"The cereal industry has competed on color, shape and the amount of sugar in the cereal, but up to now, never on price," said Rep. "I don't think we've seen a similar historical event since the birth of the industry," Connor said. Price cuts by even one company are rare in this industry, but two companies announcing reductions within two months is unheard of, he said. Connor, professor of agricultural economics at Purdue University. "It's a completely unprecedented event in the breakfast cereal industry," said John M. Since mid-April, "the Post share of the market went up about 4 percent and Kellogg's went down about 4 percent," said Lawrence Adelman, senior vice president and food analyst for Dean Witter Reynolds Inc. While the prices of all foods rose by 45 percent, cereal prices increased by 90 percent.įinancial analysts said Kellogg was forced to act after it saw its market share shrink dramatically in the short time since Post had dropped its prices. Congressional studies have shown that cereal prices have gone up twice as fast as the overall inflation rate for food from 1983 to 1994. The price cuts come at a time when consumers have indicated in market surveys growing dissatisfaction with cereal prices, which are now more than $4 a box for many brands. and the nation's third-largest cereal maker, announced an average 20 percent cut on all of its cereals, such as Alpha-Bits, Raisin Bran and Grape Nuts - triggering a rare price war in the highly concentrated $8 billion industry. Kellogg's announcement came just two months after Post Cereal Co., a division of Philip Morris Cos. Kellogg Co., the nation's largest cereal maker, bowled over the cereal industry yesterday by announcing price cuts averaging 19 percent on two-thirds of the cereals it sells.
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