NEW YORK (TheStreet) -- General Mills (GIS) - Get General Mills, Inc. Report and Kellogg's (K) - Get Kellogg Company Report are aiming to reverse stale results in their bread-and-butter businesses this year by offering more protein-packed nuts in granola bars or a hearty serving of exotic-sounding grains in classic cereal brands.
"We are trying to capitalize on changing consumer values -- consumers want harder-working calories," said Jeff Harmening, executive vice president and chief operating officer of General Mills' U.S. retail business. General Mills is following up on a well-received introduction of Cheerios Protein and new flavors of low-calorie Greek Yoplait yogurt last year by unwrapping a host of fresh products throughout January destined for the aisles of Wal-Mart (WMT) - Get Walmart Inc. Report , Target (TGT) - Get Target Corporation Report and grocery stores that range from quinoa-based clusters in Cheerios to Nature Valley nut cluster bars.
As for Kellogg's, it's undergoing a reboot of its marketing for its major cereal brands to highlight the health properties of the toasted rice that makes up Rice Krispies and the weight-loss attributes tied to its Special K product line of bars and drinks.
TheStreet takes a look at the top trends in the U.S. cereal and snack markets now starting to appear on grocery story shelves nationwide.
On the other hand, go-to brands such as Cheerios and Cinnamon Toast Crunch are being updated to adapt to consumer preferences for health and wellness and bolder tastes. In January, General Mills launched Cheerios Ancient Grains, featuring hipster ingredient favorites Kanut wheat and quinoa oat clusters. More cinnamon was recently added to Cinnamon Toast Crunch, and sales have been impressive, Harmening said.
And every hiker's best friend, granola, has been tweaked by the General Mills R&D team to include more fruits and nuts, increasingly in new, re-sealable plastic packages instead of cardboard boxes. "People want food that is unprocessed, and one way you can do that is to show them through more clear packaging," noted Harmening.
Kellogg's has been slower than General Mills in re-casting its Corn Flakes, Special K and Rice Krispies cereals businesses to play into the health and wellness movement in the U.S., as well as introducing new products. And it shows in the financials.
Third-quarter sales and adjusted operating profits in Kellogg's U.S. morning foods segment declined by 4.7% and 3.7%, respectively, year over year. "U.S. morning foods and U.S. snacks businesses were below expectations," said Kellogg's CFO Ronald Dissinger on an Oct. 30 earnings call. Kellogg's pinned the blame primarily on lackluster sales in its Special K snacks business and Kashi.
The company is nearing completion on the renovation of its GoLean cereal brand to make it certified GMO free and to include sprouted grains and chia seeds. As for the Bear Naked granola brand, Kellogg's is rumored to be experimenting with new blends of granola and bars after introducing sea salt caramel apple and coconut almond curry flavors last November. These new products would join several others brought to market by Kellogg's in the cereal category late in 2014, including cereals launched by the company in November of last year such as Special K gluten-free and Raisin Bran with cranberries.
In spite of the innovation burst, both General Mills and Kellogg's find themselves trapped in a slow-growth environment for boxed and bagged cereal due to consumer demand for to-go snacks. According to the latest data from research firm Euromonitor, sales of breakfast cereals were set to decline by 2% in 2014. Retail value sales of breakfast cereals are expected to decline by 8% overall at constant 2014 prices to reach $10.3 billion in 2018, estimates the firm.
"You will see a lot more innovation in snacking because people are demanding more out of their snacks, said Harmening, adding that nuts are "pretty hot right now" because of their high protein content. This month alone, General Mills has launched a round of snacks that are healthy for you. Several notables: Yoplait 100-calorie, whipped Greek yogurt designed to be less thick than traditional fare, Nature Valley nut crisp bars and Fiber One chocolate chip cookies.
Sales in General Mills' snack and yogurt businesses have been relative bright spots for the U.S. retail segment. Snack sales have increased by 3% fiscal year to date, with yogurt sales gaining 1%.
Kellogg's, meanwhile, remains mired in a transition at its snack business, which is headlined by brands Special K and FiberPlus. Sales and adjusted operating profits at the company's U.S. snacks business declined 4.2%, and 9.9%, respectively, in the third quarter. Kellogg's overall market share loss in the quarter was driven by declines in the consumption of both Special K and FiberPlus bars.
"We are reinventing all aspects of the Special K brand in 2015, and this will include innovation, packaging, advertising and consumer promotion," said Kellogg's Chairman, President and CEO John Bryant during the Oct. 30 earnings call. "Each of these changes will highlight Special K's position as part of our weight loss program," he added.
In mid-January, Kellogg's unveiled Special K chewy snack bars and brownies. The snack bars come in four flavors, delivering nine grams of protein and 100 calories. The brownies are available in two flavors and weigh in at 80 calories apiece.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.