US food company General Mills removed artificial flavors and colors from most of its cereals and shoppers responded as the company had hoped: By opening their wallets.
As of January 2016, seven cereals—including Cheerios, Golden Grahams and Trix—that received recipe changes posted 6% retail sales growth since their re-launch at the beginning of the year. That’s after seeing a 6% decline last year, CEO Ken Powell said during a March 23 conference call with investors. The company first announced the move in June 2015, part of a larger push by global food manufacturers to invest in health and wellness products. To date, 75% of General Mills cereal options are free of artificial flavors and colors, a feat that wasn’t easy (paywall) for the company. Replicating blues and greens in Trix cereal, for example, is tough because natural coloring reacts differently to heat and acidity levels than artificial coloring.
Growth among those brands wasn’t enough to turn around the overall cereals category for the company, which saw sales decline by 2% in the third quarter. Fiber One and Chex were two of the poor performers. Still, it was an indication that consumers noticed the company’s new labeling and health promotions.
Wellness options are growing in popularity among consumers. When Nestlé simplified its ingredient lists and redesigned its frozen food packaging in 2015, it saw solid returns. Pepsi and Coke have seen growth in their teas and flavored waters.
That’s good news for the entire US cereal industry—dominated by Kellogg’s and General Mills—which sits in the crosshairs of a disruptive shift in consumer preferences toward more foods that are healthier and more convenient at the same time. People have increasingly abandoned their breakfast tables for on-the-go snacking, breakfast sandwiches and yogurts.
Analysts with UBS are forecasting a return to 1.5% US cereal sales growth through 2018 for General Mills, even as it continues to face headwinds from other food options.