Time to wake up and shake up: who is building Europe’s challenger breakfast brand?
By Saskia Hoebée & Lucie Paté
Not much Break Through in Breakfast
The breakfast market in Europe (read: cereals, muesli and porridges) has been growing steadily over the past years to ~€20bn today and is expected to reach ~€30bn by 2029. Breakfast is the third largest category in packaged food and has historically been dominated by four players; Kellogg’s, General Mills, Post Holdings and Quaker Oats. While these companies built a portfolio of billion-dollar brands, they are often viewed as unhealthy, unexciting, staple food brands of the past.
Current offerings often fail to meet the expectations of the modern consumer in Europe and the USA, and yet we have seen relatively little innovation in this category, let alone disruption by emerging startups. We recognize that this segment is challenging to break through at scale because it is:
i) a volume play, with high repeat but low purchase value and low margins;
ii) hard to premiumise, as there are natural price ceilings, especially in Europe compared to the US where the average spending on breakfast is larger;
iii) by nature a retail dependent category (as opposed to a good fit for D2C) where it is hard to get shelf space and to build a sales channel advantage.
Challenges for challengers: Value over Volume
For startups to tackle the challenges mentioned above, we believe they need to play the value game rather than the volume game, at least at the start. This requires an aggregate of boxes to tick regarding the nailing of trends;
- Consumers are looking for healthier options to start their day. In the UK, 65% of adults say they try to eat healthy all or most of the time (Mintel). So, challenger brands should reduce added sugars, and replace that with some actual nutrients (dates, raisins, etc).
- Functionality is another requirement by many consumers looking for products enriched with protein, fiber or with clear claims, like improved digestion. In the UK, 44% of cereal buyers cite “high in fibre” as an important purchasing factor.
- Convenience, the success of Magic Spoon (super premium protein-enhanced cereals) in the US is in part explained by the extra-convenience of home delivery, even on subscription (justifiable by the high AOV).
- Making breakfast snackable, in formats beyond the bowl, to tackle on-the-go occasions and push impulse purchases. A great example of this innovation is Yfood, very successful also as breakfast replacement on the go, with both RTD and bars.
- Building a Brand that Makes Breakfast Great Again, not through old school advertisements on why one shouldn’t skip this meal, but rather something digitally-activated that consumers wake up to with a smile and are willing to share on their morning social media activity.
Who can break the fast, fast enough?
It takes a high growth, innovative team and platform to truly disrupt this space that has mainly been offering variations and derivatives of existing products.
At Five Seasons Ventures, we are excited about the category opportunity, but haven’t found our ideal investment just yet. If you believe your Company is the one that will wake the category up, we want to hear from you!
