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Pricing is cereal killer

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Sitting down, pouring cereal and adding milk is simply too inconvenient for today's on-the-go crowd. -- The Wall Street Journal, Sept. 16

Well, you can certainly understand why. First, you have to have milk in the fridge. And not just milk, but milk that hasn't gone bad. Also, you have to have a box of cereal, which can eat the heart out of a $5 bill.

And then there's the issue of a clean bowl and the related issue of a clean spoon. If you ate a bowl of cereal yesterday and want to eat another one today, and realize that you were so eager to be on-the-go that you forgot to rinse the bowl and spoon, you will be confronted with the hardest substance known to humanity: dried-on cereal.

Sure, you could soak your cereal bowl in hot water. Alternately, you could plug in a belt sander, but believe you me, it's hard to make a sander work inside a cereal bowl. But we on-the-go types don't want to be soaking or sanding cereal bowls. We want to be out partying or creating an Internet start-up or saving a whale.

Cereal? This is not Seinfeld, baby. This is life lived in the drive-thru lane.

Annie Gasparo reported in the Journal: "The maker of Cheerios is complaining that other cereal brands aren't doing their part to improve sales of the industry, as Americans are replacing their milk and bowls with foods that are lower-carb, higher-protein and easier to eat on the go. General Mills -- which has a pretty big stake in the game -- said analysts are questioning the future prospects for cereal.

"'And understand why,'" said Jim Murphy, the president of General Mills' cereal division.

"The number of cereal boxes sold in the U.S. has declined over the last three years, and frankly," he went on, "other brands aren't doing enough innovation or advertising to keep the milk-and-bowl breakfast relevant."

At General Mills, the advertising agencies are using warm and fuzzy social commentary to sell Cheerios. The one with a bi-racial family incensed racist trolls around the country. No more Cheerios at Klan breakfasts.

There's also a spot where a cute little boy asks his mom if "Nana" fed her Cheerios while she was growing up. Mom chokes up when the boy says, "When we have Cheerios, it's kind of like we're having breakfast with Nana."

This showed how serious General Mills is about selling cereal. As Stephen Colbert noted, "Nobody ever thought to leverage the death of a grandparent to hawk some hoops of oat."

We on-the-go guys don't have much time to waste on schadenfreude, but let me just say this: The cereal cartel is getting what it deserves. It's always irked me that cereal costs so much. Granted, this doesn't irk me as much since there are no longer teenaged locust-boys in the house, but really? Five bucks for a box of sweetened processed grain?

In 2010, in a documentary series called The Foods that Make Billions, the BBC reported more money was spent advertising cereal than on any other food. The relationship between value and cost was negligible.

The entire industry was built on false advertising. W.K. Kellogg spent $150 on an ad in the Ladies Home Journal in 1906, warning readers his corn-flake company might not be able to meet demand. He included a coupon just in case readers wanted to get ahead of the crowd.

In those days, people weren't as sophisticated about advertising as we modern, on-the-go, pay-five-bucks-for-coffee people are. They fell for the trap. Soon, more than 100 companies were making corn flakes in Battle Creek, Mich. The survivors were those that advertised the best and the most.

Today, 15 per cent of the price of a box of cereal pays for the ingredients in the box -- grain, sugar, marshmallows, more sugar, partly hydrogenated vegetable oil, sugar, rock-hard bits of fruit, ascorbic acid, sugar, other forms of sugar, etc. Forty-eight per cent of the price goes for packaging, shipping, sales, promotion and advertising, much of which is aimed at children. The industry's average profit margin is 17 per cent.

I've got to be on the go, but here's a tip for the industry: If you spent less on advertising -- except, of course, for newspaper advertising, which is known to deliver high-dollar customers at a fraction of the cost of TV advertising -- you could sell the cereal for less and still make 17 per cent.

Of course, we on-the-go types won't eat it anyway. If we ate cereal at home, we wouldn't have time to wait in line at Starbucks.

 

Kevin Horrigan is a columnist for the St. Louis Post-Dispatch.


--McClatchy Tribune Services

Republished from the Winnipeg Free Press print edition October 9, 2013 A9

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