Kellogg's hopes that it finally has figured out how to keep cereal sales from getting soggier: sell it in pouches.
Goodbye cereal bowl. Hello snack pack -- suitable for stuffing into a lunch box, briefcase or purse.
Never mind that sales in the $10 billion domestic cereal industry have been slumping for years. Or that Kellogg's cereal sales were down about 3% over the recent four-week period through June 7, the investment firm Nomura notes in a new research report. "Cereal trends remain weak," Nomura analyst David Hayes said in the report.
As one response, Kellogg's this summer is rolling out four cereals – Fruit Loops, Krave, Apple Jacks and Corn Pops – in single-serve pouches. The cereal business is changing, says Noel Geoffory, senior vice president of marketing for U.S. Morning Foods at Kellogg. "As consumers' lives evolve, there are more ways that we can make our food -- and our packaging -- more relevant to them."
Kellogg's, she says, spent big chunks of time with consumers and saw how many of them stuff cereal into plastic bags and take it along for snacking. "Consumers didn't want to take the whole box," she says. Smaller portions of cereal -- without the milk. That seems to be what consumers want -- never mind that milk is arguably the healthiest ingredient in a bowl of cereal. Now, Kellogg's has opted to do it all for consumers, and charge them a premium for it. A box of eight of Its Kellogg's On the Go Fun cereal pouches -- with a combined total 5.36 ounces of cereal -- fetches $3.89. By comparison, 12.2 oz. box of Corn Pops has a suggested price of $4.29; a 12.5 oz. box of Foot Loops is $4.79.
Will folks buy the pouches? One food guru thinks they will. "Cereal in a pouch is a good way to indulge your inner kid," says Lynn Dornblaser, director of innovation and insight at the research firm Mintel. "We've eaten cereal as a snack since we've been toddlers -- so why not fun, indulgent cereals in a snacking format?" The biggest driver, says Dornblaser, is that the cereal pouches are are a direct response to one of our culture's greatest loves: snacking. Americans now live their lives in small, snack-sized bits --- and not just food. "We send texts. We tweet. We learn via short, YouTube videos," she says. That's how we are increasingly eating, too -- in digestible bits, she says.
So, increasingly, the 350 to 400 new cereal products rolled out every year, she says, will focus on snack options -- or other new twists. The pouches could eventually be sold individually at convenience stores, says Geoffory. By selling cereal in pouches, Kellogg's also finds itself competing with the snack giants, such as Frito-Lay. "We're playing to a consumer need and behavior that exists today," Geoffory says. "If you love it for breakfast, why not have it as a snack at another part of the day?" In fact, one-quarter of cereal already is being consumed during other parts of the day, Geoffory estimates.
So Kellogg's is trying all sorts of things to respond to that trend. Last month, for example, it rolled out YoCrunch Cereal Bowls -- which combine several Kellogg cereals with YoCrunch yogurt in portioned cups sold in the supermarket dairy section. To get consumers thinking more about cereal at night, Kellogg's is even plastering nighttime images on the boxes of some cereals. Some Mini-Wheats and Special K boxes depict the moon, the stars and a purple-ish night sky. About the only night image missing on the new box is a consumer tripping down the stairs for a midnight snack.