Cereal makers try to get millennials back to table

Ashley Peters is the kind of consumer cereal makers like General Mills both court and fear.

She grew up eating breakfast cereal — from Cheerios to Cap'n Crunch — and now at age 30 she's part of the coveted millennial demographic. But these days, Peters usually reaches for a granola bar at breakfast, which she often eats on the job.

"It's just easier to do," said Peters, a 30-year-old communications manager at a St. Paul nonprofit group. "I don't have time for milk at work."

Cereal is still king of the American breakfast, but its realm is shrinking as consumers look for more convenience and variety.

The percent of in-home breakfast meals that include cereal dropped from 31 percent in 2009 to 26.8 percent last year, according to market researcher NPD Group.

Meanwhile, U.S. cold cereal sales have fallen 9 percent from 2011 through 2015, according to market researcher Nielsen. Over those four years, breakfast cereal experienced a bigger sales contraction in absolute numbers than any other packaged food business, including the ailing soft-drink industry, Nielsen data show.

This is all particularly bad news for Minnesota, home of General Mills, one of the nation's two mega-cereal makers along with archrival Kellogg. The state also is a big hub for the No. 3 U.S. cereal company, Post Holdings, which last year bought the former Malt-O-Meal company and its plant in Northfield. Post now runs its cereal business out of Lakeville.

Cereal manufacturers haven't been bowling over customers with innovative products in recent years. But they are finding other ways to fight back, excising dyes and other ingredients perceived as unhealthy. They're marketing cereal as an alternative to other snacks.

"I've heard cereal being killed off three or four times in my career," said Jim Murphy, head of General Mills' U.S. cereal division. "But it's a highly resilient category."

Cereal is General Mills' biggest U.S. retail business, generating $2.3 billion in annual sales or 13 percent of total revenue. The Golden Valley-based company, which turns 150 this year, began making cereal in the 1920s with the launch of Wheaties. These days, General Mills' Honey Nut Cheerios is America's top-selling cereal, and Big G and Kellogg each control about 30 percent of the U.S. cereal business.

Ready-to-eat breakfast cereal was originally sold on its convenience, and it's still hardly a tall order to fix up a bowl of Cheerios. But cereal isn't very portable, and food portability is increasingly important to consumers.

"I know cereal doesn't take much time, but it's one more thing to do," said Peters, who eats breakfast on the go.

A study last summer by consumer research group Mintel concluded that convenience at breakfast was especially critical among millennials, defined by Mintel as between ages 22 and 39. Measured against three older groups, millennials by far agreed most with the idea that cereal should be more portable, and that cereal is inconvenient because it involves washing dishes.

Other researchers aren't sold on the notion that millennials have soured on cereal just because of inconvenience.

"When we look at the food consumption trends of millennials, they are increasingly involved in food preparation," said Darren Seifer, food industry analyst at NPD Group. "They will spend more time with their food."

Food preparation can be a road to convenience, too, as Jaks Pierre discovered.

Pierre, a 25-year-old communications specialist at a Minneapolis marketing agency, took time on Sunday nights to make five egg-and-cheese breakfast sandwiches, freezing them for a microwaveable breakfast. But she switched to cereal recently because — in her case — it suddenly became easier: Her employer, SixSpeed, installed a cereal bar.

"It's a huge convenience," said Pierre, who grew up a big fan of Apple Jacks because she shared a name with the cereal, phonetically at least.

Breakfast cereal's woes are also linked to the proliferation of options, from snack bars to a plethora of yogurt styles — Icelandic anyone? Classics like eggs and bacon are back in vogue, and both play well to the protein dietary trend. Fruit consumption at breakfast also has risen over the past decade, NPD data show.

In some consumers' eyes, cereal is on the wrong side of trends that vilify carbohydrates and sugar.

"Personally, I am trying to avoid sugar," said Terrie DeBaker, 50, a real estate services worker from Woodbury who has switched from cereal to eggs and toast at breakfast.

DeBaker said that her husband and two children ages 14 and 21, "just kind of lost our taste for cereal." She said her children are more apt to eat bagels or waffles.

Cereal is still in DeBaker's pantry, but it's more often eaten as a snack, she said.

Snacking is one of the hottest spots in the food industry, as consumers increasingly eat between meals or skip lunch, and cereal as a snack is not new. Generations of kids can attest to copping handfuls of Froot Loops after school.

But in 2014, General Mills for the first time began marketing Lucky Charms as a snack.

General Mills' main offensive pivots on removing unwanted ingredients from its prime brands.

Last year, the company began selling gluten-free versions of Honey Nut Cheerios and classic Cheerios. Gluten, a protein in wheat, is harmful to those with celiac disease or other wheat allergies. While less than 10 percent of the population has such conditions, many consumers are trying to avoid gluten for perceived health reasons.

General Mills says the gluten-free effort is working: Sales of Cheerios, including Honey Nut, were up 2 percent for the nine months ending in February, after being down 8 percent in the previous year.

Mills executives are also optimistic about another project: extracting artificial colors and flavors. Naturally colored and flavored versions of Trix, Reese's Puffs and other cereals hit the market in January and registered strong sales gains.

"This is exactly what the millennial mom wants," said Mills' Murphy. He sees General Mills' cereal sales soon turning positive after more than three years of stagnation.

"I think we are going to grow this quarter," Murphy said. Cereal, he said, is heading back to a growth rate of 1 to 3 percent.

Murphy points out that cereal still has a bigger presence in consumers' cupboards than any other breakfast item. Half of Americans eat cereal for breakfast at least once a week, according to NPD. Eggs and coffee are next, each tallying 36 percent.

That is certainly true for Joe Silvestri's household. Cereal is still the bedrock breakfast, though his family shoots for pancakes on the weekend.

"On a good day, we make pancakes. On a bad day we eat cereal," said the school admissions director who lives in southwest Minneapolis and is married and has three kids — ages 20, 14 and 8.

The "good" with pancakes is that they take more effort, and it's more of a family event for them. But there's not always time on weekday mornings.

"Cereal is one of those things that kids can do independently," Silvestri, 51, said. "They grab the box and a bowl and pour."

Mike Hughlett • 612-673-7003