Consumers ready to absorb RTE grain price increases | 2022-01-04

NEW YORK — With 84% of consumers worried about the impact of inflation on their daily lives, most are ready to absorb rising prices for ready-to-eat cereals, according to a new study by Veylinx, a company based in New York. consumer information platform.

In “Pricing the cereal alsle: Understanding how customers react to inflation”, Veylinx studied the impact of price increases on the demand of 6,410 American consumers over the age of 18 for two of the most popular American cereal brands: Cheerios and Frosted Flakes. The study measured demand for five existing varieties of Cheerios (Cheerios, Cinnamon Cheerios, Fruity Cheerios, Multi-Grain Cheerios and Maple Cheerios) and five existing varieties of Frosted Flakes (Frosted Flakes, Honey Nut Frosted Flakes, Chocolate Frosted Flakes, Frosted Flakes with Cinnamon Basketballs and Mashups Frosted Flakes + Froot Loops) as well as four packaging innovations (sustainable packaging, mega-multi-pack, individual portions and resealable bag).

According to the results, relatively small price increases have little effect on demand for these breakfast staples.

For example, the study found that when prices increased by 20¢ (from $3.29 to $3.49), demand for Frosted Flakes was virtually unchanged and demand for Cheerios only dropped by 1 .5%. Larger price increases have a more significant effect on demand; a 50¢ price increase reduced demand for both brands by nearly 13%, according to Veylinx.

The study also found that consumers who eat cereal more than twice a week are more tolerant of price increases. Veylinx said demand from these consumers fell only 15% when the average price rose from $3.29 to $3.99 (a 21% increase). At this price change, demand fell by 26% for people who consume two or fewer bowls per week, according to the study.

The Veylinx study found $3.99 to be “an important psychological threshold” with demand dropping sharply above this price. A further drop in demand was noted at a price of $4.99, according to the study.

Breaking down the results among consumers, men were nearly twice as willing to absorb price increases as women, the study showed. Meanwhile, older consumers (55+) expressed the most concern about inflation – with 89% somewhat or very worried – but were just as likely to absorb increases. price than young consumers. Gen Z consumers were the least worried about inflation (only 71 percent concerned), which was also reflected in their greater willingness to tolerate rising grain prices, according to the study.

About 78% of consumers with an annual income under $25,000 were concerned about inflation, compared to 88% of consumers with an annual income over $100,000 who said they were somewhat or very concerned about inflation.

In addition to inflation, more than 60% of consumers said they were worried about supply chain disruptions, according to the study.

An additional finding enabled by Veylinx’s proprietary behavioral methodology revealed that consumers consistently exaggerate their interest and the amount they are willing to pay in traditional surveys compared to real-life purchase situations. For example, 76% of consumers said they would buy Frosted Flakes in a resealable bag when asked, but when faced with an actual purchase decision, only 39% did.

“Consumer goods companies are under enormous pressure to offset rising costs by raising prices,” said Anouar El Haji, CEO of Veylinx. “However, they cannot rely on historical data or traditional methods to accurately predict what consumers are willing to pay. The current situation demands a new way to measure demand for existing products and innovations. This grain study shows how important it is to use real behavioral insights to update pricing and positioning while identifying what innovations to launch in these inflationary circumstances.

The Veylinx study also looked at buying interest in a variety of packaging innovations to see if they provide brands with opportunities to raise prices without reducing consumer demand. The study found that most packaging innovations did not result in higher demand than standard Cheerios and Frosted Flakes boxes, regardless of price. Sustainable packaging showed the most promise for Cheerios, performing best at higher prices than the other innovations tested, Veylinx said, while single-serving pouches generated the greatest demand for these innovations for Frosted Flakes.

The study also analyzed why consumers choose Cheerios or Frosted Flakes. According to Veylinx, 44% of consumers choose Cheerios because they expect it to taste good, compared to 59% who said they expect Frosted Flakes to taste good. Meanwhile, 47% said they chose Cheerios for brand recognition, compared to 51% who chose Frosted Flakes. The gap has widened in health and wellness, with 39% of consumers saying they choose Cheerios because they think it’s healthier than other products, compared to 21% of consumers who choose Frosted Flakes for its healthy qualities.

Considering all RTE cereal brands, 18% of 6,410 US consumers surveyed said Cheerios was the brand they purchased the most in the past six months, followed by Cinnamon Toast Crunch (13%), Frosted Flakes (11%), Special K (9%), Lucky Charms (8%), Froot Loops (8%) and Life (6%). The remaining 27% most often purchased an “other” brand in the past six months, according to the survey.