“What’s up with the vaporwave cereal?” my friend asks, spotting the box of “Fruity”-flavored Magic Spoon on my counter.
The packaging is Pepto pink, with a purple gradient down the side and, on the front, a bespectacled girl astride a cereal-munching bird. There’s no overflowing bowl, no splash of milk, and, conspicuously, no Kellogg’s or General Mills logo in the corner. Instead, there are the nutritional facts: 12 grams of protein and 3 grams of net carbs — numbers you definitely won’t see on your childhood box of Froot Loops or Cocoa Puffs.
Cold cereal has remained America’s favorite breakfast food for decades not because of its health benefits, but rather because of its price (cheap), taste (sweet), and appeal among a very picky group of consumers (kids). It doesn’t hurt that it’s also extremely easy to prepare, requiring only a bowl, spoon, and milk — and even those are mostly optional.
For the past several years, though, sales in the category have been on the decline, which many experts have attributed to the public’s growing awareness around the harmful effects of excess sugar, which can include increased risk of diabetes, heart disease, and obesity, as well as the shift in consumers’ appetites toward more protein-rich foods, such as yogurt and energy bars. Low-carb diets have also seen a recent renaissance, although in place of the Atkins and Dukan diets of the early aughts, it’s now keto, Paleo, and Whole30 that reign supreme.
For followers of any of these regimens, traditional packaged cereals are strictly out of bounds — not only sugary childhood favorites like Cinnamon Toast Crunch and Lucky Charms, but also “healthy” varieties such as Cheerios and Raisin Bran, which are made from grains (a no-no) and heavy on carbs (17 grams and 38 grams per serving, respectively, while ketogenic diets generally limit total carbs to 20 to 50 grams per day).
Magic Spoon is part of a small cadre of startups that have emerged in the past year with plans to bring cereal back to a market that has abandoned it due to dietary restrictions, as well as convert some breakfast-aisle loyalists who might be looking for less sugary options for themselves or their kids. The brands each offer a variation on low-carb, high-protein cereal, sell direct-to-consumer (at least for now), and promise consumers a third option in between “inevitable sugar coma” and “sad brown ‘health’ flakes.”
“You talk to somebody about their favorite cereal and their eyes just light up”
Magic Spoon co-founders Greg Sewitz and Gabi Lewis, who launched their cereal in April, wanted to tap into the familiarity that almost every American has with the category. “As we were thinking through the world of food products, there really aren’t many that people who have a true emotional connection to and history with in the way that they do with cereal,” says Sewitz. “You talk to somebody about their favorite cereal and their eyes just light up immediately, and they think back to the pantry they had when they were a kid.”
Even with the recent sales slump — which, in addition to health concerns, has been blamed on millennials being too lazy to clean up after themselves — cereal is still a giant industry. Americans spent $9 billion on it in 2018, according to Euromonitor, down from $13.9 billion in 2000, and almost 90 percent of the country eats it for breakfast at least sometimes.
”Ten years ago, cereal was the most popular breakfast in this country,” says Lewis. “That’s going to be true 10 years from now, it’s going to be true 20 years from now. The only reason it’s declining slightly is because even though people love cereal, none of those products are talking to modern consumers today.”
Magic Spoon’s debut flavors hit on all the classics — frosted, cinnamon, fruity, and cocoa — and are sweetened (in some cases, bracingly so) with allulose, a sugar substitute found naturally in jackfruits and figs. Because allulose has been found to produce “negligible effects on blood glucose and insulin,” the Food and Drug Administration ruled this spring (in a first for the agency) that food manufacturers don’t need to count it toward a product’s total sugars, though because the sweetener is so new to the market, its long-term effects on humans haven’t yet been studied.
Americans spent $9 billion on cereal in 2018, down from $13.9 billion in 2000
Catalina Crunch, a year-old startup, uses monk fruit — a natural sweetener derived from luo han guo, a small melon native to parts of Southern China and Thailand — for a more subtle sugar-free taste. The brand was founded by Krishna Kaliannan, who originally developed its signature dark chocolate cereal as a keto-friendly breakfast food for himself. Kaliannan has been on the diet for about a decade, since shortly after he was diagnosed with Type 1 diabetes and epilepsy. (Apart from being the most-Googled diet of 2018, keto has been shown to reduce seizures in epilepsy patients who don’t respond to medication.)
While the brand’s target audience is much broader than the keto community, Kaliannan’s experience with the diet — and its lack of crackers, chips, toast, and pretzels — informed his top priority in creating the cereal: crunchiness. After poring over the science behind what makes foods crispy, he tweaked and re-tweaked the recipe, and, when it came time to pitch the business to investors, he brought along MRI scans of the cereal he’d had made at a cancer lab in New York City to demonstrate his technique.
This process also helps explain where the name “Catalina Crunch” came from. “After spending a year trying to figure out how to make it maximally crunchy, I’m not leaving crunchiness out of the name,” he says. So far, it’s working: The company has since added three more flavors — cinnamon toast, maple waffle, and honey graham — and now sells more than 2,000 pouches of the cereal a day.
A third brand, the Cereal School, is betting on nostalgic branding and snack-size packaging to bring the category into the present day. Each 24-pouch order of Fruity and Cinnamon Bun puffs arrives in a colorful box decked out with phrases like “Growing up is overrated” and the company’s slogan, “Old school cereal made the new way,” a philosophy that co-founder Dylan Kaplan explains as “a throwback to when we were kids and could enjoy cereal without concerns about, ‘Is this healthy? Is this unhealthy?’”
He and his partner Helen Guo are lifelong cereal lovers who founded the brand after discovering how few options they had in the grocery store when they tried to cut sugar out of their diets. Looking to differentiate themselves, they talked to friends and potential customers about what they wanted out of their cereal, and found that portability and portion control were near the top of the list.
“When we thought about how we could do things differently, we wanted to think beyond just the cereal itself, but also the packaging,” says Kaplan. “Why does it have to be in a cereal box? It’s been that way for decades, but does it really need to keep being that way? Those were some of the questions we asked ourselves when we were getting started.”
Selling direct-to-consumer opens up an opportunity that hasn’t historically existed for cereal brands in grocery stores, says Allen Adamson, co-founder of the consulting firm Metaforce and co-author of Shift Ahead: How the Best Companies Stay Relevant in a Fast-Changing World.
“In a sea of 500 boxes screaming at you, everyone has to scream louder”
“If you’re on that shelf today, the reason most of the branding is the same is because they tested, and in a sea of 500 boxes screaming at you, everyone has to scream louder,” he says. “So if you don’t have the big bowl of cereal with the strawberry on top with the milk splashing over it and big letters and big red colors and bumper-sticker-type graphics, you can’t break through.”
Online, brands can reach potential customers through different channels and speak to how they’re actually eating cereal, which increasingly isn’t just in a bowl for breakfast. A 2017 Mintel survey found that 56 percent of millennials eat cereal as a snack at home, while more than one in five 18- to 22-year-olds eats it on the go.
Kaliannan came up with similar findings when his marketing team surveyed more than 250 Catalina Crunch customers. Only about 45 percent said they usually ate the cereal in the morning with milk, a bowl, and a spoon. Others treated it as an afternoon snack, a crunchy topping for bowls or smoothies, or even a quick dinner. On Instagram, the brand has also reposted recipes from food bloggers who have used it as an ingredient in cereal bars and Oreo cups.
While Catalina Crunch won’t be online-only for long — it’s launching in more than 1,000 stores in January, Kaliannan says — selling direct for the first year has allowed it to establish a customer base without compromising on packaging. The brand uses 9-ounce resealable pouches (sold four at a time) rather than bags-in-boxes because its ingredients demand it, he says, but also because, in conversations with friends, a common complaint was “how damn hard it is to close the damn box after you’ve opened the bag.”
For Magic Spoon’s part, Sewitz says they chose the branding — boxes included — as a way to harken back to the cereal everyone remembers from growing up. “It’s all centered around this fine line that we are trying to walk between nodding to the nostalgia and fun and Saturday morning cartoon-style cereals of yesteryear, but also bringing a new product that feels very modern and speaks to a contemporary consumer with all of the things that they value and care about.” Also, boxes are just easier to pack and ship. The founders are still considering pouches and single-serve bags but say they also want to be mindful about packaging waste.
(For what it’s worth, the boxes I ordered are good for about seven months after delivery, according to their “best before” dates. Because the cereal isn’t stripped of fats like processed grocery store brands, though, it does tend to leave oily stains on the box if — or, rather, when — it spills out of the inside bag.)
Beyond millennials’ eating habits, there’s another reason this new wave of cereals can’t market themselves the same way Kellogg’s might: Their products are way more expensive than a box of Frosted Flakes.
Magic Spoon sells four boxes for $39 (or $1.39 per bowl), Catalina Crunch is $49 for four pouches (or $2.45 per bowl), and the Cereal School’s 24-bag bundles are $49.99 (or $2.08 each). While all offer discounts of between 5 percent and 20 percent for customers who sign up for monthly subscriptions, they’re not in the same ballpark as the $3.64 family-size boxes many Americans buy at their local grocery stores or Walmarts today.
Magic Spoon sells four boxes for $39 (or $1.39 per bowl) and Catalina Crunch is $49 for four pouches (or $2.45 per bowl)
This price discrepancy was unavoidable in order to hold on to product quality, says Kaliannan, whose cereal includes ingredients like organic pea protein, chicory fiber, and turmeric. “I knew this product was going to be more expensive than all the other cereals, just by virtue of how much the ingredients cost.” The brands are all striving to position their cereals as premium products and alternatives to popular millennial breakfast foods like smoothies and granola. On its website, the Cereal School touts the comparison in bold letters: “For the price of a protein bar, we’ve reinvented the sweet and crunchy cereal you love without the sugar and carbs!”
If the companies are successful in convincing customers to pay a premium for nutrition — whether for themselves, their kids, or both — they’re likely well-positioned for the long run, since people tend to be creatures of habit when it comes to the first meal of the day.
”Cereal, once you get a heavy user ... they have it seven days a week,” says Adamson. “For a food company, everyone looks at lifetime customer value. And if you’re eating Cereal School every day and buying a packet every day, that’s a really powerful, profitable business for them.”
It’s no wonder brands are so eager to become part of your morning routine: The decisions you make before your coffee even kicks in are worth a lot of money.
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