Download Leveraging Ready-to-Eat Cereal for Higher

Leveraging Ready-to-Eat Cereal for
Higher Center Store Sales
B
reakfast has never been bigger. Seventy percent of American consumers now say it’s
the most important meal of the day,1 and the demand for delicious, healthy morning
meals has helped make breakfast-related categories in-store a $100 billion business in
retail outlets.2
This new consumer demand for healthier morning fare is good news for other breakfast
classics, such as ready-to-eat cereal (RTEC). RTEC has been and still is the No. 1 breakfast food in the country,3 eaten at 30 percent of morning meals4 and by two-thirds of
consumers at least every two weeks.5
2
RTEC AND HIGHER CENTER STORE SALES
Indeed, signs point to an RTEC renaissance: Dollar
sales have continued to improve during the past year,6
and many retailers are growing again in this category.7
This is great news for retailers because the RTEC category is a driver of both total retailer dollars and traffic
to the store.8 RTEC is found in shoppers’ baskets on 14
percent of grocery trips, and the total ring is $44 higher
when cereal is in the basket.9 Because of its strong turns
and reach, RTEC is one of the most profitable categories
within center store (coming in at 11 out of 127 categories)10 and the second most productive among breakfast-related categories.11 In the breakfast foods category,
cereal is No. 1 in unit sales, trips, repeat purchase rate
and household penetration.12 Other center store categories that have low value and frequency in basket and
tend to be over spaced include baking mixes, desserts/
gelatins, canned fruit, and jams/jellies/spreads.13
Simply put, RTEC is a powerhouse category. Best of all,
there’s still room for retailers to better know–and further grow–the category. Let’s take a comprehensive look
at RTEC today: what, when and how the cereal consumer eats, a walk along the path to purchase, plus plenty of
opportunities for retailers to boost sales and store traffic
while exciting and delighting cereal fans.
RTEC category basics
Cereal is both a well-loved classic and an evolving category, facing new challenges, welcoming new segments
and embracing new opportunities.
For many Americans, no grocery cart is complete
without a box or two of their favorite cereal. Few foods
are as fundamental to shoppers’ grocery lists: In fact, 89
percent of shoppers who purchased cereal had planned
to buy something in the category as they entered the
store.14 Combined with the high penetration rate of the
RTEC category, it is clear that RTEC is a destination
category15 and a trip and aisle traffic driver for U.S.
retailers—a go-to leg in any well-prepared grocery
shopper’s plan of attack.
In the decision tree, the first thing shoppers decide at
the shelf is whether they want a mainstream brand
or a natural/organic product, followed by secondary
decisions about kid appeal, all-family appeal, simple
health and value.16 Nutrition matters too: Consumers
look for calcium, protein, fiber and whole grains in their
packaged foods,17 and cereal delivers on all these fronts–
especially fiber, which only 5 percent of Americans18
get in recommended amounts. More than 60 percent of
Kellogg’s cereals, for example, offer a good or excellent
source of fiber. In addition, RTEC actually accounts for
less than 4 percent of added sugar intake in the United
States.19
While whole grains are an important part of a healthy
diet, they’re not the whole story. The enriched refined
grains found in RTEC provide a key plant source of
iron, folic acid and B vitamins, nutrients that many
Americans are lacking. Meanwhile, manufacturers have
been working hard to make kids’ cereals healthier than
ever, with less sugar and more fiber than in the past.20
No wonder children who eat cereal for breakfast tend
to have lower BMIs (body mass index) and a lower incidence of obesity than children who skip their morning
meal.21
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RTEC AND HIGHER CENTER STORE SALES
Planned purchases across
breakfast category
Planned purchase
Product
94%
Eggs
Yogurt 89%
Fresh fruit
Cold cereal
89%
89%
Bagels/bread/toast 88%
Breakfast meats 88%
Hot cereal 87%
Hash browns/tater tots
82%
Energy drinks
80%
Frozen pancakes/waffles 80%
Source: Ipsos Marketing
Together, these attributes and consumption trends
suggest several projected growth areas in RTEC.
Health and wellness-oriented cereals are projected to
grow, as are granola and muesli, all of which wear the
whole-grain “health halo.” Meanwhile, the growth of
beyond-breakfast cereal consumption bodes well for
RTEC products designed for later-day or immediate
eating occasions, such as smaller-sized, on-the-go
cereal snack packs. In fact, leading brands have already
begun leveraging innovation to jump start the conversation and boost growth: Kellogg and General Mills
are launching more than 90 new products this year,
according to Nielsen.22
Category growth will also be fueled by several key
demographics. Cereal has long been a go-to for busy
parents, and RTEC continues to have a higher-than-average buy rate among bustling families.23 Other demographics have emerged only more recently. Hispanics
now represent one of the biggest RTEC consumer
segments, averaging one extra box purchased per year
compared with the general population;24 the Top 6
Hispanic brands are Cheerios, Honey Bunches of Oats,
Kellogg’s Frosted Flakes, Special K, Cinnamon Toast
Crunch, and Froot Loops.25 By 2018, an estimated 83
percent of the category’s growth will be fueled by Hispanics,26 which represents a challenge for retailers and
manufacturers.
Overall, cold cereal consumption remains very high,
with 9 in 10 U.S. households purchasing cold cereal at
least occasionally.27 And though sales slipped in the
past few years, the good news is that shoppers are not
abandoning the category. The opportunity is in buyrate: Among households whose RTEC purchases have
declined, most weren’t even aware they were buying
less cereal28–they were simply buying cereal less often.29
Retailers can take additional steps to boost RTEC sales.
In the next section, we’ll lay out strategies for engaging
with cereal consumers both before they enter the store
and once they’re in the aisle.
RTEC path to purchase
Let’s start with a step-by-step look at the path to purchase in RTEC.
As mentioned previously, cereal is usually a planned
purchase. Accordingly, nearly all (98 percent) RTEC
shoppers do some sort of preparation before they hit
the grocery store,30 with the majority opting to make a
list (84 percent)31 or check the pantry (60 percent) to see
what’s needed.32
Many shoppers also ask other members of the household what items are needed or preferred, and prioritize
their budget around foods with “mass appeal,” especially in households with kids.33 Many parents even find
themselves craving foods their kids recommend–8 in
10 shoppers say a child’s request has left them wanting a
breakfast food again.34
Brand names also play a big role in the decision-making process. In fact, the Top 10 RTEC brands make up
45 percent of all category sales,35 including Cheerios,
Special K, Kellogg’s Frosted Flakes, Cinnamon Toast
Crunch, Mini-Wheats, Kellogg’s Raisin Bran, Lucky
Charms, Froot Loops, Chex, and Cap’n Crunch.36
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RTEC AND HIGHER CENTER STORE SALES
60%
Though cereal shows up in baskets across all kinds of shopping trips, true to its
pantry staple nature, RTEC is most often purchased as part of a stock-up trip,37
with stock-up shoppers typically buying two boxes of cereal per trip. However,
cereal stock-ups aren’t an everyday or even every week occurrence. The average
cold cereal shopper makes just one cereal-buying stock-up trip per month.38
This underscores the point made previously: RTEC sales have been stagnating
due to the decline in frequency of purchase–not because consumers are leaving
the category.
Shoppers who
check the
pantry/cabinets
to see what items
are low/needed
Pre-shopping behaviors
When planning
for grocery
shopping,
a shopper
usually:
List type
(among
those
making
a list)
Checks the pantry
Checks with family
Checks the ads
Creates a list
Uses his or her mobile phone
Electronic
Paper
62%
27%
84%
Shoppers who
make a list
before going
to the store
Weekly ads/
flyers
7%
Mental list
4%
Sources: Breakfast A&U, 2012; 2015 pantry audit; GfK, Shopper Insights Shopping List Study, 2013
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RTEC AND HIGHER CENTER STORE SALES
Because the average RTEC shopper makes just one big
trip down the cereal aisle each month and often has
cereal on the shopping list already, getting on shoppers’
radar before they hit the store is crucial.
courage experimentation and fuel incremental growth
in-store.
Retailers can connect with cereal shoppers at several
pre-store touch points. Ads play a big role in trip planning–55 percent of shoppers check weekly retail ads to
see what’s on sale, while 43 percent peruse the newspaper or Internet for discounts,39 so highlighting cereal
promotions in weekly or daily marketing communications is essential.
While cereal remains a pantry staple, the category is
far from stagnant. Seven out of 10 households eat cereal
as a snack, and snackers eat it multiple ways, including
in a bowl with milk and dry;42 30 percent of cereal is
now consumed outside of breakfast.43 Many cereal fans
are even finding fun new ways to get their fix. Creative
consumption behaviors include mixing cereal with
yogurt, mixing more than one kind of cereal in a bowl,
and using cereal in a dessert recipe.44
The growing snacking occasion
Connecting via mobile is critical too. Four in 10
shoppers regularly use their mobile device to help plan
grocery trips,40 with most incorporating an app or two
into the process. Couponing apps are the most popular,
but many shoppers also use list-making apps and recipe
apps.41 To best leverage this mobile milieu, consider
building meal-planning capabilities into apps or other
digital tools.
Because cereal has become such a popular snack, an
increasing number of retailers are dedicating shelf space
to on-the-go cereal options such as cereal in a cup. Some
retailers are even devoting entire express lanes, checkout lanes or “stores within a store” to items intended for
immediate consumption. This is producing benefits: Single-serve offerings are growing at a faster rate than both
the cereal segment and the breakfast segment as a whole.45
But even though cereal shoppers tend to plan their
purchases in advance, there’s still plenty of room to en-
55%
Shoppers who check the
weekly retailer ads for what
is on sale
43%
Shoppers who check the
newspaper or go online to
find coupons
62%
Shoppers who use a mobile
device for planning their
shopping trip every time or
close to every time
Type of app used for
planning shopping trip
Coupon
26%
List 20%
15%
Recipe 12%
Payment
Price checking
Healthy eating
5%
Fitness
5%
10%
Budget 4%
None
16%
Sources: Breakfast A&U, 2012, Shopping List; GfK, Shopper Insights Mobile, 2014
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RTEC AND HIGHER CENTER STORE SALES
Optimizing RTEC
in the breakfast aisle
Shoppers make purchases based on their own needs as
well as the needs of their families, and research shows
most shoppers can find what they’re looking for using
visual cues in the aisle.46 But retailers can more effectively connect with their target consumers by shelving
breakfast aisles according to target age flow, i.e., taste
continuum. This approach encourages shoppers to stop
and browse at multiple points along the aisle rather than
cruising right through–and it works. In one study, shoppers stopped more often when traversing a breakfast
aisle shelved by target age flow,47 increasing unit sales
by 5 percent and resulting in a 4 percent higher average
dollar price per item.48 What’s more, the entire breakfast
aisle got a boost, including on-the-go cereal, hot cereal
and toaster pastries.49
Cereal shoppers also like dedicated sections for granola
products and natural/organic items. This arrangement
not only makes shopping easier and more intuitive,
but it helps point those looking to try something new
toward the right section.50
Organizing the shelf along a health continuum, with
fun, indulgent cereals on one end, simple goodness in
the middle, and healthier options at the other end of
the spectrum, is a great approach for on-the-go items.
Follow this with a section for nontraditional options
such as snack-bag cereals, toaster pastries and drinkable
breakfasts, as well as a separate section for hot cereal.
Cereal: The No. 1 display choice
RTEC display packs a big punch: Among the Top 10
center store categories, cereal sees the greatest sales lift
when on feature and display at 526, with the next closest
Top 10 category coming in at 405.51 Accordingly, cereal
is the No. 1 display choice within center store.52
To enhance the cereal aisle even further, focus on
optimizing display mix. RTEC lift and ROI significantly
increases as the quality of the merchandising improves.
This includes identifying win-win promotion partners,
pairing brands that build higher dollar rings and boost
ROI. Some manufacturers offer strong analytics and
merchandising options that can enable the right brands
in the right quantities and pricing to maximize retailer
resources in each store.
Optimizing the breakfast aisle
Focus on
day-part
(Target age)
+
=
Shopperled focus
Optimal aisle
COLD CEREAL
Kid
All family
Granola
Adult
Natural/
organic cereal
ON-THE-GO
Toaster
pastries
Fruit snacks
Wholesome bars
Reward
Simple
goodness
Better for you
Breakfast snacking
Drinkable breakfast
Hot cereal
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RTEC AND HIGHER CENTER STORE SALES
Winning with promotion
Manufacturers who have invested in these kinds of
promotions with retailers have successfully realized
incremental sales, particularly in the past year.54
Another big opportunity lies in spurring unplanned or
incremental purchases through promotions. This can
be tricky–as we’ve seen, cereal shoppers tend to enter
the store with an agenda in mind–but studies suggest
that well-executed promotional efforts pay off. Scanner
data show that stores enjoy a 14-point lift in RTEC sales
when combining feature and display promotions.53
Remember: Infrequency of purchase is one of the category’s biggest challenges. To fully optimize the RTEC
category, encourage more frequent purchases through
these kinds of one-two punch promotions.
RTEC promotions can also extend beyond the breakfast
aisle. Retailers have a huge opportunity to boost multiple category sales by cross-merchandising RTEC with
perimeter items, especially produce. As an example,
with produce sales up 4.2 percent in 2014 and on track
to keep growing in 2015,55 retailers can piggyback on
the produce aisle’s success by cross-merchandising key
items, such as bananas or blueberries, with cereal. Cereal’s high penetration and destination status can create
an extra purchase in these categories or an impulse
purchase for both categories. Yogurt, eggs, bacon, cream
cheese and, of course, milk also have high penetration
among buyers of several leading cereal brands.56
But don’t forget to keep things fun. Package inserts and
promotions engage consumers in a playful way (think
games, competitions and giveaways, seasonal items).
Total U.S. center store feature and display lift
Dollars
F&D lift
526
405
381
299
284
264
225
189
57
Snacks Cheese
271
275
201
170
193
Bread/
baked
goods
297
Milk
110
Carbonated
beverages
Beer
157
130
Prepared
foods–
frozen
Wine
Condiments/
gravies/
sauce
Cereal
Juice
drinks–
shelf
stable
Candy
Coffee
Yogurt
174
Bottled Granola/ Toaster
water yogurt pastriesbars
shelf
stable
Breakfast
bars
Crackers
Source: Nielsen Store View, 52 weeks through 5/9/15
8
RTEC AND HIGHER CENTER STORE SALES
Clearly, the RTEC category is rife with opportunities for innovation, expansion and growth. While the category remains a breakfast staple, it’s also
evolving into new eating occasions, consumption behaviors and core consumer segments. Retailers that stay ahead of the changing cereal landscape
and engage with the cereal shopper–both in-store and out–stand to see
sales and store traffic flourish. Now that’s what we call a big breakfast.
1
Added Value, 2014
26
2
Nielsen Nitro, 52 weeks ending 1/24/15 for F/D/MM/club
27
3
The NPD Group’s National Eating Trends® In-Home/Away-FromHome database
4
NPD, 2013
The NPD Group’s National Eating Trends® service; In-Home and
Away-From-Home, year ending 2/14
5
Nielsen, total U.S. xAOC, 52 weeks/24 weeks/12 weeks through
7/11/15
Nielsen category forecasting
Nielsen Homescan-total U.S., 52 weeks ending 4/18/15
28
Dunnhumby USA, Cereal Migration Analysis & Opportunities, 2015
29
Nielsen Panel, 52 weeks ending 6/29/13
30
Breakfast A&U, 2012
GfK, Shopper Insights Shopping List Study, 2013
31
32
6
7
Nielsen, 12 weeks ending 7/11/15
8
Major retailer loyalty card data (regional), 27 weeks ending 1/10/15
Nielsen Homescan Panel, Center Store Study, grocery channel, 52
weeks ending 3/28/15
9
Willard Bishop Study 2014 Report–Weekly True Profit Measure
10
Nielsen xAOC, AOD, 52 weeks ending 9/27/14
11
12
Major retailer loyalty card data (regional), 27 weeks ending 1/10/15
13
Nielsen, total U.S. grocery, 52 weeks ending 3/28/15
14
Ipsos Marketing
Nielsen Homescan Panel, Center Store Study, grocery channel, 52
weeks ending 3/28/15
15
16
Nielsen, 2014
International Food Information Council Foundation, Food and
Health Survey 2015
17
Analysis of Average Daily Fiber Intake among Ready-To-Eat Cereal
Consumers: Role of Whole-Grain Cereals in Closing the Fiber Gap,
American Journal of Lifestyle Medicine, 3/6/13
18
U.S. Department of Agriculture/U.S. Department of Health and
Human Services, Dietary Guidelines for Americans, 2010
19
20
Kellogg’s data
Miller KB, DJ Liska and VL Fulgoni, The Association between Body
Metrics and Breakfast Food Choice in Children, 2013
21
Breakfast A&U, 2012; 2015 pantry audit
Smarty Pants, 8/14
33
Smarty Pants, 8/14
34
35
Nielsen, total U.S. xAOC, 52 weeks ending 7/11/15
36
Nielsen, total U.S. xAOC, 52 weeks ending 7/11/15
Nielsen Homescan-total U.S., 52 weeks ending 12/27/2014, excludes
gas-only or Rx-only trips
37
38
Nielsen Homescan-total U.S., 52 weeks ending 4/18/15
39
Breakfast A&U, 2012, Shopping List
40
GfK, Shopper Insights Mobile, 2014
GfK, Shopper Insights Mobile, 2014
41
42
Gongos Research, 5/13
NPD, 2013
43
44
45
Gongos Research RTEC Shopper Study, 1/12
46
47
In Vivo Shopper Study: Evolution of Morning Foods, 6/13
48
In Vivo Shopper Study: Evolution of Morning Foods, 6/13
50
Dunnhumby USA, Cereal Migration Analysis & Opportunities, 2015
Nielsen Store View, 52 weeks through 5/9/15
51
52
Nielsen, total U.S. xAOC, 52 weeks ending 5/9/15
53
Nielsen Scantrack, Cracker Core CY 2013, total U.S.-food
Nielsen data
54
23
Nielsen Homescan-total U.S., 52 weeks ending 4/18/15
55
Nielsen Homescan-Hispanic, 52 weeks ending 4/18/15
25
Nielsen, total U.S. xAOC Hispanic, 52 weeks ending 7/11/15
In Vivo Shopper Study: Evolution of Morning Foods, 6/13
49
22
24
Gongos Research, 5/13
Nielsen, 26 weeks ending 6/6/15
Nielsen value-added promotion post-analysis
http://www.foodnavigator-usa.com/R-D/Cross-promoting-centerstore-items-with-produce-could-boost-sales
56
Nielsen, 9/14
About Kellogg Company
At Kellogg Company, we are driven to enrich and delight the world through foods and brands that matter. With 2014 sales of approximately $14.6 billion, Kellogg is the world’s leading cereal company; second-largest producer of cookies and crackers; a leading producer
of savory snacks; and a leading North American frozen foods company. Every day, our well-loved brands nourish families so they can
flourish and thrive.
Contact:
Kellogg’s media hotline: 269-961-3799
[email protected]