Examine the Breakfast Cereals Market

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Consumption of breakfast cereals has increased steadily since the Second World War, and has shown strong volume growth over the past 32 years. This is remarkable given that the market is so mature and given that cereals have faced increasingly fierce pressure from alternatives such as cereal bars and croissants. Furthermore, consumption in some areas appears to have accelerated during the current decade (the 2000s). The healthy image and the convenience of breakfast cereals are the main factors driving the market forward.

The breakfast cereals market grew by 15.7% in value terms between 2004 and 2008, with particularly strong growth being seen in 2007. The major companies in the ready-to-eat (RTE) cereals sector undertook a great deal of activity in 2006 and 2007, which may also have helped to stimulate sales. However, the perceived health benefits of breakfast cereals is the main factor driving sales.

RTE cereals dominate the UK breakfast cereals market, accounting for 91.2% of sales by value in 2008, compared with 92% in 2004. This slight decrease in market share reflects the faster growth of hot cereals (porridge and oats) during the 5-year review period. The muesli segment of the RTE sector also experienced strong growth between 2004 and 2008. This sector benefits from its healthy image, and suppliers have stimulated value growth over recent years by launching premium products. The hot cereals sector has shown very strong growth over the analysis period, with the exception of 2007 when a warm winter dampened sales growth. Consumption of hot cereals had been in long-term decline, but has risen over the past 5 years due to growing awareness of the health benefits of eating oats.

Three companies – Kellogg, Weetabix and Cereal Partners (an alliance between Nestl and General Mills) – have dominated the UK breakfast cereals market for many years, as these companies are able to devote huge resources to marketing, building brands and developing new products. Smaller companies have had considerable success in targeting niche markets, and, in some cases, have pioneered new areas of the industry, such as cereal bars.

The breakfast cereals market should continue to prosper in the long term, given its healthy image and the convenience of most products. Health and convenience have been the two major trends influencing food and drinks markets over the past 3 decades (i.e. since the late 1970s), and Key Note expects that this will remain the case for at least the next 10 years to 2019. Breakfast cereal makers have also responded to criticism of their products by lowering sugar and salt content and reinforcing the positive image of the market with fortified and premium products. However, for the second consecutive year, Key Note expects the market growth to slow in value terms in 2009, as the economic recession currently affecting the UK (as at January 2009) continues. Consumers are likely to switch away from premium and organic products in favour of cheaper alternatives.

REPORT COVERAGE

MARKET SECTORS

Ready-to-Eat Cereals

Hot Cereals

MARKET TRENDS

Healthy Eating

Eating Habits

Snacking

Price of Ingredients

ECONOMIC TRENDS

Gross Domestic Product

Table 1: UK Gross Domestic Product at Current and Annual

Chain-Linked Prices (m), 2003-2007

Household Disposable Income

Table 2: UK Household Disposable Income Per Capita (), 2003-2007

Inflation

Table 3: UK Rate of Inflation (%), 2003-2007

Unemployment

Table 4: Actual Number of Unemployed Persons in the UK (million), 2003-2007

Population

Table 5: UK Resident Population Estimates by Sex (000), Mid-Years 2003-2007

MARKET POSITION

The UK

Table 6: Consumer Expenditure on Breakfast Cereals as a Percentage of Total Expenditure on Food and Non-Alcoholic Drinks at Current Prices (m at rsp and %), 2004-2004

Overseas

THE TOTAL MARKET

By Volume

Table 7: Consumption of Breakfast Cereals and Oatmeal and Oatmeal Products in the UK (grams per person per week), 1974, 1995, 2002/2003 and 2004/2005-2005/2006

Figure 1: Consumption of Breakfast Cereals and Oatmeal and Oatmeal Products in the UK (grams per person per week), 1974, 1995, 2002/2003 and 2004/2005-2005/2006

By Value

Table 8: The Total UK Breakfast Cereals Market by Sector by Value at Current Prices (m at rsp), 2004-2008

Figure 2: The Total UK Breakfast Cereals Market by Sector by Value at Current Prices (m at rsp), 2004-2008

BY MARKET SECTOR

Ready-to-Eat Cereals

Table 9: The UK Ready-to-Eat Cereals Sector by Value at Current Prices (m at rsp and %), 2004-

Table 10: The UK Ready-to-Eat Cereals Sector by Value at Current Prices (m at rsp and %), 2008

Figure 3: The UK Ready-to-Eat Cereals Sector by Value at Current Prices (%), 2008

Hot Cereals

Table 11: The UK Hot Cereals Market by Value at Current Prices (m at rsp and %), 2004-2008

OVERSEAS TRADE

RECENT HISTORY

NUMBER OF COMPANIES

Table 12: Number of UK VAT- and/or PAYE-Based Enterprises Engaged in the Manufacture of Breakfast Cereals and Cereal-Based Foods by Turnover Sizeband (000, number and %), Year Ending September

EMPLOYMENT

Table 13: Number of UK VAT- and/or PAYE-Based Enterprises Engaged in the Manufacture of Breakfast Cereals and Cereal-Based Foods by Employment Sizeband (number and %), Year Ending September

REGIONAL VARIATIONS IN THE MARKETPLACE

DISTRIBUTION

Table 14: The UK Breakfast Cereals Market by Distribution Channel by Value (%), 2008

HOW ROBUST IS THE MARKET?

LEGISLATION

KEY TRADE ASSOCIATIONS

Association of Cereal Food Manufacturers

The Food and Drink Federation

THE MARKETPLACE

Rankings by Turnover

Table 15: The Leading UK Breakfast Cereals Manufacturers by Turnover (000), Latest Financial Results

MARKET LEADERS

Cereal Partners UK

Dailycer Ltd

Dorset Cereals Ltd

Doves Farm Foods Ltd

W Jordan (Cereals) Ltd

Kellogg Company of Great Britain Ltd

Morning Foods Ltd

Quaker Oats Ltd

Weetabix Ltd

Whole Earth Foods Ltd

Other Companies

OUTSIDE SUPPLIERS

Food Flavourings and Ingredients

Specialist Machinery

Packaging

MARKETING ACTIVITY

Main Media Advertising Expenditure

Table 16: Main Media Advertising Expenditure on Breakfast Cereals (000), Years Ending September 2007 and 2008

Table 17: Main Media Advertising Expenditure on Ready-to-Eat Breakfast Cereals (000), Year Ending September

Table 18: Main Media Advertising Expenditure on Cereals Requiring Preparation (000), Year Ending September

STRENGTHS

WEAKNESSES

OPPORTUNITIES

THREATS

CONSUMER PENETRATION

Ready-to-Eat Cereals

Household Penetration

Table 19: Consumption of Ready-to-Eat Breakfast Cereals in the Past 12 Months (% of adults), Year Ending March

Frequency of Purchase

Table 20: Consumption of Ready-to-Eat Breakfast Cereals in the Past 12 Months by Frequency (% of adults), Year Ending March

The Effect of Children in the Household

Table 21: Consumption of Ready-to-Eat Breakfast Cereals in the Past 12 Months by Age of Children in Household by Frequency (% of adults), Year Ending March

Hot Cereals

Household Penetration

Table 22: Consumption of Hot Breakfast Cerealsin the Past 12 Months (% of adults), Year Ending March

Frequency of Purchase

Table 23: Consumption of Hot Breakfast Cerealsin the Past 12 Months by Frequency (% of adults), Year Ending March 2008

The Effect of Children in the Household

Table 24: Consumption of Hot Breakfast Cerealsin the Past 12 Months by Age of Children in Household by Frequency (% of adults), Year Ending March 2008

New Product Development – Manufacturers Focus on Health Issues

Health Issues

Concerns Over Salt Content of ‘Healthy’ Breakfasts

The Economy

UK Facing Serious Economic Downturn

THE TOTAL MARKET

Table 25: The Estimated World Market for Breakfast Cereals by Volume and Value (000 tonnes and $bn), 2004-

The US

The Developing World

INTRODUCTION

The Economy

Gross Domestic Product

Table 26: Forecast UK Growth in Gross Domestic Product in Real Terms (%), 2008-2012

Population

Table 27: Forecast UK Resident Population by Sex (000), Mid-Years 2008-2012

Inflation

Table 28: Forecast UK Rate of Inflation (%), 2008-2012

Unemployment

Table 29: Forecast Actual Number of Unemployed Persons in the UK (million), 2008-2012

FORECASTS 2009 TO

Table 30: The Forecast Total UK Breakfast Cereals Market by Sector by Value (m at rsp), 2009-2013

MARKET GROWTH

Figure 4: The Forecast Total UK Breakfast Cereals Market by Sector by Value (m at rsp), 2004-2013

FUTURE TRENDS

New Product Development

Competitor Forecasts

DAILYCER LTD

DORSET CEREALS LTD

DOVES FARM FOODS LTD

W JORDAN (CEREALS) LTD

KELLOGG COMPANY OF GREAT BRITAIN LTD

MORNING FOODS LTD

QUAKER OATS LTD

WEETABIX LTD

Associations

Publications

General Sources

Government Publications

Other Sources

Bisnode Sources

Understanding TGI Data

Number, Profile, Penetration

Social Grade

Standard Region

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