We're eating less cereal. Here's what Kellogg's is going to do

Hadley Malcolm

NEW YORK — With sales that have turned soggy, cereal makers are trying to salvage the breakfast bowl's bruised reputation.

A bowl of Froot Loops at the new Kellogg's cafe in Times Square is topped with mini marshmallows and passion fruit jam. You can ask for it served over ice cream, too.

General Mills reported Wednesday that cereal sales were down 1% for the year. But the company and other cereal makers hope to lead a charge back in the face of changing consumer preferences.

Armed with a game plan for growth, General Mills launched its first new cereal brand in over a decade earlier this month. It is also trying to stay ahead of shopper preferences as crunchy flakes and puffs increasingly move from bowls to snack bars.

Even as some shoppers shun their grub in grocery aisles, cereal makers are taking to the streets. Kellogg's is opening its own upscale cereal cafe next week in Times Square called Kellogg's NYC.

These 4 food trends are making investors hungry

The goal: to expand the appeal of cereal beyond breakfast. Maybe even make cereal chic.

These innovations come at a crucial time. Cereal sales have been down the past four years, falling 2.4% since 2012, according to Nielsen. As customers' lives have gotten busier and more reliant on grab-and-go food, cereal has been squeezed out of morning routines.

The Kellogg's cereal cafe in Times Square will feature flavorful bowls like Rice Krispies paired with green tea powder and strawberries.

Then came an eye-popping report earlier this year from research firm Mintel that seemed to spell doom for Cap'n Crunch and friends: Nearly 40% of Millennials said they thought cereal was inconvenient because it requires too much cleanup.

"It’s really a lifestyle shift that happened about 15 years ago when the mornings became just that much more hectic," says Jim Murphy, president of General Mills' cereal division. "You kind of slowly lose a bowl a week over a long period of time."

Traditional cereals are competing against rising preferences for heartier foods like oats, yogurt and eggs. But there are also signs the dip in sales is leveling off. In the most recent 52-week period, sales were down just 0.7%, compared with decreases 1% to 4.3% in the previous three years, according to Nielsen.

"Manufacturers have done a nice job of appealing to the changing role that cereal plays in our lives," says Jordan Rost, vice president of consumer insights at Nielsen. "Cereal can take a number of different forms now."

Staff at the Kellogg's cafe wear shirts with images of Kellogg's cereal characters and sayings.

Cereal is still in 90% of households, but companies know their product lines need a drastic overhaul to remain there. General Mills has been making gradual changes, including phasing out artificial colors and flavors and launching varieties of gluten-free Cheerios.

In its earnings report, the company called out cereal as a main priority in the coming years as it looks to evolve its product portfolio and emphasize health and wellness.

The company's newest cereal, Tiny Toast, is meant to appeal to the late teen/early young adult set who have grown out of kid cereals but haven't quite gotten on the Fiber One bandwagon. It is "made with real fruit" — a big selling point for Millennials — and comes in thick, bite-size pieces easy for snacking. That checks off another Millennial sticking point: More of them, some 82%, believe cereal is a great snack, compared witih 75% for adults overall, according to Mintel.

General Mills to label GMOs on products across the country

Kellogg's will capitalize on this, too. At its cafe, the company is banking on lip-smacking menu items like Froot Loops paired with mini marshmallows and passion fruit jam to help cereal play an even bigger role later in the day. The cafe will sling bowls of Rice Krispies and Corn Pops well past breakfast time, staying open from 7 a.m. to 11 p.m.

Cereal bowls can be served with milk or soft-serve ice cream.

Kellogg's has tried this before. In 2014, the company opened a week-long pop-up bar in New York to tout its cereals as good sources of grains and proteins. The new cafe is a permanent installation of that experiment, with a bigger emphasis on seasonal recipes and unexpected flavors.

For instance, Special K will be served with Frosted Flakes, pistachios, lemon zest and thyme. Rice Krispies gets a kick from green tea powder and fresh strawberries. Customers can choose between whole milk, skim milk, soy milk, plain yogurt and soft-serve ice cream as a pairing.

"More chefs are realizing that great dishes are typically those that tap into people's food memories," says Christina Tosi, the founder of the Momofuku Milk Bar dessert shops, who created the recipes for the Kellogg's cafe. Tosi has a deeply personal connection to the brand, which plays a starring role in Milk Bar desserts, particularly in her signature cereal milk soft-serve made with milk that's been steeped in Corn Flakes.

A bowl of General Mills' new cereal brand, Tiny Toast, which launched earlier this month.

Building restaurant-like experiences around cereal has proved to be a popular concept. Beyond Milk Bar, London's Cereal Killer Cafe boasts both American and international cereal varieties. Trendy New York-based retailer KITH opened a cereal bar inside its Brooklyn store last summer. Customers go there to channel their inner child by choosing between 25 different kinds of cereal and pairing bowls with sweet toppings like crushed Oreos or ordering an ice cream mixed with cereal.

Cereal invokes a certain nostalgia about childhood and sleepy mornings spent slurping up the milk after devouring a bowl of Cocoa Puffs. That feeling is part of why concepts that reimagine cereal for modern tastes have legs, Murphy says.

"Cereal is so part of our pop culture in the developed world," he says. "It really is an emotional category."