Strategic advice for the food and beverage industry

Food giant shows it can deliver a game-changer

Oats GF main picIt’s become fashionable among some people to say that the established food companies are too big and too slow to respond to changing trends and that the future lies with nimble start-ups.

General Mills – one of the world’s biggest food companies – is showing that in fact big companies can not only respond, they can do so in a way that potentially redefines a market.

General Mills owns Cheerios, America’s biggest breakfast cereal brand. Cheerios several years ago found itself – in common with many mass-market cereal brands – increasingly left behind by the evolution of the Key Trends, specifically:

  1. the rising consumer interest in “good carbs and bad carbs”
  2. the snackification of breakfast – which has lead to unexpected developments such as the sudden and disruptive success of Belvita
  3. more and more people self-diagnosing that gluten-free is better for their health

From its peak in 2011, when it had $1.25 billion (€1.13 billion) in sales, Cheerios has seen sales fall every year, and in the 52 weeks to June 2015 they were down to $1 billion, according to IRI supermarket scanning data.

General Mills has done many things to slow the decline of Cheerios, some of which – such as the launch of a high protein variant – have been effective. Others, such as going GMO-free, have had no positive effect on sales.

But now General Mills is changing the rules of the game. In 2015 America’s biggest breakfast cereal brand is going gluten-free. From July 2015 five gluten-free variants of Cheerios went onto supermarket shelves in America. They include Original and Honey Nut, two of the best-sellers.

With Cheerios holding an 11% share of the US breakfast cereal market, it’s a game changer.

Admittedly it’s easier for Cheerios many other brands – Cheerios have always been made entirely with oats, which are naturally gluten-free. But problems with the supply chain meant that General Mills couldn’t guarantee that products would be free of wheat, barley or rye. Simply by cleaning up the supply chain, General Mills is able to re-position its biggest brand and bring it back in line with the most powerful consumer trends.

The game-changer is that gluten-free in one move goes free from being a distinct positioning and point of difference for lots of small brands to almost a category standard.

While some consumers will still hunt out small brands, the fact is that many more will respond to the marketing power and the re-assurance of well-known brand – a brand whose identity is even more re-assuring now that it’s free-from the “bad ingredient” called gluten and the “naturally healthy” benefits of oats are easier to see and enjoy.

Increasingly often, in many categories, companies will take the same road as Cheerio, taking existing products and reinventing them as gluten-free (or whatever it is consumers want).

The repositioning of Cheerios is a reminder that it’s not just starts-ups that can change markets – when big food companies embrace new consumer trends they can take steps that redefine a market.

It’s a company’s culture that determines whether it can embrace change. But with increasing pressure from changing markets and the example of General Mills before them, many more large companies will be changing their culture so that they can better compete.

Start-ups can drive change in food and beverage markets, and have done so for a decade now. But don’t assume that they are holding all the best cards.

Posted in Editorial, Mainsite

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