Open the average family's food cupboard and you'll find about seven boxes of cereal. However, in households with no children this drops to five (Weetabix Cereal and Cereal Bar Market Report 2007). Given that by 2010 there will be an estimated 440,000 fewer children compared with 2000, it presents a challenge for the cereals market and is one of the reasons it is focusing heavily on the adult sector and its obsession with health.
Kellogg's convenience category manager Frances Booth says cereal is considered to be a healthy breakfast choice by consumers and is benefiting from current concerns regarding diet. "It's an easy way to eat a healthy breakfast," she points out. "Recent consumer research by Kellogg's shows that 58% of people are eating more cereal because of the health benefits."
According to Booth, one of the biggest trends of the past five years has been a growth in what marketing people call 'shape management' - cereals aimed at dieters. "Obesity and weight management remain the main factors influencing cereal consumption. This is why Special K is growing rapidly and is now worth £112m globally."
This month sees the range expand with Special K Oats and Honey aimed at women who want a non-fruit shape management cereal. The launch will be backed by TV ads in April and September this year, as well as being featured on the back of packs in the existing Special K range.
The brand is also running the Special K Slimmer Jeans Challenge again. Last year more than 2.3 million people participated in the event. Advertising for the challenge includes panels in gym changing rooms.
Booth says Kellogg's will continue innovation in 2008 within some of its biggest brands.
In promotions, the company is currently running a consumer promotion offering free tickets to the zoo as well as the opportunity to be a zookeeper for the day across Rice Krispies, Frosties, Coco Pops and Corn Flakes. Packs will feature a free ticket, allowing an adult or child free entry to a participating zoo or aquarium. Consumers can also enter online for the chance to be a zookeeper for a day. From February the promotion will also receive TV and online support.
Nestlé business controller, convenience, Graeme Foster agrees health is the way forward for cereals. He says: "Sales are moving towards health sector cereals and accompanying category growth is through greater sales of healthier cereals. The category is actually in growth in volume and value terms, although the growth in convenience outlets is less than in the multiples."
In keeping with the health message, Nestlé cereal boxes now carry a green banner informing consumers that all Nestlé cereals contain wholegrain and the company has promoted heavily wholegrain content through TV advertising. Last year the company also reduced the salt levels in the Shreddies brand by 16%.
In the children's market education from manufacturers about the importance of breakfast has helped the market. Added functionality is still important for this sector, targeting mums who are looking for extra health benefits. In this area Weetabix last year launched three cereals with added prebiotic: Pirates, Star Force and Princess Stars.
This month sees Kellogg's extend its Coco Pops range with Coco Pops Moon & Stars. The multigrain cereal will be supported by two bursts of TV ads in April.
Honey Monster Foods is also promoting the 'nothing artificial' line of its Sugar Puffs brand in its latest promotional campaign and is putting the Honey Monster back on TV screens to help. The company teamed up with the film Bee Movie in December for an on-pack promotion on Sugar Puffs, offering consumers the opportunity to win an XBox 360 game plus a copy of the Bee Movie video game.
How to please everyone
One of the biggest challenges for cereal is addressing consumers' changing needs. Recent research by Kellogg's highlighted that three-quarters of British families don't have breakfast together and one in five people now eat breakfast alone, one in three on the way to work and three out of 10 at their desk.
Quaker marketing director Carol Garbutt says: "Quaker research shows that when it comes to choosing what to eat for breakfast, consumers opt for something that fulfils functional needs - convenient, energy-giving and hunger-busting. Women, in particular, want health, while men are more likely to opt for convenience."
Last year Quaker relaunched its entire range of cereals and has kicked off 2008 with a £1.2m TV ad campaign to launch its 'Make more of your morning' position. The ads promote the fact that Quaker oats provide four hours 21 minutes-worth of energy.
Earlier this year Weetabix added a twist to the health message, pushing the cereal into snacking with a campaign to encourage consumers to experiment with toppings and eat Weetabix at different times of the day. The company also launched the first breakfast cereal to offer one of the recommended five-a-day with its Alpen High Fruit.
New to the range this month are three new products: Alpen luxury oats, flakes & clusters; Alpen luxury granola chocolate clusters; and Alpen luxury granola cinnamon clusters. The launches form part of a revamp of the Alpen range, including a new look, and will be supported by a £2m advertising campaign.
Nestlé's Foster says that one significant factor for the market has been a move away from some of the older and established staple products to more added-value products.
He also believes the oat category will continue to do well. "The oat category saw growth in 2007 and this will be maintained in 2008, with growth primarily led by Weetabix's Oatibix cereal in convenience stores. Other cereals have entered the market, but as yet do not warrant an ongoing space on a convenience store's fixture as they are not yet mainstream enough."
One of the biggest trends in oats in the past couple of years has been cold oats. In this category Weetabix introduced Oatiflakes and Nestlé added its Oat Cheerios and Nestlé Oats & More.
According to Andrew Pyne, corporate affairs manager at Cereal Partners UK, the success of this sector has led some retailers to set up a cold oats bay within the cereal aisle. Oats appeal to consumers because they boast good health credentials, being good for heart health and cholesterol management as well as being high in fibre, vitamin B and iron.
The oats market is worth £100m but was hit by several factors including a mild winter in 2006, which caused a slowdown. Mornflake retail sales director Alan Cullom explains: "Winter 2006 was the warmest in 50 years and there was a bit of a blip, but winter 2007 was colder. Despite the mildness of the year before, porridge was still showing a 2% growth and we're seeing a strong growth in sachets."
In June last year Mornflake targeted adults, teaming up with Lyle's for Lyle's Golden Syrup porridge oat sachets. Cullom adds: "There really is a growth in the sachet market and it's premium priced so it's an opportunity for retailers to stock a wider range over a relatively small pack space."
Research by Quaker points to the fact that 80% of consumers take less than 15 minutes to prepare and eat breakfast, with 38% taking less than five minutes - signalling a big opportunity for convenience in cereals. Aiming firmly at customers looking for convenience is S&B Herba Foods' microwavable porridge. Last year the makers of the ambient ready-to-eat product launched a soya milk variety.
Value of convenience
Kellogg's Booth says that c-stores are critical to the cereal market, but they have to avoid overloading the fixture with too many lines: "We would encourage retailers to make sure their fixture is not too overcrowded with secondary lines or deep-cut deals on tertiary lines. Some recent research we undertook into the convenience sector in late 2007 shows that convenience cereal customers are less likely to buy alternatives to their main brand if their first choice isn't available, so stocking a core range of best-sellers is critical to a strong category performance."
Nestlé's Foster believes range is paramount to success. "Stores that are winning and showing category growth are those that are stocking the products that consumers actually want.
"Most convenience store consumers also shop in a larger multiple store. If the consumer cannot purchase the cereal they want in a c-store then they will more likely return to the multiple to make the purchase."
He uses the example of a five-shelf, one-metre fixture with about 24 facings. "This should be used to stock the top 20 cereals. With a couple of hot cereals and double-facings of Weetabix, plus a single facing for manager's choice. It really is that simple."
Foster says that the trends of pricemarked packs and decreasing case sizes are also helping c-stores. Both Nestlé and Mornflake have announced smaller case sizes.
According to Cullom, retailers should also keep an eye on the weather: "If there is a sudden sharp decline in temperature, sales can rise 30-50%, which is very difficult to plan for. The category used to be more seasonal, but is less so now. We sell as much in summer as we used to sell in winter."
Booth says that she sees the main challenges for this year as "ensuring the convenience cereal offerings remain appropriate for the shopper's needs - given that deals are not their primary motivation".
Cullom agrees: "The challenge is keeping up interest. Cereal is generally high on a shopping list. Keeping interest high in store and stocking new products will make the most of the opportunity. Cereals are still bought on impulse, so stock interesting lines."
Jinks Spar, Falmouth, cornwall
"We have a one-metre fixture with about 18 variants. It's the sort of market where you have to stock everything. We try to cover adult conflakes and adult healthy and then there's children and students, who make up a big part of our customers. I don't think it's
a planned purchase but there's a lot of pressure from children who pester.
"Some of the new products that come out are fads that will come and go. I find the big challenge in retailing is knowing which of the new products to stock. Epos scanners mean we can see which slow sellers to get rid of, but deciding which of the plethora of new lines to take on is difficult.
"We accept pricemarking only on frozen lines, so we premium price everything else.
"I wouldn't say cereals is the most exciting department
in the store, but it is bright and colourful. I could get away without it sales-wise, but I think it's necessary to have it in the mix."
Mace, Fareham, Hampshire
"We've got a one-metre bay with four shelves for breakfast cereals, with about eight or nine cereals on it. We stock a range of sizes, but don't do sachets. We tried the ready-made cereal a while ago, but it didn't work for us. Our customers like the old traditional cereals which have remained steady sellers.
"The major thing we've noticed, really, is the price-marking on packs and the two-pack promotions. You can argue that you lose margin on the two-packs, but you gain in other ways. And the customers like it if prices are actually on the packs, rather than us pricing them.
"At this time of year it's all hot cereals and porridge oats. In fact, in winter we sell more of all the cereals."