360° Coverage : Alternate Breakfast Options Eat Into Sales Of PepsiCo's...

2 Updates

Alternate Breakfast Options Eat Into Sales Of PepsiCo's Quaker Foods

Feb 27 2014, 1:13pm CST | by

PepsiCo is a leading beverage and snacks manufacturer, with more than half of its sales coming from its booming snacks division. Since category headwinds in sugary drinks pose a threat to PepsiCo’s...

Filed under: news

 
 
 

33 weeks ago

Alternate Breakfast Options Eat Into Sales Of PepsiCo's Quaker Foods

Feb 27 2014, 1:13pm CST | by

PepsiCo is a leading beverage and snacks manufacturer, with more than half of its sales coming from its booming snacks division. Since category headwinds in sugary drinks pose a threat to PepsiCo’s future growth, the company expects two-thirds of its top line growth in 2014 to come from the snacks division. The brands Frito-Lay and Quaker Foods in North America constituted half of the food sales and one-fourth of the overall sales for the company in 2013. But while revenues for Frito-Lay North America have increased 14% in the last five years to over $14 billion in 2013, Quaker Foods has seen a decline of 3% in sales to $2.6 billion during the same period. The shifting trends in the breakfast market have hurt sales of Quaker Foods, which sells hot and cold cereals, snack bars, rice snacks and cookies. Traditional American breakfasts such as oatmeal and sugar cereals are losing customers to quick-service restaurants and dairy products such as yogurt.

We estimate a $87 price for PepsiCo, which is around 10% above the current market price.

See Our Complete Analysis For PepsiCo

Innovation In Hot Cereals Drives Growth For Quaker

The bright spot for Quaker Foods is its constant innovations in the hot cereal segment, in which the company holds an impressive 57% market share. Consumers, especially women who take care of the entire family’s nutritional intake form the target demographic for the hot cereal market. The unemployment rate for adult women (ages above 20) fell by 1.3 percent points to 5.9% in January year-on-year. With increasing rates of employment, women are now more pressed for time and are likely to either skip breakfast altogether or consume packaged and other instant foods. PepsiCo has made efforts to remain in tune with the current market trends and provide portable, easy-to-make and precise portions of its hot cereals. In 2012 the company launched its portable Quaker Real Medleys, now PepsiCo’s third-best selling hot cereal after regular Quaker Oats and low-sugar Quaker Oats, after registering the highest percent increase in sales in the fiscal year ended May 2013. During this period, sales in the hot cereal segment grew by 4% to $1.2 billion. However, hot cereals represent only 12% of the overall U.S. breakfast cereal market, which saw a growth of less than 1% last year, as sales of cold cereals remained flat.

Cold Cereals Underperform The Breakfast Cereal Market

With some consumers either switching breakfast preferences to healthier and compact foods or skipping breakfast altogether, consumption of cold cereals has declined by 1% each year in the last decade. Cold cereals generated around $9 billion in sales last year, led by Kellogg Co and General Mills, which together accounted for 54% sales in this category. We expect this category to continue to face headwinds in the coming years due to the following factors:

  • Instant Foods Take Away Market Share

Breakfast cereals face stiff competition from alternate breakfast choices such as Greek yogurt, drive through fast foods and even milkshakes. Once considered a novelty, yogurt is now the second largest breakfast category behind cold cereals in the U.S., with retail sales of over $7 billion last year. Yogurt constitutes 40% of the breakfast market and continues to outperform the entire category. In addition, cold cereals are also suffering at the hands of quick-service restaurants that provide breakfast. Restaurants such as McDonald’s, Wendy’s, Subway and now even Taco Bell offer breakfast items that are eating into the market share of cereals. According to Nation’s Restaurant News, breakfast is a $42 billion business for the restaurant industry, where the first meal of the day accounts for one in five restaurant visits.
/>

  • Unhealthy Perception Of Sugar Cereals

As consumers in the domestic market look to live a healthier lifestyle, the demand for sugary cereals has declined over the years. Consumers now want high fiber and protein content in their breakfast meals, which has hurt sales of the core sweetened cereals category. Growing health awareness could continue to hamper cold cereal sales in the country, where more than one in three people are obese.

  • Declining Core Demographic

Children form the core demographic for cold cereals. However, the U.S. fertility rate has declined year-on-year for each of the last five years, hitting an all-time low in 2012. Children below the age of 17 form the smallest segment of the domestic population at present, and their proportion is expected to further decrease in the coming years. A decline in the core customer base also poses a threat to sales of cold cereals.

Quaker Might Strengthen Dairy Portfolio To Drive Future Demand

Volumes for Quaker Foods rose by 3% last year, primarily due to growth in Muller Quaker Dairy product volumes launched in 2012. According to Euromonitor, the yogurt and sour milk products market could grow by 10% to $9.3 billion by 2018. As PepsiCo’s partnership with the Theo Muller Group is only over a year old, both these companies will aim to compete with established dairy giants such as Danone and Chobani in this budding segment. Danone and Chobani together account for more than half of the domestic yogurt market volumes at present. Although Muller is relatively new to the American market, the company leads the U.K. dairy market with 16% market share and sales of over $500 million in 2012. MQD products might be able to grab some of the market share in the yogurt category and, along with incremental volumes in hot cereals, could offset the decline in Quaker’s core cold cereal segment in 2014.

See More at Trefis | View Interactive Bernstein Research

Like our charts? Embed them in your own posts using the Trefis WordPress Plugin.

Source: Forbes Business

 
Update
2

7 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

7 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the d ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Budapest: the 'startup' capital of Eastern Europe
Budapest, Oct 21 (IANS/EFE) Barack Obama, the Dalai Lama and NASA all have one thing in common - the fact that they distributed live videos on Ustream, the app of the Hungarian startup that represents Budapest's potential to become a technology hotspot of Europe's eastern region.
 
 
Developing countries participate in half of world trade
Geneva, Oct 21 (IANS/EFE) The participation of developing countries in world trade accounts for nearly half of global trade, according to a report by the World Trade Organisation (WTO).
 
 
India showcases IPL as driver of economic development
United Nations, Oct 21 (IANS) The success of the Indian Premier League (IPL) in cricket embodies the emergence of sports as a global industry that promotes economic development and job creation in developing countries, India told the UN General Assembly (UNGA) Monday.
 
 
Cuba dispatches two new medical brigades to Africa
Havana, Oct 21 (IANS/EFE) Cuban President Raul Castro has announced that two health brigades from the island will be dispatched to Liberia and Guinea Conakry this week to collaborate in the fight against the Ebola virus disease epidemic.
 
 
 

Latest from the Network

1,074 new dengue cases in Chinese province
Beijing, Oct 18 (IANS) China's Guangdong province has reported 1,047 new cases of dengue fever, health authorities said Saturday. Six people have already died in Guangdong -- five in Guangzhou and one in adjacent...
Read more on Business Balla
 
Blake Lively 'always' wanted to be mum
Blake Lively has ''always'' wanted to be a mother. The 27-year-old actress is expecting her first child with husband Ryan Reynolds and she admits she's been dreaming of this moment since she was a youngster. Speaking...
Read more on Celebrity Balla
 
Kris Jenner 'torn apart' by Bruce's new relationship
Kris Jenner feels ''torn apart and angry'' that Bruce Jenner is dating her former assistant. The 58-year-old matriarch split from the 64-year-old Olympic gold medalist last October following 22-years of marriage but is...
Read more on Celebrity Balla
 
Cheryl Fernandez-Versini won't move to France
Cheryl Fernandez-Versini doesn't want to move to her husband's home country of France. The 'X Factor' judge, 31, who comes from Newcastle, is adamant she won't be relocating any time soon to suit her new spouse Jean-...
Read more on Celebrity Balla
 
Lance Bass sets wedding date
Lance Bass has set a date for his wedding. The former *NSYNC singer and his partner Michael Turchin, who have been dating for two-and-a-half years, are to tie the knot on December 20, 2014, a representative for the...
Read more on Celebrity Balla
 
Nepal avalanche toll reaches 39
Kathmandu, Oct 18 (IANS) At least 39 climbers died while hiking on a key Nepali route after it was hit by a major snowstorm and avalanches earlier this week, BBC reported Saturday citing officials. Over 350 stranded...
Read more on Politics Balla
 
Jake Gyllenhaal says society is complicit in 'nightcrawling'
Jake Gyllenhaal says almost everybody in society ought to relate to his new movie 'Nightcrawlers'. The eagerly-awaited film concerns those people who monitor police scanners and then race to crime scenes to film eye-...
Read more on Movie Balla
 
India eves look for first win in AFC U-16 qualifiers
Dhaka, Oct 18 (IANS) India will hope to register their first win of the 2015 Asian Football Confederation (AFC) Under-16 Women's Championship qualifiers when they take on hosts Bangladesh in a crucial encounter at the...
Read more on Sport Balla
 
Moyes mulling return to management
London, Oct 18 (IANS) Former Manchester United manager David Moyes said that he is ready to revive his managerial career six months after being sacked by the 'Red Devils'. "I am ready to return. I have enjoyed the...
Read more on Sport Balla
 
Ebola fears loom over Ghana hosting AFCON
Accra (Ghana), Oct 18 (IANS) The Ghana Medical Association (GMA) cautioned the government Saturday against hosting the 2015 African Cup of Nations (AFCON), despite a request by the Confederation of African Football (...
Read more on Sport Balla