The Economics of Breakfast Cereal

Breakfast is the most important meal for the marketer.

Cereal gets its start in the mid to late 1800’s with John Harvey Kellogg, but the sugar coating we associate with cereals doesn’t appear until the 1940’s. Sugar and advertising gives cereal its success that carries into into the 2000’s, when 324 new varieties hit the market. Now, sales have been falling over the past decade and millennials are calling it an “inconvenient breakfast choice”.

How Breakfast Became a Thing

You’re probably heard that “breakfast is the most important meal of the day”. The origin of this statement is a 1944 marketing campaign by General Foods to sell more cereal.

Before cereal became over-sugared and over-processed, Americans viewed cereal as a health food. It was invented by John Harvey Kellogg, a religious doctor who believed that cereal would both improve health (and keep them from desiring sex). It wasn’t great, but people wanted it for its convenience. Interestingly enough, the two people who took the idea of cereal and ran with it were Dr. Kellogg’s brother and C.W. Post (of Post Cereals), who Kellogg accused of stealing the corn flake recipe from his safe. They transformed his idea (and got rid of the sex angle).

Read more about ‘the most important meal of the day’ from Priceonomics.

The 2000’s Were a Booming Time for Cereal Innovation

Between 2000 and 2009, 324 new cereals hit the market. Delicious and strange things like Oreo O’s, Cinnamon Toast Crunch, and Spider-man Cereal. All this cereal isn’t staying though: nearly half of all cereals are discontinued within five years of being released.

The charts in this article from Vox put this into perspective.

The cereal business is declining, in favour of healthier options and proteins such as eggs or yoghurt.

Cereals Begin to Lose Their Snap, Crackle and Pop

For the last decade, the cereal business has been declining. Cereal consumption peaked in the mid-1990s, and sales have been falling over the past decade, especially in cereals marketed to children, which saw a 10.7% decline in consumption from 2003 to 2013.

A combination of factors are being blamed for the decline: a change in preferences, declining birth rates health consciousness, fad diets, new kitchen gadgets, and even persnickety millennials.

Read more about the decline in cereal sales in this New York Times article.

Quick Links

Quisp is the champion of cereals, followed by old classics like Frosted Flakes, Cinnamon Toast Crunch, and Honey Nut Cheerios. (Vox)

Millennials aren’t so crazy about cereal: 40% said cereal is an inconvenient breakfast choice because they had to clean up after eating it. (New York Times)

Although some take the same study as “the baffling reason many millennials don’t eat cereal” and “the height of laziness”. (The Washington Post)

The real reason for the decline in cereal is actually an increase in interest in protein, especially greek yoghurt. (Quartz)

Cereal is a tough market, with 95% of cereals being made by just five manufacturers. (Data-Driven Thoughts)

The New York Times takes an interactive look at the history of cereal. (New York Times)