Business Strategy Case Study: Learning from the Breakfast Industry



It was not a typical day for me. For one, I woke up in my own bed for the fifth consecutive day in a row – the first time I have done this since last January. Second, I was thrilled to know that I had a morning meeting with my friend, colleague, and our Chief Simulation Officer, Eric Pressey, to finalize the design of an exciting new business simulation. Besides being the smartest person I know (I first met him in September of 1979 when we were both freshmen at the University of Pennsylvania), Eric is also an incredible foodie and we can spend hours talking about our favorite meals past, present, and future. And third, I was really excited to brainstorm with our summer interns on new ideas for the blogs we publish on a weekly basis.

As usual, I started my day with a great run, and headed to the office. I always have a piece of fruit for breakfast washed down with a lot of water to rehydrate. Unfortunately, in my rush to get to the office, I left my delicious and perfectly ripened banana sitting on the kitchen counter.

About an hour into our big customized business simulation meeting, one of our Project Mangers called from the road to let us know she was on her way into the office and was stopping at Cosi to pick up some food. At first I said no, but then we looked at the online menu and I decided to get something because I was really hungry. I settled on a Spinach Florentine breakfast wrap.

When it arrived a little while later, I was impressed. It was delicious! Wow, I thought to myself, this is really good. And at under 400 calories and manageable amounts of fat and sodium, it wasn’t even that bad for me. Knowing that places like Cosi, Dunkin Donuts, and Starbucks are all expanding their breakfast offerings, that got me wondering about the current state and strategies of traditional breakfast food companies.

According to market research company Mintel, the number of quick-serve restaurants serving breakfast items is up over 17% and the number of fast-casual restaurant service breakfast items is up 29%. The report said that morning favorites (in addition to coffee) are breakfast sandwiches served on a variety of breads including tortillas, biscuits, round bagels, square bagels, muffins, buns, and toast.

So what does all of this mean for breakfast cereal companies?

Many readers of this blog are familiar with General Mills, Inc. The company has been around for nearly 150 years and is still planning for future success. Seeing the trends and changes in eating habits, General Mills decided to invest more resources into their core cereal business. They are confidently betting that between its new products, current trends, and demographics, they will revive and grow cereal consumption.

In contrast to more people eating breakfast out, cereal is the top choice for consumers who eat at home. Cereal is still quick and easy to prepare and eat for people who only have a few minutes to get their morning nutrition. Because of the convenient variety of flavors, it is easy for consumers to switch up the types of cereals they buy without getting bored of a specific kind. As they look at the trends and data, General Mills is expanding their business strategy and product portfolio with new types of products including high protein, gluten-free, and fiber products to take advantage of the opportunities.

To widen the variety, General Mills is launching several new food products in all sorts of flavors and sizes. According to an article in Bloomberg Businessweek, General Mills has a total of 150 new products coming out. To really stand out from competitors, General Mills has widened its range of gluten-free products and created bolder flavors that consumers have been looking for more recently. For example, the Chex™ website lists a variety of different cereal, oatmeal, and other mix flavors on its products page (many of which are gluten-free). General Mills wants to appeal to all customers, not just a select few. The flavors have become more extreme as well. Consumers want their cereals to have more distinct tastes. The Chief Operating Officer of General Mills, Jeff Harmening, has promised its customers “more cinnamon taste on Cinnamon Toast Crunch and fruitier taste on Trix.”

The demographics show that cereal in the United States is most popular with children, older adults, and Hispanics. General Mills is targeting these age groups as their consumption of cereal continues to increase. A useful marketing strategy General Mills has is advertising older cereal names to adults. The goal is to bring nostalgic customers back to their childhood cereals such as Lucky Charms. The question of course is can you revive an old product to old customers? It may be hard and expensive, especially as it seems more affluent consumers are willing to spend money at the fast-casual restaurants.

In order to drive the value proposition, General Mills is also using technology and digital media to its advantage. With the use of online advertising, it has been able to target more consumers than it had before.

In addition to launching new varieties of cereal, General Mills also introduced its own snack delivery service,Nibblr. Nibblr is an interesting concept: it is a service that delivers healthy snacks to your home or office. Why is this relevant? If consumers are drawn into services like Nibblr for snacks, they could also look to services to deliver cereals and other breakfast items.

As in many industries, things are constantly changing. Unlike companies like Kodak, Digital Equipment, and others that are no longer in existence because they failed to see a disruptive technology, the breakfast industry is moving very slowly. That means companies like General Mills can take their time to think about and invest in the evolution of their business. They just need to make sure that their bets are the right bets and that they understand who their customers are in the product development process.


Robert Brodo

About The Author

Robert Brodo is co-founder of Advantexe. He has more than 20 years of training and business simulation experience.