Why Did Americans Stop Eating Kellogg’s Cereal?

Summary

Kellogg, a cornerstone of American breakfast since 1906, faces significant challenges as cereal consumption declines due to health trends and competition. After a tumultuous period marked by lawsuits, a worker strike, and a plant fire, the company announced plans to split into three distinct entities in June 2022, aiming to enhance focus and recovery. Despite a resurgence in cereal sales during the COVID-19 pandemic, Kellogg's North American cereal segment continues to struggle. The company is shifting its branding strategy to promote cereals as snacks or desserts, seeking to leverage nostalgia while navigating a changing market landscape.

Takeaways

• 📉 Cereal consumption in the U.S. has been declining over the past decade as consumers become more health-conscious.
• 🧑‍🤝‍🧑 Kellogg's faced challenges including lawsuits, a worker strike, and a plant fire, affecting its cereal business significantly.
• 🏭 The company was founded in 1906, with its first product, Corn Flakes, marketed as a healthy and easy-to-digest breakfast option.
• 🐯 Kellogg's successfully marketed sugary cereals to children, creating iconic mascots like Tony the Tiger and expanding its product line.
• ⚖️ In 1972, Kellogg was involved in an FTC case regarding alleged monopoly practices, which was ultimately dismissed.
• 🍭 Health trends led to declining sales of sugary cereals by the late 1970s, prompting Kellogg to diversify its offerings with healthier products.
• 🏺 Despite challenges, Kellogg saw a temporary surge in cereal sales during the COVID-19 pandemic, with an 8.5% increase in 2020.
• 💼 In 2022, Kellogg announced plans to split into three companies to focus on distinct market segments: Global Snacking, North American Cereal, and Plant-based products.
• 🔍 The cereal business is being repositioned as a snack or dessert option to adapt to changing consumer preferences.
• 🚀 The future of Kellogg's cereal business remains uncertain, with hopes of resurgence as the company restructures and pivots towards profitable sectors.

Q & A

What factors have contributed to the decline in Kellogg's cereal sales over the past decade?

Kellogg's cereal sales have declined due to changing consumer preferences towards healthier, less processed foods, increased competition from other brands, and the rise of convenient breakfast options like bars.

What significant event in 2020 affected cereal consumption, and what was the impact on Kellogg's sales?

During the COVID-19 pandemic, there was a significant increase in cereal consumption, leading to an 8.5% year-over-year increase in Kellogg's net cereal sales in 2020.

How did Kellogg's respond to legal challenges regarding its marketing practices?

Kellogg's faced lawsuits concerning its nutritional claims, resulting in a $13 million settlement in 2021 where the company agreed to stop using terms like 'healthy' and 'nutritious' in its marketing.

What restructuring decision did Kellogg's announce in June 2022?

Kellogg's announced plans to split into three separate companies: Global Snacking, North American Cereal, and Plant, aiming to better focus on their distinct strategic priorities.

What were some of the innovative products Kellogg's introduced to adapt to changing consumer trends?

Kellogg's introduced products like Nutri-Grain cereal, High Happy Inside with prebiotics and probiotics, and collaborated with Little Debbie to create Nutty Buddy Cereal, as part of its strategy to appeal to health-conscious consumers.

How did the company address the criticism regarding its sugary cereals marketed to children?

Kellogg's settled an out-of-court agreement to improve marketing practices aimed at children and agreed to a set of nutrition standards.

What challenges did Kellogg's face in late 2021, and what were the outcomes?

In late 2021, Kellogg's faced a worker strike involving 1,400 employees and a major fire at its Memphis facility. The strike ended with a new contract that included a $1.10 hourly raise for workers.

What percentage of Kellogg's portfolio is accounted for by snacking, and how has that segment performed?

Snacking, including frozen breakfast products, accounts for 80% of Kellogg's portfolio, and snack sales grew by 5% in the first quarter of 2022, contrasting with a 10.3% decline in cereal sales.

How has nostalgia played a role in Kellogg's recent marketing strategies?

Kellogg's has tapped into nostalgia by revamping nostalgic brands and flavors, appealing to consumers' childhood favorites to boost cereal consumption.

What is the expected long-term outlook for Kellogg's North American cereal business after the restructuring?

While Kellogg's expects stable net sales over time for the North American cereal business, its long-term growth potential remains uncertain due to ongoing market challenges.