BOSTON — Strong marketing and compelling consumer news — constant drivers of growth in the ready-to-eat (R.-T.-E.) cereal category — remain in play at General Mills, Inc., giving the company’s chief executive officer hope that the latest turnaround in cereal is sustainable.
“We’ve grown Cinnamon Toast Crunch for probably four or five years in a row,” Jeffrey L. Harmening, chairman and c.e.o. of Minneapolis-based General Mills, told participants at the RBC Capital Markets Consumer and Retail Conference on May 31. “We’re growing Lucky Charms double digits now. We’re growing Reese’s Puffs at a high rate. I mean, it’s behind really, really good marketing and really compelling consumer news. And that’s what’s always driven the cereal category. And if you’re going to drive Lucky Charms, introduce a new marshmallow and market really well behind it. I mean, you can make it more complicated than that, but it’s a bad idea.”
While “taste” brands have performed well, one area where General Mills has struggled to gain traction is in “adult” brands or “wellness” brands. Mr. Harmening said the trend is not unique to the cereal category, and many segments have faced similar challenges. He attributed the difficulties to consumers’ ever-changing definition of weight management.
He said consumers are not necessarily looking for low calorie counts, but rather are interested in cereals that fill them up. This trend toward satiety has spurred demand for products containing protein and is one of the reasons General Mills’ granola business “is on fire,” Mr. Harmening said.
“People are still interested in weight, we just have to deliver it in a way that’s compelling to them,” he said.
Mr. Harmening said consumers remain interested in heart health and fiber as well, but the key for sustainable growth is to make sure that products taste good.
“They’re not really willing to sacrifice something that tastes good for something that’s good for them,” he said. “They kind of want it all. (It’s) why brands like Honey-Nut Cheerios do well. It lowers cholesterol, it tastes good. It's good for you.”
As the R.-T.-E. cereal category moves forward, Mr. Harmening said he expects a resurgence of some businesses that rely on weight management, heart health and energy, but they will need to be products that taste good.