Cereal bar growth to be driven by children, Hispanics, says Mintel
of these products are expected to slow over the next few years,
according to a new report. However, opportunities for growth still
remain, particularly through targeting children and Hispanics.
According to the report by Mintel, bar sales grew by an impressive 69 percent between 2001 and 2006, which equates to a 48 percent increase at constant prices.
However, the category's growth slowed considerably in the last year: at constant 2006 prices, sales grew only 1 percent between 2005 and 2006. This was primarily a result of slowing sales in the breakfast/cereal/snack bar segment, said Mintel.
This segment currently makes up 47 percent of the total market, and grew by almost 10 percent over the past two years. The remaining 53 percent of the market is made up of granola bars, which showed stronger growth due to the product's greater flexibility. This segment grew 15 percent since 2004.
Main drivers behind the popularity of cereal bars are a desire for healthier food alternatives, as well as demographic factors, according to the new report.
Many cereal and granola bars make nutritional claims that synchronize with the desires of Americans to eat a healthier diet. Although the most commonly cited reasons for eating cereal bars were to replace meals or as a snack, consumers also said they purchased them for weight loss, as an energy boost, and to maintain metabolism or blood sugar.
Around 75 percent of adults have made changes to their diet in the past five years in an effort to improve or maintain health. These changes included consuming less fat, lowering calorie intake, reducing sugar intake, and eating more vegetables, fruit, grains and fiber.
According to Mintel's Global New Products Database (GNPD), which reviewed the new products and brand extensions in the category, many bar products' claims matchthese changes in consumers' diets.
Common claims during the period included "low-in" (such as "low/no trans fat," "low glycemic index," "low allergenic" ), "organic," "preservative free," "wholegrain," and "fortified."
The demographic factors of age, presence of children, and ethnicity are also expected to drive growth in the market, said the report. While a total of 65 percent of respondents to a Mintel survey said they consume cereal bars of some kind, most frequent consumers of the products are children, teens and 18-34 year-olds.
And the expected 15 percent increase of the nation's Hispanic population is also good news for marketers of cereal bars, as this population segment is more likely to eat bars than other consumers.
"As Hispanics are a high-growth segment of the population, manufacturers should promote and develop product for this population. The Hispanic population is also younger and more likely than the population as a whole to have children. Younger and family households are also more likely to eat cereal bars," said the report.
The US cereal bar market is currently dominated by four major players: Quaker Oats, Kellogg, General Mills and Kraft. In 2006, these four companies accounted for 77 percent of sales, excluding Walmart.
Quaker Oats' Chewy Granola, General Mills' Nature Valley, Kellogg's Nutri Grain and Special K bars, and Kraft's South Beach bar were the top-selling brands in 2006.
"The top five brands achieved significantly higher sales growth than the category as a whole. These brands grew by 24 percent between 2004 and 2006, whereas total category growth was 12 percent. The packaged food companies exert marketing muscle behind new product introductions and brands and are better able to gain shelf space for their products," said Mintel.
Kraft, which only recently exerted its presence in this market, increased its market share by almost 7 percent in just two years, according to the report. The company's advance was driven by the successful licensing and marketing of a breakfast bar under the South Beach brand and extensions of its Post cereal brands (such as Honey Bunches of Oats bars), each endeavor supported by a significant advertising campaign.
Kraft is now the second-leading manufacturer in the breakfast/cereal/snack bar segment with 18 percent market share, surpassing Quaker Oats, General Mills and Atkins.
General Mills became the leading manufacturer of granola bars in 2006, surpassing Quaker Oats, on the heels of the success of its Nature Valley Sweet & Salty Nut andHealthy Heart brand extensions. The company benefited from introducing products with a "low-in" claim (Healthy Heart is lower in cholesterol) while sales of Quaker Oats' 'chewy' products flagged, possibly due to a cut in advertising from $12.7 million in 2003 to $2.8 million in 2004.
Mintel also notes that private label sales, though still commanding a small part of the market, increased by 40 percent between 2004 and 2006, indicating a maturing market for bars, and the potential for downward pressure on prices for branded products in the near future.
The market researcher forecasts that overall growth in the category will slow but remain steady. US retail sales of cereal bars are predicted to increase 45 percent at current prices and to increase 22 percent at constant prices from 2006 to 2011.