History
Breakfast, defined as the first meal of a day, has become a common diet of Americans since the rise of human civilization. 10,000 years ago Neolithic farmers learnt how to cultivate and so they created first a steady food supply. Romans revolutionized the first meal with a cereal version which has dominated the world since with wheat, oats and barley being the main ingredients. Cereal is currently the only major breakfast component in the present worlds and has built an 8 billon dollar industry in the 21st century. In 1890 John Harvey Kellogg single handedly built the first modern breakfast-food industry in greek Michigan. This led to dominion of four big cereal companies namely, Kellogg, General Mills, Post, and Quaker
Structure
Economic Analysis
There are four big cereal companies holding 86.4% and a few small companies holding 13.6% of the market share. Price competition is nonexistent. In 1993 the industry earned a net profit of 6.7% barriers to entry and numerous government attempts to finish it have failed. Cereal industry is at $8 billion any approach that can gain 1% increase is substantial for the companies.
Porter’s Model
Rivalry
The cereal being highly consolidated market. The dominance 1970 by the four companies to 90% of ready to eat cereal, which has dropped recently the market, is still consolidated
Buyer Power
Due to the fact that there are only a few major companies, consumers do not have a big impact on the industry because they purchase small quantities of cereal weekly. Hence Cereal Companies are not dependant to their views. Grocery stores are their main threats because they decide who gets shelf space and this is what cereal companies need.
Supplier Power
There are a few substitutes to cereal thus they give suppliers in cereal industry a lot of power since they are common and do not swing the consumer precedence. Secondly is there is a capability of suppliers merging with these substitute companies. For example sugar companies trying to merge with cereal company.
Substitutes In 1970’s and 1980’s pop Tarts and breakfast bars began to compete with cereals and consumers had more to choose from. Consumers need for a healthy diet led to another substitute i.e. hot cereal
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