Kellogg Cozies Up To Wal-Mart In Bid To Overcome Cereal Slump

Kellogg Co. is introducing its latest Frosted Flakes flavor with an exclusive run at Wal-Mart Stores Inc., hoping to stand out at a retailer that has roiled the packaged-food industry in recent years.

A new cinnamon version of Frosted Flakes will debut on Wal-Mart shelves later this month, followed by a broader rollout in January. The approach helps ensure that the product will get out in front of the retailer’s very large customer base, said Ken Shea, an analyst at Bloomberg Intelligence.

“It gives them very strong exposure,” he said.

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Wal-Mart is the biggest seller of groceries in the U.S., and its efforts to streamline the cereal aisle have created headaches for companies like Kellogg. As part of a decluttering push, the retailer is putting fewer products on display and not doing as many in-store marketing stunts — say, a tower of cereal that might get your attention. Wal-Mart also has curtailed newspaper circulars that once helped promote products and specials.

That’s meant food companies have had to work harder to get attention. Kellogg’s and chief rival General Mills Inc., the maker of Cheerios and Cinnamon Toast Crunch, also are contending with a broader cereal downturn. Many younger consumers have shifted away from the breakfast staple, partly because of the perception that it’s too sugary and processed.

Earlier this month, Kellogg cut its revenue forecast for 2016, saying it now expects sales to drop 1 percent — in part because of Wal-Mart’s strategy shift.

Cinnamon Trend

Frosted Flakes is Kellogg’s second-biggest brand, behind Special K. It generated about $474 million last year, according to Euromonitor.

In tapping cinnamon, Kellogg is following a playbook used by its main competitor. In 2014, General Mills boosted the amount of cinnamon in its Cinnamon Toast Crunch — a brand that has seen sales jump since the change.

Kellogg worked for about a year to create the new flavor, which is only the second Frosted Flakes variation in nearly a decade.

“It really came down to the fact that our fans were asking for cinnamon,” said Brad Schwan, senior director of brand marketing at Kellogg’s morning foods unit.

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