May 29, 2023
Despite the dozens of options Americans seem to have when shopping for breakfast cereal, it turns out there really isn’t much of a choice when it comes to where your money goes.
“If you had to guess, how many brands do you think are actually in the cereal aisle?” TikTok user @CancelThisClothingCo asks in a video posted May 23 regarding “The illusion of choice in America.”
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He then shows a series of images of different cereals on grocery store shelves, including many different brands and their offshoots. Upon closer inspection, however, he finds that most brands are either directly or indirectly produced by one of only four companies: General Mills, Kellogg’s, PepsiCo and Post.
Apart from a few store-brand selections, there’s only one independent brand on display.
The video has been viewed more than 2.3 million times.
After years of rising consolidation, the American food market is now run by only a handful of companies. These entities have accumulated the scale and efficiencies needed to secure their dominant position in the sector.
Market concentration isn’t necessarily beneficial to consumers. In fact, a study by the Federal Reserve Bank of Boston found the U.S. economy to be 50% more concentrated these days compared to 2005, which the researchers suggest could be applying meaningful upward pressure on inflation and prices.
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However, market dominance is great for investors. Here are the top three companies that dominate the typical American cereal aisle and how their stocks have performed in recent years.
General Mills
General Mills stock is up about 98% over the past five years. Meanwhile, the S&P 500 is only up about 54% over the same period.
The food conglomerate’s portfolio includes popular cereal brands such as Cocoa Puffs, Cheerios, Chex, Lucky Charms and Cinnamon Toast Crunch. However, the portfolio stretches far beyond breakfast foods. General Mills also owns pet food brand Blue Buffalo, baking products giant Betty Crocker and nutritional biscuits like Fibre One.
The company recently lifted its 2023 profit forecast after raising prices for many of its branded products. That’s a testament to its pricing power.
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Kellogg’s
Kellogg’s is probably the most famous name in breakfast cereals. The company’s brands include icons like Corn Flakes, Rice Krispies, Special K and Froot Loops. Its portfolio isn’t limited to cereal brands, including the likes of Pringles, vegan food producer Morningstar Farms and frozen breakfast brand Eggo, all of which are popular with consumers across the world.
However, the stock isn’t as popular with investors. Kellogg Company stock is up only about 6% over the past five years, vastly underperforming the S&P 500 index as well as many other peers. Nonetheless, the company’s recent price hikes across its product mix helped it raise full-year profit targets for 2023.
PepsiCo
Although Pepsi is synonymous with soft drinks, consumers may not know about the company’s vast portfolio of brands. PepsiCo owns cereal brands like Quaker Oats, salsa brand Tostitos, snacks like Lays, beef jerky brand Matador and sparkling water brand Bubly, among several others.
This immense brand collection has been lucrative over the years. PepsiCo stock is up 83% ($183) since mid-2018, outperforming the S&P 500. The stock even outperformed its closest soda rival, Coca-Cola, over the same period (43%, $60).
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Vishesh Raisinghani is a financial journalist covering personal finance, investing and the global economy. He's also the founder of Sharpe Ascension Inc., a content marketing agency focused on investment firms. His work has appeared in Moneywise, Yahoo Finance!, Motley Fool, Seeking Alpha, Mergers & Acquisitions Magazine and Piggybank.
