US food industry: health conscious consumers are cereal killers

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Ready-to-eat cereal is a culinary bedrock of American life. Giant boxes of Cheerios and Frosted Flakes have fuelled family breakfasts for almost a century. But cereal is starting to lose its snap, crackle and pop.

Health-conscious consumers are swapping cold cereal for smoothies, overnight oats and eggs. Only 12 per cent of American households eat cereal on a daily basis, according to a recent survey by CivicScience.

Consumption peaked in the mid 1990s. Annual sales across the industry have fallen from nearly $14bn in 2000 to about $10.4bn in 2019, data from Euromonitor shows. The pandemic gave demand a jolt. But the reprieve did not last. Volume sales of ready-to-eat cereal in the US fell 5.4 per cent last year after dropping nearly 11 per cent in 2021.

Big Cereal’s diminished presence in American pantries has put companies at a crossroad.

At Kellogg, management is forgoing the slow-growing North American cereal business. It is spinning out the division housing brands like Special K and Raisin Bran into a new company called WK Kellogg. This will leave Kellogg, which will be renamed Kellanova, with its fast-growing snacks business. The division, home to Pringles and Cheez-it, accounted for just under half of Kellogg’s total sales last year.

Kellogg said the separation will create two stronger, more focused companies. But it is hard to see how a standalone cereal company can outperform. Investment is needed to revitalise tired brands. That is at odds with plans to cut costs and boost ebitda margins. The new company looks more like soggy leftovers.