THE BACKGROUND
Packs of Shredded Wheat will turn red in June to promote the Big Red Fightback - the brand's contribution to British Heart Week. Breakfast cereals, one of the most heavily advertised sectors in the grocery category, are having to switch their marketing messages toward health to cope with the current national mood. Such flexibility and innovation elsewhere have helped reinvigorate a market that in the late-90s was showing all the hallmarks of maturity. Manufacturers have reversed falling sales in both volume and value terms.
UK consumption of breakfast cereals is up 8% since the 1999 low of 378 tonnes, while the value of the market has grown 12% to reach an estimated £1.12bn in 2003 (Mintel). The growth is due mainly to a combination of innovation and a renewed commitment to branding.
Pricing strategies have also played a major part. Brand manufacturers, tired of losing a growing chunk of the market to own-label in the late-90s, have fought back in recent years, investing in their brands while reducing the price difference between their products and own-label alternatives.
Brand owners have recognised the necessity of innovation to continue growing this market. One of the major growth segments over the past few years has been hot cereals, once dominated by Weetabix's Ready Brek.
The launch of Quaker's Oatso Simple in 1998, backed by a consistent TV spend, helped bring consumer attention back to the idea of eating porridge.
Quaker's more traditional Porridge Oats has seen a resurgence of popularity, thanks to recent publicity on the health benefits of oats. The upshot is that the hot cereals sector has risen in value by 47.2% since 2001 to £78m. Oatso Simple and Ready Brek account for 51% of this.
Elsewhere, innovation has helped tackle the problem of consumers dashing out in the morning without breakfast. Cereal bars, pioneered by Jordans, have been adopted as brand extensions by most of the major players. The most recent version is Kellogg's Crunchy Nut Corn Flake bars.
Technical developments have also helped cereal manufacturers add some sparkle - Kellogg and Cereal Partners have added dried fruit to various brands in the past two years.
The children's sector of the market has seen significant investment, with merchandising tie-ups producing promotions and uniquely-shaped products. Kellogg has launched the Bart Simpson-themed Eat My Shorts brand in the past year, while Cereal Partners is selling a Shrek-themed cereal, complete with a silver pack that is hard to miss on the supermarket shelf.
Although Kellogg is still the biggest UK cereal manufacturer, with a market share of 40%, its Corn Flakes lost the top brand spot in 2002 to Weetabix. This is partly because of the falling popularity of corn-based cereals (sales fell by 16.1% between 2001 and 2003), but can also be attributed to a sharpening in marketing focus on the part of Weetabix, whose value brand rose by 12% between 2001 and 2003 to reach £179m.
Weetabix, acquired in January by US private equity group Hicks Muse Tate & Furst, altered its marketing strategy three years ago. Where once its advertising focused on entertaining consumers, with straplines such as 'Have a bix', its emphasis has switched to the product's energy-giving properties. Ads by Banks Hoggins O'Shea FCB have shown bell-ringers and school caretakers filled with energy after eating Weetabix. At the same time, price promotions were used to encourage trial.
Weetabix has introduced an organic version to reinforce the brand's health positioning and changed the names of some variants to increase the profile of the brand. Mini Bix, for example, has become Weetabix Mini Crunch.
A wholesale redesign of all packag-ing was instigated, making more of the packs' yellow colour and encouraging supermarkets to merchandise all its products together.
'Weetabix products used to get lost in the aisles,' says John Crowther, Europe planning director at FCB, and former planner on Weetabix at Banks Hoggins. 'But now they dominate the fixture with a wall of yellow'.
Cereal Partners is another strong advocate of health-related messages.
Its Shredded Wheat boxes host large heart-shaped flashes that advertise the product's role in reducing saturated fat and helping to lower cholesterol.
This on-pack work is mirrored by the brand's ads, which feature Ian Botham talking about eating Shredded Wheat to help keep his heart healthy.
Kellogg, on the other hand, uses a system of logos to denote the various health benefits, such as concentration and physical energy, that its products claim to offer.
However, the cereal companies have found that this reliance on health is a double-edged sword as the obesity debate hots up. A constant stream of studies by government and NGOs have highlighted the high sugar and salt content in some cereals, particularly those made for children.
The Food Standards Agency is running an enquiry on food packaging, while the EU is considering a regulation that would ban links with health charities and vastly reduce the scope of cereal manufacturers to claim health-improving properties.
Consequently, the companies have toned down their claims in recent months and embarked on campaigns that look as though they are contributing to the solution, rather than adding to the problem.
Kellogg is currently conducting a promotion on its Just Right and Special K brands that offers consumers a pedo-meter to measure how far they walk.
Cereal Partners, meanwhile, launched its Fitnesse brand in September last year to take on Special K.
The obesity debate in this country could prove pivotal to the future health of the European cereals market. British families are key to the market - families consume twice as much as households without children, and Britons munch their way through twice as much cereal as our European neighbours.
So if enough parents really do start rejecting those chocolate-coated premium-priced boxes, the cereal giants will have a problem. Moreover, Mintel predicts that the market has already reached its volume peak.
'People are increasingly aware of what they need to look for (on packs),' says a Kellogg spokesman. 'The next 12 to 18 months are going to be a key period for any food company.'
TOP-SELLING BRANDS BY MARKET SHARE (2003)
Brand Owner pounds m %
1 Weetabix Weetabix 78 7.0
2 Corn Flakes Kellogg 74 6.6
3 Crunchy Nut Corn Flakes Kellogg 46 4.1
4 Frosties Kellogg 41 3.7
5 Rice Krispies Kellogg 36 3.2
6 Coco Pops Kellogg 36 3.2
7 Special K Kellogg 34 3.0
8 Shreddies Cereal Partners 30 2.7
9 Sugar Puffs Quaker 29 2.6
10 Shredded Wheat Cereal Partners 28 2.5
11 Cheerios Cereal Partners 23 2.1
12 Alpen Weetabix 15 1.3
13 Cookie Crisp Cereal Partners 9 0.8
14 Others n/a 638 57.1
Total 1,117 100
Source: Mintel
CEREAL SALES BY TYPE
Cereal type 2001 2003 Change
(pounds m) (pounds m) (%)
1 RTE cereal 1,015 1,039 2.4
2 Hot cereal 53 78 47.2
Total 1,068 1,117 4.6
Source: Mintel
ANALYST COMMENT
Jenny Catlin Consumer analyst, Mintel
The cereals market is heavily branded, but the supermarket chains also have a strong own-label presence, accounting for 17% of the market in 2003. But the market value of own-label cereals has been slowly falling, dropping by more than 9% between 2001 and 2003.
One of the main reasons for this has been the massive duplication in the market, which meant that either the brand or the retailer product had to go. Also, the retailers tended to offer the corn and healthy wheat brands, which are suffering at a category level. As copycat products they have failed to either develop a credible premium offer or deliver exciting kids' brands. Meanwhile, branded cereals such as Kellogg, Weetabix, Cereal Partners (Nestle), Quaker and Jordans have seen increases in their market value and have maintained their market share.
The breakfast cereal market is one of the most heavily advertised grocery categories. On-pack offers dominate, as it is one of the few sectors than can make the most of a large printable packaging surface. In-pack promotions are the domain of the brands. Promotions tend to be aimed at the children's sector and rely on popular licences, related to films and cartoon characters, to generate appeal. Own-label cereals adopt the same tactics, but often can't deliver credible in-pack offers as they are not able to secure branded/character licences.
As with so many mature markets, suppliers have turned their attention to encouraging consumers to spend more on the product.
So while total volume sales are expected to dip by 3%, value sales are expected to grow by 8% in current terms. As a result, prices paid per unit weight will rise by 5% as consumers trade up.
.jpg)
.jpg)