R-T-E Cereal Breakfast Industry
Name: Andres Gil
Competitive Analysis and Strategy
The ready to eat (RTE) cereal industry has grown steadily, with a compounded annual volume rate of three percent between 1950 and 1993. It success during the 20th century had been driven by the surge of consumer’s interest in healthy and dietary food. After World War II there was an increase demand for vitamin fortification products. During the 50’s, pre-sweetening gained popularity among Americans and in the 70’s and through the 80’s consumer’s preferences turned to granola and natural cereals. Ready-to-eat breakfast cereals have become the best option for a healthy and nutritional breakfast mainly due to the market’s perception that adults who consume breakfast, especially incorporated vitamins cereals, will have a better overall diet quality than those who skip breakfast. At the same time, the RTE cereal industry has experienced high concentration by the three largest producers (Kellogg, General Mills, and General Foods) who had restrain competition and new entrants through in-pack premiums, offering free souvenirs in their packages, trade dealings, discounts offered to retailers in exchange of better shelf placements, and aggressive marketing techniques. Private labels have been able to successfully enter the ready-to-eat cereal industry due to changes in consumer’s perception regarding the premium paid for RTE cereal products and also due to changes in external market forces which allowed private labels to offer similar products at a much lower price. As one consumer surveyed explains “cereal prices are an obscenity – to take a genuinely basic food and make a luxury item out of it is an outrage, and not far from sinful.” The big three have been heavily promoting their products through coupons, conditioning the consumers to pay less only by presenting coupons at the register. However, such tactic eroded brand loyalty as consumers were forced to...
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