Current Conditions

The United States has the fourth highest per capita consumption rate of cereal in the world (behind Ireland, England, and Australia). The more than 2.7 billion packages of cereal sold in grocery stores each year make it the third most popular supermarket product (behind carbonated beverages and bread) and translates into an average of 10 pounds, or 160 bowls, of cereal per American annually. Despite the size of the cereal market, its well-established maturity has led to stagnant growth. Adjusting to the fast-paced American culture of the twenty-first century is presenting the industry with some difficult challenges.

Growth in the cereal industry has been slow to non-existent in the early 2000s. Ten of the top 15 cereal producers reported losses in 2002, and the ready-to-eat category of cereals, which reached $8.6 billion in 1995, fell to $8.1 billion in 2001. The question at hand for the industry is how to remake cereal's image in light of the new culture. Tinkering with flavorings and offerings, such as the recent trend toward the addition of dried fresh fruit, proves some relief, but with over 150 different choices on store shelves and 20 new offerings added annually, variety has done more to overwhelm than excite consumers. In addition, cereal companies are committing fewer dollars to their marketing budgets. Overall ad spending fell from $913 million in 1995 to just $577 million in 2001, a 37-percent decline.

Under these market conditions, cereal packaging is receiving new attention. In Brand Week, Sonia Reyes noted: "Decades ago, when times were simpler consumers were interested mostly in the product's taste and value. Packaging was a secondary consideration, other than throwing in special offers to tempt kids. But these days, with meal occasions boiled down to their bare essentials, packaging and delivery have emerged as key weapons in the cereal marketer's arsenal." New ideas circulating the industry usually include doing away with the traditional cereal box, which has undergone little change in its lifetime. Alternatives range from clear plastic containers to a return of the small variety six-packs.