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Cereal makers leave no niche unfilled.

What consumers say they need and what they say they want is not always what they buy. For cereal manufacturers, the proof is on the shelves. Despite consumers' professed interest in eating healthier, the biggest growth segment in ready-to-eat cereals is the presweetened variety.

"Presweeteneds may be controversial--but not from a sales standpoint," says Craig Ulmstead, a spokesman for General Mills.

Cereal makers do try to find the balance between parents' nutritional demands and kids' taste preferences. Cheerios and Honey Nut Cheerios exemplify the ability to satisfy both groups. The original Cheerios is consistently number one in sales and the top choice of children, while the Honey Nut variation is the category's most successful introduction in a decade.

Another area of appeal to children is the use of licensed characters. Last year, many of the major manufacturers got a healthy boost from licensed products. For example, there were products like Ralston Purina's Donkey Kong, General Foods' Smurf Berry Crunch and General Mills' Strawberry Shortcake and Pac-Man.

Entries into the children's cereal Category so far in 1984 are General Mills' Cinnamon Toast Crunch and a new licensed introduction, E.T.; General Foods' Strawberry Honeycomb; Ralston Purina's Donkey Kong Jr.; and Quaker Oat's Choco Crunch, an extension of Quaker's popular Cap'n Crunch.

While children are receptive to new product introductions, especially those featuring favored characters, they're also fickle. Consequently, licensed products typically have short life spans. Kellogg, one of the last big cereal manufacturers to jump on the licensing bandwagon, hopes things will be different for its 1984 introduction of C-3PO, a cereal named for a Star Wars character. "We figure this cereal will live a good long life because at least four or five more movie sequels are going to be made," says Bill Lambert, vice president and director of sales for Kellogg. Health is hot

Ken Defren, General Foods' manager of corporate communications, believes there's strong--if not dynamic--growth potential for "healthy" cereals. "General Foods, while not overlooking other possibilities in the market place, is looking closely at the healthy cereal category," he says.

Sandra Harrington, manager of brand publicity for Ralston Purina's grocery products division, admits that her company thought healthy cereals would carve a bigger niche then they did. But that doesn't mean they are giving up. "We don't want our competition to fill the niche," she says. "If we don't come up with it, somebody else will if there's a need."

Kellogg is equally committed to this still lackluster category. "We want to make sure every consumer is given the chance to purchase the type of cereal he wants," Lambert says. Two such brands that consumers said they needed, but don't seem to be buying--low-sodium Corn Flakes and low-sodium Rice Krispies--are still being test marketed.

But health appeal isn't totally failing. "Brain" and "fiber" have become popular new catchwords for adults, and fruit seems to appeal to children. Bearing this out are the introductions, all in the last year, of Crispy Oatmeal and Raisin Chex by Ralston Purina, Honey Nut Crunch Raisin Bran and Fruit & Fibre by General Foods, Shredded Wheat and Raisins by Nabisco, and Kellogg's Fruitful Bran, Cracklin' Oat Bran, Crispix (targeted to the Chex eater), and Strawberry Krispies. All-family: another way to go

Children may be the primary targets of cereal manufacturers' efforts, but the other segments of the population are not being ignored. Many of the products being introduced are positioned as "all-family." The all-family approach has two factors in its favor. It ends shelf space problems for both housewives and retailers.

The emphasis on all-family cereals shows no sign of abating in 1984. Already this year. Quaker has rolled out its Raisin Life, an extension to its popular all-family Life. Similarly, Ralston Purina hopes its new licensed entry, Cracker Jack, will appeal to the entire family. Granola's gains

Whereas ready-to-eat cereals are still finding consumers unpredictable, General Mills' Nature Valley granola line has provided a textbook example of marketers reading consumers' minds and supplying them with just what they really want.

Success breeds imitation, however, and Nature Valley has more company than it bargained for.

quaker Oats Chewy Granola Bar was responsible for cutting into market share leader Nature Valley's portion last year and boosting Quaker's overall share by 50%. "We're not concerned about competitors," says Marcia Watts of quaker Oats, pointing to the category's doubling of sales over the past two years. "WE're concerned about making enough product to fill demand." Quaker Oats has just introduced its second generation granola bar called Granola Dipps.

No longer called the "granola bar" section, the category has been broadened to the "wholesome snack" or "good for you" section. For example, Pillsbury has just rolled out its candidate for the section, Milk Break, which has no granola. Milk Break has 1/2 glass of non-fat milk in each bar, and is being supported by a whopping $16 million ad campaign.

Despite the growth in this area, Carnation Trail Mix bars met its demise in 1983. But Carnation is still strongly supporting its Carnation Breakfast Bars, a product that also contains no granola. "Though they're merchandised in the same part of the store, they're the only fortified bar that, with a glass of milk, can be a complete meal," says Paul Zilk, product manager.

Hershey introduced its New Trail Granola Bar in 1982 and went national in September 1983, supporting its product with TV ads, coupons and other promos. The most dramatic promotion was in-store sampling recently conducted in California. "The redemption rate was phenomental," says spokesperson Deb Ryerson.

A reformulated Kellogg's Pop-Tart, containing no artificial flavors, no preservatives, has recently been positioned in print ads against granola products. Fruit roll sales skyrocket

After living in the "health foods" and "dried fruits" departments, fruit rolls have found a profitable home in the wholesome snacks section. This subcategory has risen to more than $100 million in sales from practically nothing a year ago.

Steve Warhover, vice president and general manager of General Mills' Minnetonk division, says his company's Fruit Roll-Ups sales alone exceeded $70 million last year. Lipton's Sunkist Fruit Rolls, ranked second, were introduced in Los Angeles in August 1982 and are now available in three-fourths of the country. Geared toward children, both products were so successful that General Mills and Lipton had problems meeting demand.
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Publication:Progressive Grocer
Date:Jul 1, 1984
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