50003886205000502920Eric Floresca2009Nature’s Path Foods350000Eric Floresca2009Nature’s Path Foodscenter50005029209000050000center550005532120A review of the Breakfast Cereal Category and Nature’s Path Foods. 900000A review of the Breakfast Cereal Category and Nature’s Path Foods. -5340352308860<br />Contents TOC o "
h z u Executive Summary PAGEREF _Toc234330869 h 3The Brand PAGEREF _Toc234330870 h 4Canadian Breakfast Cereal Industry PAGEREF _Toc234330871 h 4Trends PAGEREF _Toc234330872 h 5Competition PAGEREF _Toc234330873 h 6PepsiCo – Quaker Oats PAGEREF _Toc234330874 h 6Kellogg’s PAGEREF _Toc234330875 h 6Kashi PAGEREF _Toc234330876 h 7General Mills PAGEREF _Toc234330877 h 7Weetabix PAGEREF _Toc234330878 h 8Who is the Consumer? PAGEREF _Toc234330879 h 8Nature’s Path News PAGEREF _Toc234330880 h 9Marketing and Advertising PAGEREF _Toc234330881 h 9ENDNOTES PAGEREF _Toc234330882 h 10<br />Executive Summary<br />Nature’s Path is a privately held firm based in Richmond BC. They are known for their breakfast cereal and were named one of the 30 greenest employers of 2009. Their main brands are Nature’s Path Organic, EnvironoKidz Organic, Weil, and Optimum. The Canadian breakfast cereal market was valued at $1,398.8 million in 2008 and expected to grow to $1.488.9 million by 2013. The main competitors in this segment are PepsiCo at 42.8%, Kellogg’s at 29.9%, General Mills at 10% and other at 16.6%. The main distribution channel is supermarkets and hypermarkets which account for 72.2%, independent retailers at 20.3%, specialist retailers at 3% and other at 4.5%. <br />The people who purchase Nature’s Path cereals are between the ages of 25-49, they have some university education and are employed in sales, management and as professionals. They are married with kids, read magazines, are medium to heavy users of the internet and light television watchers. Nature’s Path strongest markets are out west in BC and Alberta with Quebec being their strongest market in eastern Canada with the other province having a lower than average significance. In late 2008 they launched a campaign in Toronto targeting organic food buyers that focused on outdoor, interactive and product sampling. Their most recent products are the Flax Plus, Maple Pecan Crunch, Cherry Chocolate Strips Frosted Toaster Pastries, Whole O’s, Vanilla Almond Flax Plus Granola and Agave Plus Granola all launched within the last few years.<br />3451860232410The Brand<br /> Nature’s Path Foods is a privately held firm that produces breakfast and other products using organic ingredients grown in a sustainable environment. One tag line is eat well and do good that is fundamentally what they are about as a company. As a company they started up in 1985 and their first product was Organic Manna® Bread and in 1988 they expanded to cereals that would provide the tremendous growth for the firm and remain at the core of their business. They employ over 350 people at their 4 North American operations.<br />In 2000 they launched 2 more brands one being Optimum™ Power and in 2007 they began their partnership with Doctor Andrew Weil that would integrate integrative medicine concepts into cereals. They added a second production facility in 1999 and a third in 2008. Their main brands Nature’s Path Organic, EnvironoKidz Organic, Weil, and Optimum. Their product lines consist of cold and hot cereals, toaster pastries, granola, bards, cookies, eco packs, waffles and finally baking mixes and ingredients. In April 2009 Nature’s Path was deemed one of the 30 greenest employers in 2009 for a culture of environmentally responsibility.<br />Canadian Breakfast Cereal Industry<br />The value of the Canadian breakfast cereal market was $1,398.8 million in 2008. This represents a compound annual growth rate (CAGR) of 0.9% for the period from 2004-2008. The most lucrative sales were in ready-to-eat cereals which generated $1,247.6 million in revenues in 2008 representing almost 90% of the market’s entire value while hot cereals represent below 11% of revenues for the category. <br />By the end of 2013 the cereal market value will be $1,488.9 million at a CAGR of 1.6% during this period. Volume grew by 1.2% in 2008 to reach 190 million kg and by 2013 volume is expected to be 205.7 million kg an increase of 8.3% since 2008. Canada accounts for 9.6% of the America’s breakfast cereal market value with the US accounting for nearly 80% of the Americas market total value. <br />This is a market where substitutes are numerous and not only limited to cereal but other food types that will depend on consumer preference. Supermarkets and hypermarkets are the primary buyers of breakfast cereal and the main point of distribution. They account for 72.2% of the market with independent retailers at 20.3%, specialist retailers at 3% and other at 4.5%. In the cereal category product differentiation is broad due to the sheer variety of ingredients and changing consumer tastes which have caused the dominant players to appeal to the niche audiences.<br />Trends<br />In comparing traditional cereals to organic cereals 2008 saw growth according to Neilson the natural cereal segment was up 4.3% for the 52 week timeframe ending November 29th, 2008 and organic cereal up 4.6%. One of the trends driving growth in natural/organic is gluten-free products like cereal. Maria Emmer-Aanes, director of marketing and communications for Nature's Path says that they try to put half in the gluten-free section and half in the cereal section. <br />For cereals cross-merchandising is a challenge since the most logical place to pair them with dairy is usually not accessible due to clean-floor policies of most retailers. It is also possible for cross merchandising with shelf stable dairy substitutes like soy. This is beginning to change in wake of the current economic crisis and some creative thinking by producers. Another area of cross merchandising is with granola which according to Chuck Alwine owner of Natural Foods has become pretty much a cereal option. A prime driver has been a shift to healthy food alternatives. In some categories the growth in organic compared to traditional products is more pronounced compared to cereal. <br />Competition<br />Competition is fairly robust with many alternatives within the category and substitutes outside of it available. Nature’s Path’s competition is quite broad including some of the most well known brands from Kellogg’s, Quaker Oats, and General Mills and private labels like President’s Choice. They must fight for the attention of consumers and shelf space in stores. The other players make up 16.6% of the Canadian marketplace. With the main benefit of cereal is it fits into the busy lives of today’s consumers.<br />2744470168910PepsiCo – Quaker Oats<br />PepsiCo is a dominate player in Canada for this category with a share of 42.8% in the market value in 2008. They compete in categories from snack foods, beverages, cereal and juices. They compete in this category with Quaker Oats. Some of their brands include life cereal, Quaker Oatmeal and Instant Oatmeal, 100% Natural Cereal, Harvest Crunch Cereal, and Quaker crunch. A specific Quaker Oats product known as Weight Control is meant to target the target as Special K with an emphasis on how these products can help individuals manage their weight and diet.<br />3331210142875Kellogg’s <br />Kellogg’s made up 29.9% of the Canadian cereal market in 2008 and is known for ready to eat cereals and convenience foods. They had $418.24 million in revenue for 2008. They have some of the most well known brands in the market like Rice Kipsies, Frosted Flakes and others that target more health conscious consumers like Special K, Muslix, All-Bran and Just Right. They also operate in the organic product category through the Kashi brand. In 2008 they had North American Sales of $8.5 billion. Special K is a product that has been positioned as helping to control weight and promote health.<br />Kashi<br />-762002212340The Kashi brand has a similar positioning as Nature’s Path. They are committed to natural foods and health. This brand is completely separate from the mainline Kellogg’s. The main brands they sell in Canada are 7 Whole Grain Honey Puffed cereal, 7 Whole Grain Puffed cereal, GOLEAN Cereal, GOLEAN Crunch cereal and High Fibre Flakes & Granola. They have recently begun a television campaign that has focused on its 7 whole grains. It showcases a female hiker walking a path and speaking about the 7 grains.<br />General Mills<br />General Mills has a 10.7% share of the Canadian breakfast cereal market with revenue of $149.67 million in 2008. Some of their products are Cheerios, Trix, Wheaties and Chex. They also have separate brands that focus on specific niches like Fibre One and an organic brand from Cascadian Farms which uses certified organic ingredients. In the US they have US retail market position in dollar share of 30% and ranked number 2. In a transcript General Mills stated that “net sales increased 8% to reach $14.7 billion.” Operating profits grew faster than sales to be over $2.6 billion.<br />Weetabix<br />They were incorporated in 1975 in Canada and it is a subsidiary of the UK parent company Weetabix Ltd. They were originally created to produce their own version of a South African cereal. Some of their brands include Weetabix and later Alpen. Weetabix Canada produces over 90 brands of cereals for the Canadian, British and American marketplace. Weetabix focus is on natural foods and they produce an organic version of the Original Weetabix cereal which would target a similar market as Nature’s Path.<br />Who is the Consumer?<br />According to statistics Canada breakfast cereal have become more popular than ever before, reaching 4.1 kg per person in 2008. This is an increase of 38% from twenty years ago. According to statistics Canada consumption of cereal products has steadily risen for the past two decades up nearly 20 kg overall since the mid-1970 level. In recent years wheat that was primarily used from bread products is now used for pastes, snack foods and other products. Rice and rice products have also become more popular with Canadians over the last two decades. <br />According to PMB the target market for Nature’s Path is 25 to 49 years old with the 25-34 year old group with a significance of 151 and for 35-49 a significance of 131. This group have at least some university education with significance of 218 for those with a bachelor’s degree and a 120 for a post graduate. They are likely to be married with children. This market is employed in tech, sales, teaching, management, and as professionals. The strongest market for Nature’s Path is its home province of BC, Alberta and then Quebec with the others all below average in significance for their populations. <br />The household income for their audience is +$35k and they are more likely to live in communities +100,000. This is a product that is weighted towards females slightly who has a higher significance than mans. They have a high magazine imperative and a light TV imperative. They live a hectic lifestyle, more likely to have a fairly conservative taste in food and look into flyers to determine what to buy. <br />They read the papers between 3-5 days a week, and watch television 5 days a week at the average for their population. The shows they watch are situation comedies, reality TV and dramas. They are more likely to watch headline news, the food network, HGTV, Life Network among others. Around half have cable television of some kind. They listen to the radio to and from work. Finally they are medium light to heavy users of the internet with all groupings having a higher than average significance.<br />Nature’s Path News<br />34607501985010Nature’s Path recently bought 2,240 Acres of organic farmlands and partners with local organic farmers. Demand for organic products has risen by over 20 over the past few years. It now makes up 3% of the overall food market but only 0.5% of all farmland is for organic farming with expansion at a slower rate than the growth in demand. The partnership with organic farmers will help to ensure growth the farmers and strengthen Nature’s Path’s supply chain to help with their growth.<br />Marketing and Advertising<br />In late 2008 they launched the Eat Well. Do Good campaign in Toronto. The campaign targeted organic consumers and was meant to communicate their playful and quirky voice. It was also meant to emphasize their commitment to social and environmental responsibility. It kicked off in September and ran through November. The campaign consisted of miniboards and posters that appeared in Toronto PATH stations, on trains, in transit shelters and fitness centres. It included product samples, coupons meant to be a catalyst for trial by new users. It also included a microsite at www.eatwelldogood.com where people could learn more about nature’s path. This campaign was created by egg (http://www.eggusa.net) a brand communications firm for reaching eco-conscious consumers.<br />Finally they will be sponsoring the CHFA East in October, the CIBC run for the cure in BC in October. In the US they will be sponsoring Boo at the Zoo in D.C., the Boston Vegetarian Food Festival and in November the Green Festival in San Francisco.<br />ENDNOTES<br />