This article is part of our Breakfast Digital Feature.

Cereals are in trouble: consumers think they’re too sugary, sales have been declining for some time now and they’re under attack from the multitude of breakfast items available for the time-pressed consumer.

It may come as a surprise then to find out the number of breakfasts featuring cereal has risen 1.1% to 10.7 billion in the past year [Kantar Worldpanel 52 w/e 21 June 2015]. So what’s going on?

Customisation is helping, with Brits adding healthy additions to their bowls such as fruit, nuts and seeds. “Shoppers want great taste and variety in their breakfast, and as a result we’re seeing more people customising their morning meal,” says Alison O’ Brien, Kellogg’s commercial strategy director. “Some 13% of breakfast cereal occasions now feature fruit, with bananas, berries and currants the most popular customisations.”

A 4.9% drop in average price has also helped – nine out of the 10 bestselling RTE brands saw a reduction in average price. Ramping up volume-based promotions played a key part in this, with notable increases in ‘X for £Y’ promotions seen in portable, RTE and everyday family cereals. However, total price reductions remain the tactic of choice, accounting for 30.9% of all volume sales.

As a result, volume sales are up 1.6% but value remains on a downwards slope having lost a further 3.4% over the past year. This picture is reflected in the performance of cereals’ bestselling brands. Of the top 25 RTE brands, 12 have gained volume over the past year but only five added value [IRI 52w/e 18 July 2015].

  £m y-o-y% kgs (m) y-o-y%
Own label 246.5 -9.1 89.7 -5.2
Weetabix 109.9 -3.9 24.6 -0.7
Kellogg’s Crunchy Nut 81.6 -7.6 21.5 -3.3
Kellogg’s Special K 65.3 -19.7 11.6 -20.1
Kellogg’s Corn Flakes 55.3 -9.0 17.8 -2.6
Kellogg’s Coco Pops 54.7 -4.2 12.8 2.0
Nestlé Shreddies 51.2 0.9 15.3 10.5
Nestlé Cheerios 48.4 -9.6 11.5 -4.0
Kellogg’s Rice Krispies 41.6 -9.5 8.7 -5.5
Nestlé Shredded Wheat 37.1 -9.3 10.1 -2.5
IRI: 52w/e 18 July 2015        

Kellogg’s O’Brien believes innovation is the key to further growth. “Innovation is driving growth in the category,” she says. “This year, Kellogg’s launched Disney Frozen cereal, which has a 15% share of the year-to-date innovation sales across all outlets, while Krave Choco Roulette and Coco Pops Porridge are the second and third best-performing innovations in the category. Kellogg’s has an impressive 37% share of all innovation value sales this year.”

Innovation has helped Krave and Coco Pops gain volume sales but Variety is the only one to see growth in value – sales are up 19.8% adding £3.1m to brand value, which it attributes to strong displays at seasonal peaks such as Christmas and summer holidays.

Kellogg’s may have made headway in NPD but its power brands are flailing. Collectively its 10 RTE cereals in the top 25 lost £42.5m. The biggest hit was taken by Special K which lost £16m, followed by bestselling brand Crunchy Nut (down £6.7m) and All Bran (down £5.8m). “We’ve identified issues with the performance of All-Bran and Special K, and we’ve taken steps to address them with brilliant innovations and campaigns,” adds O’Brien.

Kellogg’s is hoping innovation can improve things. “Kellogg’s recently overhauled its Special K portfolio, with new Protein Crunch, new Super Porridges and the improved ‘Nutri K’ flake with 10% less sugar and nine vitamins and minerals,” she adds. “Special K has already seen an uptick in sales: this July we saw its biggest value sales week of the past year.”

With All Bran, Kellogg’s has ventured into the muesli category with two variants, which it claims have 30% more fibre than average muesli. “While the benefits of fibre might not sound too trendy, the products’ packaging is colourful and modern, and will appeal to shoppers of all ages,” says O’Brien.

  £m y-o-y% kgs (m) y-o-y%
Quaker Oat So Simple 107.7 3.2 17.3 0.6
Own Label 45.8 0.1 28.3 -0.4
Quaker Oats Traditional Porridge 13.6 1.2 7.0 0.8
Scott’s Porage Oats 11.9 -2.7 6.1 -0.4
Ready Brek 11.2 -10.9 2.8 -8.5
Kellogg’s Special K 4.6 -21.2 0.4 -33.3
Mornflake Superfast Oats 3.6 -11.3 3.2 -13.0
Alpen 3.2 -36.9 0.3 -46.0
Flahavans 2.7 5.8 1.3 4.6
Jordans 2.7 -2.8 1.1 -8.8
IRI: 52w/e 18 July 2015        

Venturing into new cereal formats is also a tactic being played out by Quaker – a brand synonymous with hot cereals – as it launches three granola variants. “It is designed to bring new consumers into the segment and drive sales for retailers whilst helping to ignite growth within the cereals category. With only two in 10 UK households consuming granola today, the segment has enormous headroom for growth,” says Duncan McKay, Quaker senior marketing manager.

Both health and convenience are important drivers within the hot cereals market, which in the past has fared much better than its cold cousin. Although sales of the category overall dipped slightly, Quaker is still finding it to be a lucrative market.

Sales of Oat So Simple are up by £3.4m while its traditional porridge oats gained 1.2% in value. “Quaker Oats, the nation’s fastest growing major cereal brand - delivering 60.1% of porridge sales - continues to build on its track record for driving the hot cereal category,” says McKay. “Convenient products such as Quaker Pots and Cuppa have brought new and younger consumers into the porridge category; these shoppers are increasingly looking for quick, easy and healthy solutions to fit into their hectic daily routine where breakfast sometimes can be missed.”

Others have been less fortunate. Alpen suffered the biggest losses of the hot cereals bestsellers, losing £1.9m followed by Ready Brek (down £1.4m), Symingtons (down £1.3m) and Kellogg’s Special K (down £1.2m).

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