Sep. 18, 2012 at 7:32 AM ET
Kellogg is trying to breathe new life into its venerable Pop-Tarts, which are battling a tough sales environment as consumers demand healthier options and increasingly eat their first meal away from home.
The Battle Creek, Mich.-based company, the nation's biggest cereal maker, recently entered into licensing agreements with several big state universities in an effort to reach one of its prime markets for the toaster pastries -- adults aged 18-34. The company also resurrected its “Crazy Good” advertising campaign targeting young people that ran from 2004-2008, promoting the brand through social media and concerts.
Kellogg has said the promotions have been a success, pointing to Nielsen data that shows sales associated with the Pop-Tart brand, including some ancillary products, rose 5 perecnt in the second quarter versus a year earlier.
But Symphony/IRI, another firm that tracks sales, says Pop-Tart sales have slipped 1 percent so far this year after holding flat last year at about $420 million. Sales volumes have been maintained through price increases, as unit sales have fallen since 2010, Symphony/IRI says. The firm's sales figures exclude Wal-Mart and certain other stores.
For health-conscious parents, Pop-Tarts might be a tough sell against trendier options such as Greek yogurt, which has been surging in popularity. Some varieties of Pop-Tarts carry 200 calories and 13 grams of sugar in a single pastry.
That could explain why Pop-Tarts has teamed up with the universities of North Carolina, Michigan, Georgia, Arkansas and Florida to produce toaster pastries in school colors. While kids under 18 are twice as likely to consume toaster pastries as adults, many food companies including Kellogg have adopted guidelines limiting the marketing of sugary products to children.
Kellogg also is grappling with stagnant popularity of its flagship ready-to-eat cereals, sales of which fell in the most recent quarter.
“There could be a shift in terms of consumption trends,” Morningstar analyst Erin Lash said in an interview. Lash rates Kellogg a “hold.” “Moms have continued to buy healthier offerings for their kids even if that means that they don’t have the money to buy healthy options for themselves.”
Though breakfast has been called the most important meal of the day, Americans spend precious little time eating it -- about 14 minutes on average, according to market researcher NPD Group. People are increasingly eating their first meal on the road, which is evident by the surging breakfast business at fast-food chains.
“Along with bagels and breakfast bars, Pop-Tarts had a nice run in the 1990s ,” said Harry Balzer, an NPD Group analyst. “Now, they are leveling off. We are looking for something more hearty, and the breakfast sandwich seems to be the answer.”
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