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Deeper Look Into Mintel's Breakfast Foods Report

December 19, 2012

A new report from Mintel Group Ltd. shows that private label has a strong foothold in breakfast foods, competing against a highly fragmented national brand landscape. Deeper inside, though, are a number of insights about private label's strength in the categories.

The report, titled “Breakfast Foods – US, September 2012,” shows that private label holds a 19 percent share of breakfast foods sales in food, drug, and mass channels (excluding Walmart). Kellogg is the leading national brand at 13 percent share, with Kraft Foods (8 percent) and Smithfield Foods (6 percent) further behind.

Dollar sales in private label breakfast foods rose 4.3 percent from 2011, and the report had praise for the retailers in charge of brands.

“Retailers need to continue to maintain product quality while innovating to meet consumer needs,” it said, “focusing on healthful options, but not compromising on taste, while maintaining a competitive price.”

While consumers strive to eat healthier, many may not know how to approach the issue. To this end, the report suggests manufacturers and retailers consider becoming more involved in educating consumers on how to make better food choices. Some ways could include partnering with dieticians and providing food offerings that are intrinsically healthy, such as quinoa.

The report showed that many consumers continue to eat breakfast at restaurants on the weekend, and close to half said they would like more restaurant-like options at the grocery store.

“It is therefore a balancing act for breakfast foods manufacturers and retailers to satisfy multiple consumer needs, while facing fierce competition from foodservice, in a still-shaky economy where competitive pricing is key,” it said. “Therefore, while convenience and portability remain important attributes for the breakfast foods category, companies also need to continue to provide more healthful alternatives that would help consumers achieve their goals for a healthier lifestyle.”

Mintel also found that although a majority of respondents to its consumer research shopped at grocery stores for breakfast foods, 51 percent go to mass merchandisers, and 25 percent visit club stores.

“Better prices, coupled with an increase in food offerings, have attracted consumers to one-stop shops that also offer more affordable prices,” the report said. “Additionally, many retailers also have been focusing on improving private label products, thus directly competing with brands.”

Mintel found that many national brands together own half of the FDMx sales in the breakfast foods category, while private label and smaller brands control the other half.

“Therefore,” the report said, “success for manufacturers and retailers within the breakfast foods category lies in continuous innovation and staying relevant with consumers.”

“While the majority of consumers do buy branded products for many of the segments, some consumers buy only private label, and many purchase a combination of the two. Therefore, private label is likely to continue to be a key player within the breakfast foods category, benefiting from a still sluggish economy and many product quality improvements that bring products common ground with national brands.”

Private Label Promotion

According to Mintel’s consumer research, most consumers continue to be loyal to branded products in most breakfast foods segments, likely due to the long-lived presence of brands that have gained consumer loyalty. Therefore, retailers need to continue to focus on developing products that meet the quality standards that consumers expect, but with an enticing price tag.

To better promote private label products, the report suggests retailers hold in-store tastings and cross-promote other private label products.

 “For example,” the report said, “a retailer could provide a breakfast products flier filled with its private label offerings, not only with discounts, but recipe ideas that tout quality and versatility.”

Personalized offers also may encourage more spending by offering individualized prices based on shoppers’ behaviors.

For example, a Safeway consumer was offered a 24-pack of Refreshe bottled water for $2.71, due to her history of buying Refreshe brand products other than bottled water. The 24-pack was priced at $3.69 for another consumer, according to the New York Times.

“Safeway is betting that offering the first customer a price edge will provide enough incentive for her to buy a new item,” the report said.

Increasing Consumption

According to Mintel’s consumer research, four in 10 respondents are interested in seeing more offerings of ethnic-inspired foods; close to half of consumers aged 25-44 show interest. To this end Trader Joe’s offers a breakfast burrito with turkey bacon, cheese, eggs and potatoes.

“While this is a great start, companies have an opportunity to deliver more “authentic” burritos, geared for Breakfast,” the reports said.

Additionally, as consumers are starting to pay closer attention to vegetarian meals, either for health reasons, animal rights reasons, because of rising meat and dairy prices, or just because they are making simple lifestyle changes, the report suggests manufacturers and retailers of breakfast foods need to consider offering more meat substitute options.

Mintel’s “Attitudes toward Healthy Food—U.S., June 2012,” found that 48 percent of consumer respondents would like to see more restaurant-like options. Mintel suggests breakfast food producers should consider offering more options that are currently popular on restaurant menus.

To meet the need for healthier offerings, the report suggests in addition to improving nutritional profiles, companies could add ingredients that are intrinsically healthful, including chia seeds, flaxseeds, and quinoa, as well as “power fruits” such as acai and pomegranate.

Sweet Breakfast Breads and Pastries

The breakfast category is mainly driven by the performance of the two largest segments: sweet breakfast breads and pastries and breakfast meats. Each accounts for 40 percent of the category’s market share, the report said.

The sweet breakfast breads and pastries segment posted a positive performance, experiencing 21.8 percent growth from 2007-11. The report also said private label has a strong presence, representing 23.8 percent of the sweet breads and pastries through FDMx; it remained flat during the review period.

According to Mintel’s consumer survey, 43 percent of respondents say they typically eat a combination of private label/store brand and name brand versions of breakfast pastries, and 42 percent say the same regarding doughnuts. These data suggest that many consumers are not particularly brand loyal, and competitive pricing coupled with high quality could swing some people to buy private label.

However, only 20 percent of respondents said they typically eat private label breakfast pastries only, and 17 percent said the same about private label doughnuts, underscoring the fact that a wide majority of consumers are loyal to certain brands of sweet breads and pastries.

Breakfast Meats

For the 52-week period that ended June 10, supermarket dollar sales in the breakfast meat category rose 4.2 percent from the same time period in 2011, Supermarket News reported, citing data from SymphonyIRI Group.

This was due in part to retailers introducing private label products that heeded to shoppers’ budgets, as well as their quest for healthier and natural products, said the report, using Safeway’s rolled all-natural Open Nature brand of uncured bacon as an example.

Private label is the household penetration leader with 36.3 percent, according to Mintel’s report, compared with 24.6 percent for Oscar Mayer. Private label’s lower price encourages consumers to buy it more often, so it has the most purchase occasions at 2.7 times, followed by Oscar Mayer at 2.5 times.

The report also found that private label has the highest brand loyalty at 39.2 percent, with the much smaller Louis Rich/Oscar Mayer a close second at 37.8 percent.

Waffles/Pancakes/French Toast/Toaster Pastries

The Waffles/Pancakes/French Toast/Toaster Pastries category is dominated by Kellogg and its brands, according to the report, and likely benefited from intensive product innovation that the company has focused on: more healthful options, without compromising fun and taste. This highlights an opportunity for other companies and private label to expand offerings.

Frozen & Refrigerated Breakfast Entrées

Although frozen entrées have experienced some softness during recessionary times, the segment was able to rebound and overall grew 19.8 percent from 2007-11; since 2010, the segment’s growth rate has passed prerecession levels, said the report.

The refrigerated entrées segment has continued its downward trend that has been apparent since 2009, the report found. Lack of innovation, relatively higher prices, and quality concerns all contributed to this decline.

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