Breakfast cereal industry

Breakfast food industry

American entrepreneurs and health food enthusiasts created non-meat breakfast foods in the late 19th century that, thanks to systematic marketing and heavy advertising, became economically important by the early 20th century, transforming American eating habits and produced a multibillion dollar consumer industry controlled by four oligopolistic firms.

Oatmeal

Ferdinand Schumacher, a German immigrant, began the cereals revolution in 1854 with a hand oats grinder in the back room of a small store in Akron, Ohio. His German Mills American Oatmeal Company was the nation's first commercial oatmeal manufacturer. He marketed the product locally as a substitute for breakfast pork. Improved production technology (steel cutters, porcelain rollers, improved hullers), combined with an influx of German and Irish immigrants, quickly boosted sales and profits. In 1877, Schumacher adopted the Quaker symbol, the first registered trademark for a breakfast cereal. The acceptance of "horse food" for human consumption encouraged other entrepreneurs to enter the industry. Henry Parsons Crowell started operations in 1882, and John Robert Stuart in 1885. Crowell cut costs by consolidating every step of the processing --grading, cleaning, hulling, cutting, rolling, packaging, and shipping—in one factory in , operating at Ravenna, Ohio. Stuart operated mills in Chicago and Cedar Rapids, Iowa. Stuart and Crowell combined in 1885 and initiated a price war. After a fire at his mill in Akron, Schumacher joined Stuart and Crowell to form the Consolidated Oatmeal Company. In 1888, a trust or holding company combined the nation's seven largest mills into the American Cereal Company using the Quaker Oats brand name. By 1900 technology, entrepreneurship, and the "Man in Quaker Garb" had given Quaker Oats a national market and produced yearly sales of $10 million.

Precooked cereal

Ready-to-eat precooked cereals was the next development, pioneered by Shredded wheat, which Henry Perky introduced in Denver in 1893. Perky soon built a national distribution system to grocery wholesalers nationwide. He sold out to the National Biscuit Company in 1928. In St. Louis William Danforth, with financial help from his wealthy father, bought a local firm manufactured feed for dairy cows and chicken feed under the Purina brand name. He capitalized on the 1890s health food craze and succeeded in having his cereal named the official breakfast food of the popular Dr. Ralston health clubs. Sales boomed, and human cereal became a major part of the business. However the Ralston-Purina Company by 1920 focused primarily on animal feeds

Kellogg and Post

New breakfast-food concepts came from John K. Kellogg and Charles W. Post. The Battle Creek Michigan cereal industry rose from a combination of sincere religious belief and commercial interest in health foods. A medically trained Seventh-Day Adventist, Dr. John H. Kellogg experimented with cereals because Adventists were not allowed to eat meat. As a student he realized the convenience of purchasing breakfast foods at groceries already cooked and ready to eat. Granola was his product; it resembled toasted bread crumbs. In 1891 Kellogg applied for a patent for a flaked-food process; in 1895 he launched cornflakes, which overnight captured a national market. Soon there were forty rival manufacturers in the Battle Creek area. Charles W. Post, a former Kellogg patient, discovered a new angle, with Postum, a cereal coffee substitute that eliminated most of the caffeine found in regular coffee. In 1898 he introduced Grape-nuts, the concentrated cereal with a nutty flavor and in the late 1890s Post joined the cornflake wars with Post Toasties. Good business sense, determination, and powerful advertising produced a multimillion dollar fortune for Post in a few years. Post's death in 1914 facilitated the merger of his company with the Jello firm and began the process of mergers that led to the powerful General Foods Corporation.

William K. Kellogg, after serving for many years as his brother John's administrative assistant, in 1906, broke away and set up the Kellogg Toasted Corn Flake Company. William Kellogg discarded health food concept, opting for heavy advertising and commercial taste appeal. His signature on every package became the company trademark and insurance of quality. During the 1920s the company expanded by embracing technological advances and new products; in 1925 Rice Krispies exploded on the market, using better packaging and waxite liners to insured freshness and better shipping. By 1930 Kellogg's nine plants nation wide controlled 40% percent of the American ready-to-eat cereal industry, with an expanding international trade as well.

More oatmeal

Early in the 20th century, the Quaker Oats Company (formed in 1901 to replace the American Cereal Company) jumped into the world market. Schumacher, the innovator; Stuart, the manager and financial leader and Crowell, the creative merchandiser, advertiser, and promoter, doubled sales every decade. Alexander Anderson's steam-pressure method of shooting rice from guns created puffed rice and puffed wheat. Crowell's intensive advertising campaign in the 1920s and 1930s featured promotions with such celebrities as Babe Ruth, Max Baer, and Shirley Temple. Sponsorship of the popular "Rin-Tin-Tin" and "Sergeant Preston of the Yukon" radio shows aided the company's expansion during the depression. Meat rationing during World War II boosted annual sales to $90 million, and by 1956 sales topped $277 million. By 1964 the firm sold over 200 products, grossed over $500 million, and claimed that 8 million people ate Quaker Oats each day.

National advertising

National advertising in magazines and radio, and after 1950 television, was the key to the emergence the 1920s of the fourth big manufacturer, General Mills. In 1921, James Ford Bell, president of a Minneapolis wheat milling firm, began experimenting with rolled wheat flakes. After tempering, steaming, and cracking wheat and processing it with syrup, sugar, and salt, it was prepared in a pressure cooker for rolling and then dried in an electric oven. By 1925 Wheaties had become the "Breakfast of Champions." In 1928 four milling companies consolidated as the General Mills Company. The new firm expanded packaged food sales by heavy advertising, including sponsorship of such radio programs as "Skippy," "Jack Armstrong, The All-American Boy," and baseball games. Endorsements by Jack Dempsey, Johnny Weissmuller, and others verified the "Breakfast of Champions" slogan. By 1941 Wheaties had won 12% percent of the cereal market. Experiments with the puffing process produced Kix, a puffed corn cereal, and Cheerios, a puffed oats cereal. Further product innovation and diversification brought total General Mills sales to over $500 million annually (18%in packaged foods) by the early 1950s.

The cereal industry followed the pattern of many American manufacturing organizations. Responding to perceived needs and consumer demands, innovators launched new products. From these beginnings emerged combines with larger capital bases to handle the business of mass production, nationwide distribution, and heavy advertising expenditures marketing. Imaginative entrepreneurs used the new mass media both to acquaint consumers with their products and to create demand. Small firms lacking a national advertising base went out of business or were bought out to an oligopolistic industry controlled by four corporations.

Bibliography

• Caldwell, Elwood F. Breakfast Cereals and How They Are Made (2nd ed. 2000)
• Day, Richard Ellsworth . Breakfast Table, Autocrate: The Life Story of Henry Parsons

Crowell.

• Forsythe, Tom, et al. General Mills: 75 Years of Innovation, Invention, Food & Fun. (2003)* Gray, James. Business Without Boundary: The Story of General Mills. (1954)
• Marquette, Arthur F. Brands, Trademarks, and Good Will: The Story of the Quaker Oats Company.
• Powell, Horace B. The Original Has This Signature--W. K. Kellogg.
• Thornton, John Harrison. The History of the Quaker Oats Company.
• Wojahn, Ellen The General Mills/Parker Brothers Merger: Playing by Different Rules

2003