A Recipe for Growth at Breakfast
By Jim Doucette, Managing Director

How many times have you heard the phrase, "Breakfast is the most important meal of the day?" Probably many times, and for good reason. Studies show that children who eat breakfast do better in school. Not only do adult breakfast eaters perform better during the day, they are also more likely to maintain a healthy weight.

Consumers, by and large, have internalized the message about Breakfast being a good start to the day.  On an average day, almost 9 out of 10 of us do eat breakfast, creating a $108 Billion breakfast market, including both in-home and away from home meals.

The top consumer needs for foods at breakfast are – in order – Taste, Satiety, Nutrition and Convenience.  While ranking third, Nutrition is critical at breakfast vs. other occasions.  Breakfast is the single meal occasion where the majority of food eaten is healthy; almost two out of three eatings are "healthy" at breakfast.  People do tend to start the day off well!

Healthy Eatings as % of  Eating Occasions (ex beverages):	%
Breakfast	64%
Lunch	33%
Dinner	39%
Snack	43%

Source: The NPD Group's National Eating Trends®

Cereal (cold and hot) accounts for almost one third of all foods consumed during the in-home breakfast occasion.  Breads (for example, toast) are a close second, though much of Bread at Breakfast is consumed as a side-dish, and Eggs are a distant third.

% of Foods Eaten at In-Home Breakfasts:	%
#1 Cereals (cold and Hot)	32.3%
#2 Breads	29.7%
#3 Eggs/Omelettes	9.7%
All Other	28.3%
Total	100%

Source: The NPD Group's National Eating Trends®

Cereal's large share of the Breakfast occasion is unique.  At other meal occasions, no single category even approaches the dominance Cereal has at Breakfast.  How has Cereal established such a position of strength?  The answer to this question lies in a detailed, precise understanding of the drivers of consumer choice at Breakfast.

First, what are consumers eating at Breakfast?  When consumers choose Cereal, they are not just choosing between forms or brands of Cereal.  The competitive frame of reference for Cereal extends to the broad Breakfast landscape, with consumers choosing between Cereal and Bars, Fruit, Yogurt, Breakfast Sandwiches and other foods.

Second, why are consumers choosing Cereal so often?  The answer lies in the needs met at each eating occasion.  More than any other Breakfast category, consumers cite Cereal for being both a Tasty and Nutritious choice.

Meeting consumer's dual Taste and Nutrition needs has driven the category to an estimated $12 Billion at-home cold and hot cereal business.  But the category has not grown in recent years and future growth projections are decidedly modest.  With over 90% penetration, it is already used by almost every household.  Further, the category is facing significant production cost headwinds as grain and energy prices continue to rise.

Determining growth for cereal starts with going back to the behavioral and needs drivers of consumers' choices.  For example, food usage at the in-home breakfast occasion is driven by the situational factors of weekday vs. weekend usage and the age of the eater.  These situational drivers of choice (whether the occasion is weekend vs. weekday and whether it is for kids vs. adults) help determine which Breakfast foods closely compete with one another.  While Cereals are driven by weekday/routine usage, the segments within the category compete in many different places in the Breakfast landscape and each segment has a unique competitive set.  Of course, major segments like Hot vs. Cold and Adult vs. Kids have different competitors, but within Adult Cold Cereal, there are different competitive sets for segments such as Blends, Pre-Sweetened All-Family Cereals, All-Natural, etc.

So, the first step towards Cereal growth is a precise understanding of the true competitive set for each segment. True category growth will come from innovation that sources volume from adjacent categories by delivering benefits sought in a way that is unique and ownable for Cereal.  For example, Adult Healthy Cereals tend to compete more closely with fruit and yogurt, other categories that meet consumers' taste/nutrition needs.  However, all three categories tend to lag consumers' desire for satiety at Breakfast, so a potential path to growth for Adult Healthy cereal is to create a more satiating experience while continuing to deliver on taste and nutrition.  Recent Adult Healthy introductions, such as General Mills' Wheaties Fuel and Kellogg's Fiber Plus Antioxidants appear to be trying to achieve this type of benefit balance.

Overall, satisfying the dual benefits of the key consumer needs of Taste and Nutrition have driven the cereal category's growth historically.  Going forward, growth will need to come from a deeper understanding of the drivers of consumer choice.  In "Analyzing the Most Important Meal of the Day," Maureen Treankler will examine the case studies of three cereal brands that have thrived by delivering on the needs of their consumers.