The study, published this week by Packaged Facts, a publishing division of MarketResearch.com, revealed that after growth in the sector of 4.3 percent in 2003, last year had produced a less significant, but nonetheless solid figure of 1.5 percent.
"Given that breakfast foods overall constitute a huge, mature and highly segmented market, the growth achieved is not negligible," said the report.
For manufacturers this is still a market where money can be made. Breakfast foods gained $367 million in retail value in 2004 to approach the $24.5 billion mark, following a $985 million gain the previous year.
Packaged Facts projects that the breakfast foods market will enjoy considerably greater growth over the next five years than it did in the 2000-2004 period, reaching $28.1 billion.
Eggs and egg substitutes had the best year of any breakfast foods category in the 2000-2004 period, posting a 2003 increase of 18.7 percent. The category's growth slowed to 4.5 percent the following year, but its two-year gain of $733 million, pushing its total value to $3,788 million, represented close to half of the breakfast foods market's growth between 2000 and 2004.
This performance reflected the popularity of low-carbohydrate, high-protein diets such as Atkins, and consumer willingness to pay a premium for products perceived as healthier- such as cage-free, organic or vegetarian - and cholesterol-free refrigerated egg substitutes. This segment nearly doubled in size, reaching $204 million.
Sales of cereal and breakfast bars declined in three of the last four years, including a 2 percent dip in 2004 to $10,830 million. The category lost $270 million in value in 2000-2004, virtually all of it in the cold cereal segment, the largest segment in the breakfast foods market.
The number of new cereal products jumped by 77 percent from 2002 to 2003, to 623, and stayed close to that level in 2004 according to Productscan. "Natural" was the most often used package tag on new cereals throughout the 2000-2002 period, but was supplanted by "high vitamins" in the two most recent years, while "high fiber" was used one-third more times in 2004 than the previous year. Though down slightly in 2004, "high minerals" has also become one of the favorite package tags of cereal marketers.
The overriding trend in recent breakfast food product introductions is toward healthier fare. This trend encompasses foods that offer higher nutritional value, purer ingredients, foods to help people lose weight or maintain a healthy weight, and foods formulated to inhibit the development of certain diseases.
General Mills, for example, last year converted its cereal line to whole grains and Kellogg's recently launched Disney Pixar Finding Nemo oat cereal is made with whole grains and provides 11 vitamins and minerals.
Because time is often most pressing at the start of the day, convenience is especially important. To simplify meal preparation for time-pressed parents, General Mills, for instance, has introduced frozen dunkables French toast sticks with syrup in its Pillsbury range and frozen Shrek 2 waffle sticks with dippin' cups.
In the cereal arena, General Mills has extended its Cereal in a Cup line (plastic cups with pull-off paper labels) and Cereal Go Bags with honey nut Cheerios and cinnamon toast crunch varieties. The Kellogg take-away line offers quick fixes, such as cracklin' oat bran, in re-sealable plastic cup that fits a car's cupholder.
According to Simmons Market Research Bureau data, 18.5 percent of US adults consider breakfast to be the most important meal of the day, with those over 65 and people in higher income households more likely to start the day with a meal.
Cheerios was the most popular cold cereal brand, according to Simmons, ranking as a favorite brand for 19.3 percent of adults, with brand extension Honey Nut Cheerios second at 12 percent, followed closely by Kellogg's frosted flakes and traditional corn flakes.
Younger teenagers were disproportionately likely to eat Cheerios and Cap'n Crunch, while older teenagers shift to Quaker instant oatmeal and Nature Valley granola bars.
Younger kids go for Quaker instant oatmeal , Kellogg's nutri-grain bars, and Quaker fruit & oatmeal bars, while older children prefer French toast crunch, Oreo O's, and Reese's peanut butter puffs.
Ready-to-eat (cold) cereal is by far the largest segment of the breakfast foods market. It has been slowly contracting during 2000-2004, but the segment still accounts for over one-third of the total market.
"If marketers can turn cereal sales around, the breakfast foods market could get a big boost. Otherwise, sales will likely be constrained to low-level growth, despite healthy growth in a number of smaller product segments," according to the researchers.
One area in which cereal marketers have been able to grow their sales significantly is healthful adult cereals aimed at the growing ageing population.
The volume of cereal introductions remained as high in 2004 as the previous year with about 600 new products, according to Marketing Intelligence Service, with healthful varieties abounding. Special K, for example, has been Kellogg's fastest growing because it addresses consumer concerns about obesity.
One of the biggest challenges facing marketers of packaged breakfast foods in the coming year may be ramped-up competition from the foodservice side, especially at the quick-service restaurant (QSR) level.
"Several QSRs have already begun to expand their offerings for the morning crowd, and roughly half of the new products are grab-and-go items designed for fast-feeding including 'dashboard dining,'" said the report.