MINNEAPOLIS — Grocery store favorites such as Betty Crocker and Hamburger Helper are hurting. Cheerios, still the nation’s No. 1 cereal brand, needs some help.
Customers are eating more fresh produce and meats, more and more often bypassing the center aisles where “Big Food” companies such as Golden Valley-based General Mills reign. They also are turning to products from newer companies, which are having an easier time finding a niche in the market.
While the move away from processed foods is a few years old, the pace of current change is unprecedented, said Ken Powell, General Mills’ CEO and a 36-year food industry veteran.
“I’ve been doing this a long time, and I’ve never seen it this fast,” Powell said.
With consumers souring on certain ingredients, General Mills this year exiled gluten from Cheerios and banished artificial colors and flavors from all of its cereals, its biggest U.S. seller. With organic booming, General Mills is on the prowl for more acquisitions such as its buyout of Annie’s, the mac and cheese maker popular with millennial moms.
Alexia Howard, a stock analyst with Bernstein Research, said General Mills’ product offensives make sense. “Consumers are worrying about these things, so they do seem to be reacting in the right way. But is it enough?”
With its annual U.S. retail sales down for the first time in a decade, General Mills has cut costs. But that isn’t enough, Powell said. “To have a sustainable business model, you have to have growth.”
General Mills introduced several new products this year under the Nature Valley brand, one of its healthier lines. It cut sugar by 25 percent in its original Yoplait yogurt. It has cut salt from many products. It announced that by the end of 2016, almost all of its cereals will be free of artificial colors and flavors. And with gluten-free Chex as its fastest growing cereal, it is rolling out more gluten-free products.
Changing tastes
Demographic changes are affecting the market. Millennials are better educated, more diverse and less loyal to brands, Howard wrote. They gravitate more toward the perimeter of the grocery store, where fresher foods dominate.
Millennials have “different food values,” Powell said. “They are looking for real food, authentic food, simple food … There are lots of things they are avoiding — artificial sweeteners, preservatives, flavors.”
A survey earlier this year by market researcher Mintel found that 47 percent of “older millennials” — ages 29 to 38 — don’t trust large food manufacturers. That number was 35 percent for younger millennials and only 18 percent for consumers older than 38.
The older millennials, particularly those with families, are a critical market. Indeed, Howard said, moms with children younger than 10 years old likely make decisions for about 50 percent of food eaten at home. And they are getting and sharing much of their information about food on the Internet.
“The consumer has much more control,” Powell said. “They can get information the way they want, when they want.”
