Sour Patch Kids, Hostess Honey Buns, Churros, Nutter Butters and Peeps are now appearing in breakfast bowls.
The cereal aisle isn’t what it used to be.
Sour Patch Kids, Hostess Honey Buns, Churros, Nutter Butter and Peeps are snacks consumers would once look for in various aisles in the grocery store. But now they can all be found in cereal form.
Top cereal makers like Post Holdings, General Mills and Kellogg have launched indulgent cereal brands during the last year, and told Food Dive that they plan to continue innovating to keep up with consumer demands and fulfill a rising desire for better tasting cereal.
“Consumers just have more choice than ever on how to get what they want for breakfast or for snacks. So we’ve definitely seen a huge increase in the competition,” General Mills’ Director of Marketing for Cereal Scott Baldwin told Food Dive. “They’ll go somewhere else if you don’t keep innovating and keep making cereal relevant in their lives.”
This influx of indulgent and out-of-the-box cereal flavors comes at a time when the cereal market has struggled, as consumers have turned to better-for-you breakfast options.
Milk and cereal was once the go-to breakfast option for many Americans. Today’s consumers are looking for more convenience and nutritional benefits, leading cereal sales to fall. Although cereal manufacturers have remained optimistic, sales decreased 17% from 2009 to 2016.
And that decline has only continued. Ready-to-eat cereal sales have seen a steady decline in recent years and unit sales were down 1.5% last year, according to Nielsen data provided to Food Dive. Americans purchased $8.3 billion worth of cereal in 2018, a substantial drop from $8.8 billion in 2016. Manufacturers are turning to these wild flavors to save the category and fight off big competition, but will it be enough?
Taste is tops
Nancy Brown, a managing partner of the firm CBX who has spent more than 20 years working in consumer branding with clients like General Mills, told Food Dive that cereal companies are desperately trying to adapt to consumer demands. She said shoppers haven’t always loved new reformulations to make signature cereals more healthy, so now companies are shifting gears.
“Now what we are seeing is that cereal is really going all in on permissible indulgence, and we’re seeing crazy flavors,” she said. “They’re realizing that taste is important in this category. Cereal is never going to be like eating vegetables.”
The way people eat cereal is changing, too. She said people are eating cereal as a snack instead of breakfast, so they are launching unique flavors of common snacks to attract consumers.
“It’s kind of crazy when you really look at how many new cereals come out every year and what really stays. Most of them don’t,” Brown said. “But what is it going to take to get people to eat cereal? And maybe it’s putting more marshmallows in it or unicorns.”
General Mills has launched cereals like Cinnamon Toast Crunch Churros, Fruity Lucky Charms and Chocolate Toast Crunch in recent months. When selecting the latest flavor innovation, Baldwin said General Mills looks at the different needs from consumers. The company decided to launch its churros cereal because the traditionally fried-dough pastry has been growing more popular as a snack.

“There’s always room for great tasting cereals. If you look at the category of cereals that have focused on taste, they have just grown and grown and grown,” Baldwin said. “And that’s something that most people say they are looking for first and foremost when they choose cereal. We’re always looking for new ways to deliver on that for people.”
But it seems like all the big cereal brands are picking up on this indulgent trend.
“Reinforcing product and flavor variety and versatility may help to move consumers around the category more, influencing consumers to eat more cereal more often,” according to a Mintel report sent to Food Dive.
Post launched Sour Patch Kids and Hostess Donettes and Honey Bun cereals this year. Post’s Chief Marketing Officer Roxanne Bernstein told Food Dive that nine out of 10 households are buying cereal so it is “an enormous base to work with.”
“The cereal industry specifically has had a rough go of it over the recent past, I would say we are seeing some of those category trends moderating a bit,” she said. “But if anyone is attempting to convince you that cereal is dead, let me reassure you that cereal is absolutely not dead. Cereal is a category that we live for at Post Consumer Brands.”
Doug VanDeVelde, general manager of Kellogg’s U.S. Ready-To-Eat Cereal segment, told Food Dive in an email that cereal plays “an important role as America’s favorite breakfast food.”
Kellogg has launched cereals like Peeps and Caticorn, a unicorn cat cereal, in recent months, but they’ve also introduced a digestive health cereal and various Special K cereals to appeal to consumers looking for different health benefits from their cereal.
“When we talk to people about what they want in their food choices, two things are clear: they want a variety of great-tasting, exciting food, and they want food that meets their nutrition preferences,” he said.
Changing target audience
Manufacturers and analysts that follow the industry agreed that the target for these sugary cereals are millennials. At Post, Bernstein said that consumers keep rediscovering cereals from their youth.
Post has marketed cereals like Oreo O’s and Sour Patch Kids through sampling events and social media, hoping to attract that age group to the unique flavors.
“We are looking to bring a lot of excitement to the category and to millennials specifically,” Bernstein said. “For the millennial audience, we’ve been looking at nostalgia and taste and convenience that is really delivering a holistic experience that is very motivating to that particular target.”
Baldwin agreed, saying these new offerings can help people “remember how much they love cereal.” He said consumers are now reintroducing indulgent cereals to themselves, then giving them to their kids.
Brown, the expert in the category, said the target audience for these sugary cereals is both millennials and Baby Boomers. She said manufacturers need to “be mindful of what their habits are and what they’re looking for because that’s a really big audience that grew up with (cereal).”

Although millennials are known to be fickle and constantly change their product preferences, cereal manufacturers remain positive about its potential.
“We do see people going back and forth between all of those different categories, we don’t see consumers eating just one particular category of food every single day of the week,” Bernstein said. “But cereal is a great option for breakfast and for snacking, and that is an idea that is resonating even more.”
By the numbers
Major cereal brands have seen mixed results in earnings as the companies relaunch their dedication to indulgence.
For Post, the company’s Consumer Brands business — which includes the company’s ready-to-eat cereal business in North America — had $455.3 million in sales in its most recent quarter last month. This is a 5.4% increase from the year before.
“Pebbles, other licensed products and Honey Bunches of Oats drove the majority of the volume growth, while the increase in average net pricing resulted from favorable product mix and pricing taken later in the quarter,” Jeff Zadoks, chief financial officer at Post, said in an earnings call.
For General Mills, second quarter net earnings dropped 20% and net sales for its North America Retail segment, which includes cereal and snack units, totaled $2.68 billion, down 3% from the year before. The decline was largely because of its lower sales activity in its U.S. cereals and a drop in volume for its U.S. snacks. But the company remains upbeat about its potential with innovation.
“Overall, we’ve been really excited about where cereal is headed. We’ve seen a lot of momentum increase in the last two years for cereal,” Baldwin said. “As we invest in our core brands, as we increase our innovation, it’s paid off in growth for us, but it also helps the overall cereal category.”
Baldwin said General Mills makes more than 100 varieties of cereal. The company is continually adding new ones and retiring some others, depending on how they perform.
“We just decided that, hey, we need to innovate even more to get the cereal category back to its healthy, growing position,” he said.
When it comes to Kellogg, the company has been struggling to lift its cereal products. In its most recent quarter, U.S. mornings foods sales fell about 3%, amid a decrease in cereal consumption, .
Overall, earnings haven’t been looking up for cereal just yet, and it could continue to face more struggles. As consumers have shifted to look for foods with more nutrition, satiety and convenience than a bowl of cereal offers, a Mintel report published in October forecasted a gradual decline of 5% in cereal from 2018 to 2023.
Health hurdle remains
Better-for-you brands continue to emerge and challenge the cereal market in new ways. Organic cereal has carved out a bigger share of the market in recent years, according to Grand View Research. For that reason, some say that this sugary phase won’t last.
Boyd Swinburn, who co-wrote a new report from the Lancet Commission on Obesity that has called for health warnings on products like breakfast cereals, told Food Dive that if processed foods contain added ingredients that are harmful to health like salt and sugar, consumers need to be fully informed.
As studies have shown the impact of obesity and the danger of excess sugar, consumers have turned away from sugar. Researchers, like Swinburn, argue that these sugary products are contributing to obesity and help to convince consumers to avoid it.
“Large manufacturers of ultra-processed foods and their industry associations have been very active in lobbying against public policies to combat obesity, therefore they are major contributors to world obesity numbers,” Swinburn said.
Stan Smith, co-founder and president of One Degree Organics, which makes organic cereals, told Food Dive that consumers have more knowledge about the ingredients they buy and want more transparency from food manufacturers, which has led to a decline in sugary cereal consumption.
Consumers are looking for products that are less processed, simpler ingredients, more nutrients and organic, he said.
“The more traditional types of conventional cereals that are not taking the ingredients so much into consideration are going to continue to decline as it has been,” he said. “People are shifting away from that.”
Smith said that consumers are also looking to get more out of their food products, with companies showcasing values like sustainability, family-ownership and transparency. Mission-based companies and brands with more transparency have become more popular in the space.
“(Consumers) are not so interested in just taking a big CPG’s products and saying, ‘That is what we are going to go with,’ ” he said. “They really want something that is a little more niche that reflects things that they value, that they stand up to and they’re willing to vote with their spoon as far as their choice of cereals.”
Originally published by FoodDive