Don’t expect Bloomberg Businessweek to make it onto food marketing giant Kellogg’s buy list anytime soon. The business mag features a pretty scathing hatchet job of the marketer, its core products, and the way its management team has been dealing with a cultural shift toward better nutrition, especially for kids.
“Kellogg still spends more than $1 billion a year on advertising, but it no longer has the same hold on breakfast,” Bloomberg’s Devin Leonard writes in this week’s cover story. “The sales of 19 of Kellogg’s top 25 cereals eroded last year, according to Consumer Edge Research, a Stamford (Conn.) firm that tracks the food industry. Sales of Frosted Flakes, the company’s No. 1 brand, fell 4.5 percent. Frosted Mini-Wheats declined by 5 percent. Meanwhile, Special K Red Berries, one of the company’s breakout successes in the past decade, fell by 14 percent. Kellogg executives don’t expect cereal sales to return to growth this year, though they hope to slow the rate of decline and do better in 2016. But some Wall Street analysts say cereal sales may never fully recover. In Battle Creek, so-called Cereal City, that would be the equivalent of the apocalypse.
“Kellogg faces a more ominous trend at the table,” Leonard continues. “As Americans become more health-conscious, they’re shying away from the kind of processed food baked in Kellogg’s four U.S. cereal factories. They tend to be averse to carbohydrates, which is a problem for a company selling cereal derived from corn, oats, and rice. “They basically have a carb-heavy portfolio,” says Robert Dickerson, senior packaged-food analyst at Consumer Edge. If such discerning shoppers still eat cereal, they prefer the gluten-free kind, sales of which are up 22 percent, according to Nielsen. There’s also growing suspicion of packaged-food companies that fill their products with genetically modified organisms (GMOs). For these breakfast eaters, Tony the Tiger and Toucan Sam may seem less like friendly childhood avatars and more like malevolent sugar traffickers.”