A stalwart of US cereal bowls, Post’s Honey Bunches of Oats has just landed on UK shelves. What are its prospects this side of the pond, asks Vince Bamford
For all the American brands that have become a part of the UK retail landscape, there are still plenty of US bestsellers unheard of on these shores.
Take Post cereals. An American institution with a 114-year history, the company was virtually unheard of in Britain before the surprise arrival of its Honey Bunches of Oats cereal two weeks ago. But has the brand got what it takes to join the ranks of successful American exports or will it go the way of top-10 US cereal brand Lucky Charms, which disappeared from UK supermarket shelves in the 1990s?
Few would deny the company is facing a tough challenge in attempting to carve itself a slice of the £1.5bn UK cereals market yet its UK partner says it is already looking at which Post brands could follow Honey Bunches of Oats. Some industry observers have questioned the timing of the move as even the UK’s biggest brands are struggling, with sales of eight of the top 10 cereal brands declining year-on-year [SymphonyIRI 52w/e 16 July 2011]. But could Honey Bunches have what it takes to shake the sector out of its deal-induced torpor? (see Focus on Breakfast, p47)
The UK arrival of Honey Bunches of Oats was heralded by a national newspaper push, but few who saw the ads would have been aware of how big Post and Honey Bunches are in the US. According to 2010 Nielsen data, the company holds a 12% share of the US cereals market and 5% is taken by Honey Bunches of Oats alone, making it the third-placed cereal in the market after Cheerios and Special K.
Retailers have welcomed the arrival of the brand, claims Brands Direct, the Essex-based sales, marketing and distribution agency that manages Post’s niche Grape-Nuts cereal in the UK and is driving the Honey Bunches of Oats push. The claim is held up by initial listings for the brand at launch in the UK it was in Asda, Tesco, Morrisons and Budgens.
Industry insiders suggest retailers are keen to see another major player challenge the current UK cereals triumvirate of Cereal Partners, Kellogg’s and Weetabix, with some suggesting increased competition may give retailers leverage when dealing with suppliers.
“The introduction of another player into the market gives everyone a little room to manoeuvre,” says Mike Slegg, founder of Produced In Italy, which produces The Groovy Food Company gluten-free breakfast cereals.
Anything that gives consumers more choice and adds excitement to the market is a good thing, says Weetabix consumer insight controller Chris Dubois. “We’re starting to see more cereals come in from abroad, although its still fairly niche at the moment.”
Now Honey Bunches is on our shelves, Post’s first challenge is to keep it there and it’s no given, even for a company of Post’s size as 80% of cereal eaters say they are happy with the choice of cereals, according to Mintel data.
Key to its development will be the level of marketing investment Post is willing to allocate to Honey Bunches of Oats. Brands Direct has promised an “aggressive” level of promotional activity Honey Bunches of Oats (rsp: £2.49) has already been offered for £2 a pack in Asda, and has been part of a three-for-two deal across the category aisle in Tesco but rivals can be expected to up their own activity in response to the brand’s arrival.
Post has set aside £3m for Honey Bunches advertising activity, which has included more press ads this week and a forthcoming TV push.
Potentially its biggest issue is finding a niche on the cereals fixture. Honey Bunches of Oats has come from a cereal market that consists primarily of mainstream products aimed at families. In comparison, the UK cereal aisle has, for example, a section for Weetabix products, mainstream muesli and granola, premium products such as Dorset Cereals, a large oats section and products sold on a wholegrain message.
“If you look at the UK cereal aisle, all the products have a defined role to play in the category whether it is Jordan’s, Dorset Cereals or a brand from one of the biggest players,” says one industry observer. “If you can’t offer something niche in such a busy category then you will struggle.”
One selling point Honey Bunches can offer, suggests Alex Waters, North American president of The Value Engineers, is honey and oats in a single product. Both are growing in popularity and there are few products one exception a variant of Kellogg’s Crunchy Nut Clusters that offer the two ingredients in a single package. “The twin goodies of honey and oats could make headway with the granola/crunchy-focused healthy cereal consumers,” says Waters. “The launch may be a smart move given the current economic climate, which is driving consumers towards multi-occasion products.”
Honey Bunches may also make noise about its lower sugar levels, with obvious targets including Crunchy Nut, Frosties and Cheerios. Sugar content is a bigger issue for consumers than fat or salt, according to Mintel, and the relatively low sugar content of Honey Bunches puts it in a favourable position. “At 20.3g per 100g it’s lower than Crunchy Nut (35g/100g),” says Mintel senior food analyst Alex Beckett. “Health messaging is the norm but Post has more to shout about than some.”
One potential barrier is the lack of recognition of Post and Honey Bunches of Oats compared with some US brands, such as Oreo or Hershey, prior to their arrival in the UK. This is particularly an issue as, according to Mintel, a quarter of cereal eaters buy a cereal according to how famous the brand behind it is.
“Post has no awareness as an endorser brand, so cannot provide the added lift the Kellogg’s brand, for example, would play on a new cereal from that stable,” says Waters. “Endorser brands are of great value over competitors and especially over own-label copies, so this is a key weakness for Post.”
It’s still too early to determine whether Brits will develop a taste for Honey Bunches of Oats but there’s no doubt its arrival has got the cereal market buzzing. Will Post sting or be stung?
What is Post?
- Post is owned by US own-label and foodservice giant Ralcorp
- Its biggest-selling brand is Honey Bunches of Oats, which was launched in the US in 1990
- Post’s wheat and barley cereal Grape-Nuts already has a small presence on UK shelves and is managed here by Brands Direct
- Other brands include Alpha-Bits cereal and two Flintstones-licensed cereals. It also sells cereals under the Bran Flakes and Shredded Wheat names in the US
- It has been reported that Weetabix owners Lion Capital are looking to acquire Post to gain a US foothold. “If true, it makes sense for Post to be building a UK presence,” said Alex Waters, North American president of The Value Engineers
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