Kellogg Bets That Bigger Cereal Cafe Can Help Generate Food Buzz

(Bloomberg) -- Kellogg Co. is hoping that Instagram-obsessed millennials can help make cereal cool again.

The food giant, struggling to break out of a four-year sales slump, is opening a cavernous new cereal cafe in Manhattan’s Union Square -- doubling down on a concept that it started in Times Square last year.

The cafe will be about fives times larger and feature an Instagram station with props and professional lighting, designed to help customers perfect their social-media posts. There’s a full cereal bar, giant murals of Kellogg characters like Tony the Tiger, a station to heat up Pop-Tarts and a special iron to cook fresh Eggo waffles.

“We want cereal to be seen as modern,” said Aleta Chase, a marketing executive at the Battle Creek, Michigan-based company.

That’s no easy task. Many consumers view breakfast cereal as too sugary and processed -- attitudes that have dragged down the industry’s sales for five straight years. Cereal is projected to finish 2017 down 1.6 percent, according to Euromonitor International.

As the world’s biggest cereal maker, Kellogg has suffered the brunt of the downturn. Sales of Special K, one of its top brands, have slipped 26 percent since 2012.

All-Hours Snack

Kellogg has argued that cereal declines are easing as younger customers embrace it as an all-hours snack. But the turnaround has been elusive, and the cafe in Union Square is an attempt to generate some foodie buzz. In fact, it was the slew of pictures posted by visitors to the Times Square location that helped convince the company it needed a bigger space.

“We needed something that was more experiential,” Chase said. “There’s a more lasting emotional connection if they experience it firsthand -- that’s hard to do with a TV commercial.”

The cafe is operated by Sandra Di Capua and Anthony Rudolf, two fine-dining veterans who have worked at New York institutions such as Per Se and Eleven Madison Park. They said a flexible lease in Times Square, where the rent was roughly equivalent to a much larger space on East 17th Street, allowed for the relocation.

And while Kellogg sees the restaurant mainly as a marketing tool, the operators are trying to make money off the concept. The Times Square location was profitable, showing it can be done.

“It has to be a viable business,” Rudolf said.

To contact the reporter on this story: Craig Giammona in New York at cgiammona@bloomberg.net.

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Lisa Wolfson

©2017 Bloomberg L.P.