MINNEAPOLIS -- General Mills Inc.'s global cereal partnership with Nestle, Cereal Partners Worldwide, turns 25 years old this year and is as important as ever.
Big food companies facing stagnant U.S. growth are focusing on increasing sales of cereal and other packaged food products internationally. The U.S. cereal market -- General Mills' largest business -- has been weak in recent years.
And a bowl full of milk and flaked grains can be a hard sell in emerging markets where the typical morning meal is steamed rice or bread and cheese.
In countries where cereal is ensconced, consumers increasingly are forsaking the breakfast classic for yogurt, breakfast bars or other more convenient items. It's a familiar trend for both General Mills, based in the Minneapolis suburb of Golden Valley, and Kellogg, based in Battle Creek, Mich.
"In developed markets, some of the same challenges as in the U.S. are playing out there," said Dave Homer, the Switzerland-based chief executive of Cereal Partners Worldwide. "You've just got more alternatives at breakfast."
Globally, ready-to-eat cereal is a $27.7 billion business, which has seen sales grow about 1 percent over the past three years, according to Euromonitor International. That's better than the 5 percent decline during the same period in the U.S., where cereal is a $9.7 billion market.
Cereal Partners Worldwide, a partnership that results in Cheerios being sold under the Nestle brand in Europe, is a solid contributor to General Mills' bottom line.
In the U.S., Kellogg and General Mills dominate the industry, each with about 30 percent of the market. But globally, Kellogg has a 30 percent share, and General Mills -- through Cereal Partners Worldwide or by itself -- has 18 percent.
The United Kingdom is home to the world's most voracious cereal eaters, with annual consumption of about 16 pounds per person, according to Euromonitor. Cereal Partners Worldwide is also strong in continental Europe, where it is well represented there by such brands as Chocapic, a chocolate-flavored flake, and Nesquik, which is akin to General Mills' Cocoa Puffs in the U.S.
Australia, where Cereal Partners Worldwide owns the big brand Uncle Toby's, and Canada, a big market for Cheerios, tie for second in per capita consumption with 10.1 pounds. The U.S. is fourth at 8.8 pounds.
"These are very strong markets that have been in cereal for a long time," Homer said.
In such developed markets, consumers are leaning toward cereals -- and all packaged foods for that matter -- that are perceived as more healthy.
"People want things a little more natural, a little less processed," Homer said.
So in Britain, Cereal Partners Worldwide beefed up its marketing for an old standard, Shredded Wheat, playing the health card. Shredded Wheat has no salt or sugar and a low level of saturated fat.
"Some brands have attributes people care about that you just haven't told them about for a while," Homer said.
The result has been almost double-digit sales growth in Shredded Wheat over the past year.
The partnership also has reduced sugar in cereals marketed to children over the past few years, as General Mills has done in the U.S. This spring, Cereal Partners Worldwide trumpeted a 30 percent sugar reduction in Fitness, a popular wheat and rice flake cereal aimed at adults.
Developing cereal markets offer more potential for growth, but they're trickier to crack.
In Malaysia, a traditional breakfast might include puffed bread with curry or steamed rice mixed with an egg and cucumber-onion relish. In Indonesia, the morning meal might be coconut rice or soy cakes. None sound much like a bowl of Cheerios.
Homer said the key to gaining acceptance is educating consumers.
"You have to explain to people what [cereal] is and what it does," he said. That means marketing to moms that cereal "gives kids a good, strong start to the day."
Cereal Partners Worldwide has been quite successful in Indonesia and Malaysia, where it has large and leading cereal market shares.
But Cereal Partners Worldwide and other cereal-makers have struggled in the alluring China market.
Consumers there "eat a lot of savory foods, not sweet, and breakfast cereal is sweet," Homer said. "It's very different by country."
Business on 06/02/2015