I recently spent a week's vacation in Prince Edward Island. Most mornings I found myself eating spectacular breakfasts and this got me thinking about the business itself. Nutritionists often remark that breakfast is the most important meal of the day, especially for kids because it provides the energy to go about your daily grind. Breakfast cereals alone account for estimated spending of $6.2 billion annually. The total amount for all things breakfast is many times larger. This presents investors with many different opportunities. When you consider how many people skip breakfast every day, the potential market is even greater.

IN PICTURES: Money Can't Buy Happiness, But What About Championships?

Cold Cereal
This is probably the first thing that comes to mind for most people when they think of eating breakfast at home. It's quick and easy. Cheerios, made by General Mills (NYSE:GIS), leads the way with 12.6% market share (Numbers from 2008) followed by Kellogg's (NYSE:K) Special K at 5.4% and Ralcorp's (NYSE:RAH) Post Honey Bunches of Oats at 4.9%. Thirteen brands account for half the cereal sales in the U.S. - the fight here is clearly for second place. Kellogg's investors need not frown. Overall, it has a 33% market share versus 25% for General Mills and 15% for Post. It might not have the number one brand in the cereal game, but it has five of the top 10. That's a good consolation prize.

Frozen Food
I'm talking about waffles, pancakes and other breakfast items that you store in the freezer. The big winner is Kellogg, whose Eggo frozen waffles have 73% market share in the category. Unfortunately, due to a listeria outbreak last fall and a subsequent flood at its Atlanta plant, the company has been unable to meet customer demand in the first half of 2010. This shortage hurt Kellogg's second quarter results. With Eggo sales off 9% year-over-year and North American cereal sales off 13%, overall revenues were 5.3% lower, resulting in a 15% drop in net income. Kellogg believes the second half will be better. Time will tell if any market share went to other competitors like Aunt Jemima, made by Pinnacle Foods Group under license from Quaker Oats.

Warm Cereal
Quaker Oats, owned by Pepsico (NYSE:PEP), has a commanding 58% market share in the warm-cereal market. Through the first half of the year, it sold $212.2 million in oatmeal in the United States. Private-label brands were next at $103.7 million with Cream of Wheat, owned by B&G Foods (NYSE:BGS), in third with $27.2 million. According to Quaker Foods and Snacks President Jaya Kumar, "Only 40% of Americans eat breakfast even though 97% consider it the most important meal of the day." My sentiments exactly. Pepsico, realizing the untapped potential, plans to spend more on product innovation, hoping this increases the oatmeal unit's 4% contribution to overall sales.

Breakfast has been one of the few bright spots in the restaurant industry in recent years. For the 12-month period ended March 2010, 12 billion morning meals were served at restaurants with 80% coming from quick-service establishments. The two fastest growing items ordered by breakfast customers over the past five years are specialty coffee and breakfast sandwiches. Demographics suggest this growth will continue. This bodes well for McDonald's (NYSE:MCD), Starbucks (Nasdaq:SBUX), Tim Horton's (NYSE:THI) and Panera Bread (Nasdaq:PNRA). All of whom have done well during this recession.

Bottom Line
Imagine what would happen if every American ate a good meal in the morning. Not only would the country be healthier physically, it'd be healthier financially as well. (Trim the fat from your grocery bill to reduce the impact of food cost on your budget. To learn more, see 22 Ways To Fight Rising Food Prices.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  2. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  3. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  6. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  7. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  8. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  9. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  10. Professionals

    Tips for Helping Clients Though Market Corrections

    When the stock market sees a steep drop, clients are bound to get anxious. Here are some tips for talking them off the ledge.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!