Stores Miss the Oatmeal-Hot Cereal Trend

June 11, 2010

Purveyors of oatmeal and hot cereals that are so trendy today have a message for moms around the world:

Purveyors of oatmeal and hot cereals that are so trendy today have a message for moms around the world: Thanks, mom! Insistent prods to ‘eat a good breakfast’ rang true in homes all over and created generations of consumers ready to give celebrity treatment to these staples of good nutrition and value.

Those days are here. The combined effect of television exposure on food programs, and heavy marketing by restaurants, diners and food carts – think Starbucks, Au Bon Pain, Jamba Juice and others – are putting oatmeal and hot cereals in front of the public every morning with special twists. What’s behind their push? They can make these servings easily, push them out quickly, present them well in appealing flavors with nice chef flourishes, foster a healthful image, and make sky-high margins.

It’s a great way to start the day for eateries, which could use the growth segment, and consumers, who gain a nutritional lift. Foodservice operators make it so easy that breakfast consumers are flocking to them. The new apple-cinnamon oatmeal at Au Bon Pain is the chain’s fourth-best breakfast seller, behind coffee, pastries and breakfast sandwiches, the chain told the Washington Post recently.

Yet supermarkets and other retail channels aren’t capitalizing on the enormous appeal of oatmeal and hot cereals, according to Nielsen data. The morning time-crunch is certainly one factor, but F3 believes that smarter cross-merchandising would be key to pump up the category and leverage the versatility, family appeal and healthfulness of these products. When hot cereal is in the cart, for example, the highest indexed product is disposable diapers and training pants (116, where 100 reflects average purchase incidence). Number two is baby food (111), number three is baby needs (110), according to March 2010 Spectra Homescan Product Library data. These items help illustrate the stage of family formation, and suggest the extended lifetime value and rhythms of the households that are buying hot cereal at retail. 

Dried fruit and molasses table syrup both index at 109, rounding out the Top 5 companion purchases with hot cereal; these items are specific to the actual product consumption, and suggest pairings in the aisles that could effectively build baskets and increase shopper satisfaction.

Unfortunately, through the past two years of this recession, retail merchants have suffered negative growth in both the hot cereals category and the oatmeal segment within it.  Dollar sales of hot cereal overall fell 3.4% to $1.05 billion on a 2.2% equivalized unit volume (16-ounce basis) decline in U.S. food, drug and mass merchandiser stores (including Walmart) during the 52 weeks ended April 17, 2010, Nielsen data showed.  This followed a year in which dollar sales of hot cereals slid by 0.6% EUV dipped by 1.8%.

The oatmeal segment had parallel performance in these same channels and time period. Dollar sales fell 3.9% to $606.0 million on a 0.7% EUV dip in the latest 52 weeks; in the prior year, dollar sales had slid by 3.5% and EUV was down 3.7%, reported Nielsen.