Changes

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 national corporations with larger capital bases to handle the business of mass production, nationwide distribution, and heavy advertising expenditures. Imaginative entrepreneurs used the new mass media both to acquaint consumers with their products and to create demand. What was unusual about the industry is the oligopolistic control by 4 companies—much like the automobile industry before it was open to foreign competition in the 1970s.  Cereal firms lacking a national advertising base went out of business or were bought out. There remain niche markets such as local firms and specialty foods that allow small companies to operate.  By the indicators used by industrial-organization economists to measure market structure, company conduct, and social performance, the industry ranks at the extreme oligopolistic end of the range of food industries. In this type of environment, the result is normally higher prices to consumers.  For the cereal industry, 20% of the shelf price goes to the grocery store, 36% to the factory, and 44% to profits, advertising and distribution. <ref>Reimer (2004); Connor (1999)</ref>  In recent years the most popular brand has been Cheerios from General Mills, with sales over $500 million a year, bolstered by over $20 million a year in national advertising. Kellogg's Frosted Flakes is No. 2, with sales of $250 million.<ref> Stephanie Thompson,  "Kellogg pounces on toddlers; Tiger Power to wrest the monopoly away from General Mills' $500M Cheerios brand." ''Advertising Age'' v.75#49 (Dec 6, 2004): online at Expanded Academic ASAP. </ref>  

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 national corporations with larger capital bases to handle the business of mass production, nationwide distribution, and heavy advertising expenditures. Imaginative entrepreneurs used the new mass media both to acquaint consumers with their products and to create demand. What was unusual about the industry is the oligopolistic control by 4 companies—much like the automobile industry before it was open to foreign competition in the 1970s.  Cereal firms lacking a national advertising base went out of business or were bought out. There remain niche markets such as local firms and specialty foods that allow small companies to operate.  By the indicators used by industrial-organization economists to measure market structure, company conduct, and social performance, the industry ranks at the extreme oligopolistic end of the range of food industries. In this type of environment, the result is normally higher prices to consumers.  For the cereal industry, 20% of the shelf price goes to the grocery store, 36% to the factory, and 44% to profits, advertising and distribution. <ref>Reimer (2004); Connor (1999)</ref>  In recent years the most popular brand has been Cheerios from General Mills, with sales over $500 million a year, bolstered by over $20 million a year in national advertising. Kellogg's Frosted Flakes is No. 2, with sales of $250 million.<ref> Stephanie Thompson,  "Kellogg pounces on toddlers; Tiger Power to wrest the monopoly away from General Mills' $500M Cheerios brand." ''Advertising Age'' v.75#49 (Dec 6, 2004): online at Expanded Academic ASAP. </ref>  

==Bibliography==

==Bibliography==

[[Category:Food and Drink]]

[[Category:Food and Drink]]

[[Category:Business]]

[[Category:Business]]