Tucked into a small, beige business park in south Lakeville, the headquarters for the nation’s third-largest cereal company is easy to miss.
Post Consumer Brands, maker of Honey Bunches of Oats, Fruity Pebbles and Grape-Nuts, has been based in Minnesota since 2015. The company and its new name are the product of the purchase by St. Louis-based Post Holdings of Minnesota-based MOM Brands, known for Malt-O-Meal.
Post’s presence adds to that of General Mills to make the Twin Cities the unofficial cereal capital of the world. While analysts and food trend watchers have long sounded the alarm about cereal’s declining sales, the segment remains the nation’s top breakfast food.
“I think its death is largely exaggerated,” said Chris Neugent, Post Consumer Brand’s president and CEO, in his first media interview since the two companies coupled up.
The new Post is bigger, with 18.7 percent of the ready-to-eat cereal category. That’s in third place behind General Mills in Golden Valley and Michigan-based Kellogg’s, each at 30 percent, according to market researcher IRI.
In addition to the highly recognizable hot cereal brand Malt-O-Meal, MOM makes the large bags of ready-to-eat cereals that consumers may know as knockoffs of iconic brands. Malt-O-Meal’s Cinnamon Toasters bear an uncanny resemblance to General Mills’ Cinnamon Toast Crunch.
MOM Brands also gained market share with its Mom’s Best Cereals that are free of certain ingredients, like high fructose corn syrup and artificial flavors and preservatives. This line — with its earth-toned boxes made from recycled cardboard — appeals to more health- and eco-conscious shoppers.
Post Foods brought higher name recognition to the marriage, with the colorful products like Alpha-Bits and Honeycomb and the adult-targeted Great Grains. But Neugent said he knew the company needed to act as if it was starting over.
“We realized immediately that if you get two 100-year-old companies and put them together, you better not get a 200-year-old company,” he said. “We couldn’t make it MOM Brands 2.0 and we didn’t want to make it Post Foods 2.0. We needed to act like a start-up that was blessed with great assets.”
Post Holdings — which also owns Minnetonka-based Michael Foods, a food service provider and maker of Crystal Farms cheeses and All Whites liquid egg whites — is an acquisition-driven company that focuses on efficiency and food-business fundamentals.
“The biggest challenge has been that we have fewer people, that’s the reality of what a merger means. The combined company has less people than the two companies individually,” Neugent said.
The former Post Foods corporate office in Parsippany, N.J. was closed following the acquisition and most of its 200 employees were offered jobs in Minnesota. A few took positions here, said Neugent, but the company went on a hiring binge, particularly to build a new marketing team.
“One of the functions we had to add the most people to was in marketing because the advertising spend for Post Food’s brands was much bigger than Malt-O-Meal ever was,” Neugent said.
Post Consumer Brands now has about 2,800 workers companywide, including more than 1,000 in Minnesota. More than 360 of those workers are at the corporate headquarters in Lakeville while another 685 work at its two manufacturing plants in Northfield.
Neugent said he has spent the past two years focusing the company on perfecting its business fundamentals: improving the taste of existing products, finding ways to reduce costs, updating retail displays for its bag cereals to take up less shelf space and giving branded cereal boxes an occasional makeover.
“It’s blocking and tackling, it’s not real sexy, but it makes money,” he said.
The company also focused on relationships with the retailers, even when it meant paring back on some products.
“One of the things we have done in the last couple years is discontinue niche products that maybe didn’t work as well, things that at the end of the day just clog up the retailers shelves,” Neugent said. “They have hidden costs, and it’s more efficient for everyone to get rid of them.”
Excluding the effects from the merger, Post Consumer Brands managed to achieve 2 percent net sales growth in fiscal year 2016. This is a small victory in the breakfast cereal segment, which is facing plenty of challenges in the current market.
Q1 ‘particularly impressive’
John Baumgartner, a food industry analyst for Wells Fargo, wrote in a note following the company’s first-quarter results in February that Post Consumer Brands’ sales “were particularly impressive,” and that “reinforces our thesis that the brand’s distribution growth potential supports a robust multiyear opportunity.”
That growth can be hard to come by as consumers face an increasing array of options for breakfast. “It’s a challenge, but the opportunity is to find new ways to grow and to be the one that is growing,” Neugent said.
In the past, both Post Foods and MOM Brands put resources into exploring acquisitions as a way to grow.
“We are not putting any energy around that in-house,” Neugent said. “We are very focused. New in-house products will be cereal-based.”
Post Consumer Brands is leaving that work to its parent company, Post Holdings in St. Louis, which has made it clear it plans to continue growing through acquisitions.
“Post Holdings is definitely an acquisition-driven company, so there’s always that possibility that we will have other brands and categories here. It is certainly possible,” Neugent said.
Post Consumer Brands is unapologetic about working in the cereal space, a sector often maligned with negative forecasts. “I think it is a mistake to think the cereal category is going to continue to decline. I think the future of the category is dependent on those of us who make cereal,” Neugent said. “We all just need to roll up our sleeves.”