Last March when the multiples began their price slashing bonanzas, no one realised just how far they would go. Traditionally, breakfast cereal brands have enjoyed premium pricing and good margins. But cut-throat pricing is now changing the balance of power between brands and own label, with the latter gaining ground. Retailers' cuts are squeezing these once profitable margins, with promotions, price cuts and price marked packs driving sales. Despite more premium, more expensive lines coming on stream which are helping to build value share, this fierce price competitiveness between the multiples is leading to fears that manufacturers won't be able to maintain consistent advertising support if profit margins are squeezed too much. Just last week it was reported that Kellogg had finally agreed to supply German discounter Aldi in Germany with own label in a bid to hold on to the business, a deal which would have been unthinkable before. Our own weekly shopping survey, The Grocer 33, shows how Kellogg's Corn Flakes is being targeted by the multiples ­ take Safeway's one day only special, slashing the price of a 500g pack from 99p to 55p. Meanwhile, the breakfast cereal market has declined by about 2% since 1997 in both volume and value, and there is no sign of volume growth in the short term [Mintel]. Ready to eat cereals account for the biggest share of the breakfast market with Kellogg, Cereal Partners ­ the partnership between Nestlé and General Mills ­ and Weetabix controlling around two thirds. However the small hot sector is growing, with Quaker's microwaveable cereals finding a niche among 25 to 44 year olds, and its newest Top That creamy cereal aimed at people with kids. Cereal bars are also driving growth. And five year trends from Weetabix show that cereal is still the key food for breakfast, with traditional cooked breakfasts in decline. Weetabix is spending more than £10m on its mini bix ­ Frutibix and Bananabix ­ this year. Sales director Trevor Hart says: "The breakfast cereal market is extremely competitive, so it is the innovative brands and marketing activity that will drive sales and increase profits for retailers." While both Weetabix and Cereal Partners' shares have grown ­ with Weetabix up 7.3% to £137,480m and Cereal Partners up 9.1% to £134,668m, brand leader Kellogg's share has dropped 4.1% from £428m to £411m [Information Resources: MAT 52 weeks to December 1999]. In the US Kellogg has lost pole position to General Mills but in the UK it is still brand leader where, as well as undertaking heavyweight advertising support, it has been heavily investing in price discounting to win back share. However the key drivers for growth are seen as convenience and snacking. Breakfast skippers are on the increase as time pressured consumers have only time for a snatched mouthful of coffee before hitting the commuter route. Single person households combined with busier lifestyles have sparked off the deskfast' trend, with people opting for a bite at the office rather than a nibble at home. Cereal bars have been one way of catching up with the food on the go trend. Ever since 1997 when Kellogg launched Nutri-Grain into the UK, the company has been out to recapture those breakfast skippers. It has since followed this up with Nutri-Grain Twists. And Kellogg's Rice Krispie Squares has become a £24m brand [Information Resources]. However other companies such as McVitie's are muscling in on the £28m Nutri-Grain brand. McVitie's says its Go Ahead! is a strong contender, claiming 3% of all biscuits are eaten at breakfast time. The company's Apple Bakes and Berry Bakes were worth £3.5m in 1999, accounting for 13% of Go-Ahead! biscuit sales, and it predicts that this year Bakes will grow by more than 20%. Other contenders include Jacob's Bakery's Vitalinea, Jordan's bars, Halo Foods' 9 to 5, and Renshaw Scott's New Yorker bars. However Kellogg continues to innovate and its faith in Nutri-Grain is underscored by its latest extension ­ a 90% fat free chocolate variant that appears to be repositioned as an impulse confectionery line which perhaps may usher in other sweet fillings such as toffee and caramel. But where do retailers merchandise this wide choice of snacking lines? Many have created breakfast zones placing all the essential ingredients together to make life easier for the consumer, but this has had a mixed reception from suppliers. Dailycer, a leading player in own label, produces around 30% of the £195m own label cereal market [Information Resources] but also makes brands such as Weight Watchers from Heinz Perfect Balance, Cheshire, and Thomas The Tank Engine and Friends shaped cereals. It claims consumers are confused when some products are merchandised in cereals and others in biscuits. Marketing manager Richard Mulford says: "My belief is that, with all the advertising that Kellogg has done capturing the imagination and ensuring understanding of the concept of the missed breakfast, all cereals ­ including cereal bars in a convenient format for on the hoof eating ­ should be merchandised in the cereals fixture." This is not a view echoed by Ennis Foods, the company which brought a new dimension to food on the move when its Rumblers fresh milk and cereal range hit the shelves. The company believes space allocated to breakfast on the go lines in multiples will be squeezed as more of these products are launched by manufacturers eager to exploit the out of home breakfast market. It says retailers will need to redefine the category to profitably capitalise on this trend, but that this could lead to pressure on conventional breakfast cereals. Category redefinition should also lead retailers to consider the potential returns from giving dedicated chiller space to the increasing number of fresh breakfast products coming on to the market. The Rumblers brand, which combines a separately packaged portion of breakfast cereal and a serving of fresh semi-skimmed milk, complete with a full sized spoon with a folding handle, was launched two years ago. It is planning to extend the range with a new variant in the summer called Rumblers Bio ­ a serving ofnatural pouring bio yogurt and a separate serving of luxury cereal clusters. What the company can do with wet and dry combinations is extensive, says marketing controller Fiona Aydogan. "Our current range is fairly mainstream. The new range will be more premium, more indulgent, and targeted at multiples, impulse and foodservice." Many people have questioned whether the deskfast trend is a gimmick or satisfying a human need, and Ennis Foods strongly favours the latter. Aydogan says: "We did research after our products were launched and more than 50% were buying Rumblers up to five times a week. "We believe deskfast is going to grow. It won't fade away." {{FOCUS SPECIALS }}