives.
Children’s cereals and bars, along with toaster pastries and bagels, have also been performing well as consumers continue to source breakfast items at retail even though many have returned to pre-pandemic routines that include foodservice breakfast purchases. Research from The NPD Group showed that restaurant morning-meal visits were up 2% in the 12 months ending December, on top of a double-digit increase in 2021.
At Abington, Va.-based K-VA-T Food Stores, parent of the Food City supermarket chain, sales of breakfast products such as cold cereal and toaster pastries have continued to perform well, said Dan Glei, executive VP of merchandising and marketing.
“We don’t know where customers consume those foods — maybe people are taking the things they were accustomed to eating at home with them to work,” said Glei. “I think a lot of people got used to being a little closer to home these last few years, and I think they continue to do the things that they like.”
For many items, dollar sales growth is outpacing unit growth at K-VA-T, a trend that has been reflected nationwide in products throughout the store amid rising price inflation.
For the 52 weeks through Feb. 25, dollar sales of cereal and granola were up 13.7%, to about $13.6 billion, according to NIQ (formerly NielsenIQ), while unit sales were down 2.9% in that time period. Toaster pastries followed a similar pattern, with dollar sales up 10.3%, to $913.2 million, and unit sales down 2.1%.
Among the few breakfast categories that saw increases in both dollar sales and unit sales were nut butters, jam and jellies, which recorded a 12.7% increase in dollar sales and a 2% uptick in unit sales. Bagels also had a strong year, with sales up 18.1%, to almost $1.5 billion, and unit sales up 4.6%, according to NIQ. In the freezer case, bagels recorded even better number, with dollar sales up 34.2% and unit sales up 16.3%
Promotions and innovation
In this environment, long-term promotional offers that provide discounts on multiple-item purchases have proven effective, said Glei. Offering these multi-buy/must-buy promotions over the course of multiple weeks helps give customers confidence they can expect to find value when they shop, he explained.
“There’s a mix-and-match element to it that helps families stretch their dollars a little bit further,” he said. “Regardless of whether shoppers are buying branded or our own brand products, value in 2023 seems to be resonating much stronger with customers than it did in 2021 and 2022.”
That also explains customers’ interest in larger pack sizes for certain breakfast items, said Ross Purdy, VP of center store merchandising at K-VA-T.
“In cereal, we’re seeing a migration away from the middle-sized boxes,” he said.
Some consumers appear to be shifting to smaller-sized boxes, perhaps to try to minimize their overall grocery bill, while others are seeking to economize and obtain value by buying larger boxes and bags.
Private-label cereal sales also ramped up significantly at K-VA-T in 2022, Purdy said, noting that some of the gain was attributable to the retailer’s own promotional strategy.
The large name brands in cold cereal have remained a dominant force in the category, however, Glei pointed out, citing their innovation to reflect flavor and nutritional profile trends.
Other breakfast foods that have shown growth at K-VA-T include granola — albeit off a very small base — and breakfast items for children, both in the cereal aisle and in the bars category, said Purdy. Overall, consumers also have been buying larger pack sizes of breakfast/snack bars, he said.
In toaster pastries, some recent flavor innovations have helped drive sales, said Glei.
“There are always new flavors coming out, but some of the recent ones have resonated a little bit better,” he said.
Better-for-you formulations
Tracy DeCarlo, director of category solutions at Daymon, a sales and marketing firm focused on private label, said consumer interest in eating healthier is also impacting the breakfast category.
“Shelf-stable breakfast foods have long faced consumers’ perception of being artificial, high in sugar, and less healthful than fresh alternatives,” she said.
According to proprietary research from Daymon, 77% of consumers are looking for new ways to live a healthier life, and 56% of food shoppers said they are willing to pay more for products that fit their lifestyle.
“It is imperative for retailers to offer more healthful, convenient breakfast options,” said DeCarlo. “Providing private brand, shelf-stable breakfast options with health basics such as low sugar, high protein, and organic ingredients have become table stakes.”
Private-brand shelf stable cereal, bars and baking mixes are all gaining share with the help of cleaner and more healthful ingredient panels, she said.
Private brands play an important role in making better-for-you and innovative options more accessible for consumers, DeCarlo said, adding that younger consumers in particular are turning to private brands for solutions.
“Within the breakfast categories, this equates to innovations showcasing high-protein, plant-forward ingredients and enhanced functionalities that address top-of-mind consumer challenges, such as gut health or more energy to get through the day,” she said.
In the freezer case, frozen breakfast options increasingly offer globally influenced flavor profiles and enhanced convenience, said DeCarlo.
“Expanded breakfast offerings inspired by cultures around the world and newer forms such as bites and small hand-held items will also be essential to future innovation,” she said.
