Kellogg and General Mills artificial-free pledge won’t reverse cereal decline, says expert

06-Aug-2015 - Last updated on 07-Aug-2015 at 10:38 GMT

Healthy NPD in breakfast cereals is not just a fad, it has sticking power, says Euromonitor

Kellogg and General Mills’ pledges to remove artificial ingredients from their cereals in the coming years will not be enough to help cereal rebound but could spark an R&D trend, says a Euromonitor analyst.

This week, Kellogg announced it would remove all artificial ingredients in its branded cereals, some snack products and Eggo frozen products by 2018. The announcement came less than two months after rival cereal major General Mills made a similar pledge to remove ingredients by 2017.

Jared Koerten, senior food analyst with Euromonitor International, said that while the reformulation pledges should be acknowledged as a seismic change for industry, they didn’t hit on the root cause of the cereal decline.

“Instead of eating a bowl of cereal, consumers are eating snack bars or yogurt while on the go. It’s one of the broader reasons cereals are going down,” Koerten told BakeryandSnacks.com. “ … I don’t think [the pledges] will be enough to reverse the broader trend of cereal’s general decline,” he said.

In 2014, the value of the cereal market fell 2%, according to Euromonitor; Mintel suggested a 5% drop from 2009 to 2014.

A shift in research and innovation

The pledges could, however, spark a sea change in R&D priorities among manufacturers, he said.

Koerten said removal of artificial ingredients and “healthy” product development was not just a fad, but rather something that had significant staying power.

Younger consumers want healthier cereal products, says Koerten

“A lot of it is driven among younger buyers; millennials and generation X’ers who have taken an activist stance with their food,” he said. “As their income grows; as their earning power grows, I think that will be even further reflected in food purchasing habits.”

This in turn, he said, would change research and development priorities among food manufacturers across the world. Much of the current research and development money, for example, would likely be spent on finding new natural colorings and flavorings to replace chemicals these companies used to employ, he said.

“Even when they’re developing new products, it will be a prerequisite,” Koerten said. “They won’t be introducing a lot of products that don’t already fit this natural trend - it will really change the way companies research and innovate in the next several decades.”

Pressure to follow?

Kellogg and General Mills together make up roughly half of the cereal market, with Kellogg representing sales of about 27% of the cereal market, Euromonitor data shows.

Koerten said this meant other players like Post and private label brands would likely feel under pressure to follow in the footsteps of the two market leaders and start eliminating artificial ingredients.

There will be pressure on others to follow suit, says Koerten

He said private label brands had already started providing stiff competition for big brands; driving up quality in their products with a shift towards organic and healthier variants.

“That completive pressure is still there and I think it will continue to shift the aisle,” Koerten said.

There would also likely be more focus on hot cereals and granola, he said, as the market image of these products was that they were “less processed, more natural”.