CITI: We performed a deep dive into breakfast and concluded 2016 is when cereal makes its comeback

“Cereal [is] poised for a comeback in 2016,” declared Citi analyst David Driscoll in a recent note to clients.

He’s talking about the breakfast food, which has been pummelled by the popularity of breakfast meats, the rise of Greek yogurt, and all the bad press about carbs. Rising wheat prices and declining ad spending in the category hadn’t helped.

“We performed a deep dive analysis of the breakfast occasion and its implications to US cereal consumption,” he continued. “Our analysis suggests cereal category sales are positioning for a positive inflection point in 2016, as overall conditions for cereal consumption are improving.”

Interestingly, Driscoll partially attributes cereal’s potential smash return to Greek yogurt: While over the past few years you couldn’t turn on a TV without seeing some sort of commercial extolling the virtues of the trendy, rich yogurt, it seems that the craze is finally starting to fizzle out.

And that’s good news for cereal.

Driscoll notes that Greek yogurt stole share away from ready-to-eat (RTE) cereal from 2011-2014 as the bacterially-fermented dairy product enjoyed insane growth at +36% CAGR. By comparison, non-Greek yogurt volumes declined annually by 11% during that same period.

But in 2015, Greek yogurt volume has started to sputter, and total yogurt volume growth has stalled — which you can see in the table below.

“Hence, given that total yogurt has been taking share from RTE cereal (led by Greek) we believe some of the pressure on US RTE cereal volumes is likely abating as competition from yogurt seems to be easing,” writes Drisdoll.

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