General Mills Rethinks Trix

It used to be hard to avoid news articles and TV programs dedicated to rising obesity among U.S. children. The American fascination with diet and health hasn't disappeared -- Starbucks' (Nasdaq: SBUX  ) revelation that trans fats will soon be history at its locations is making big headlines today. However, the kid angle has faded. Consequently, the timing looks good for General Mills' (NYSE: GIS  ) disclosure that it will stop selling low-sugar versions of Trix and Cocoa Puffs, which the company introduced in 2004 at the apex of the outcry over childhood obesity.

I can't fault General Mills for dropping the low-sugar cereals -- they apparently didn't sell well. And General Mills has adjusted and now plans to replace the cereals with new brands that stand a better chance of succeeding, while keeping the company's health-conscious image intact. However, the short shelf life of low-sugar Trix and Cocoa Puffs illustrates the pitfalls for food companies that succumb to media and public pressure.

General Mills understandably felt the need to introduce the low-sugar brands, as Kellogg (NYSE: K  ) had already done the same. In retrospect, though, the move was a hasty and poorly thought out response to the childhood-obesity hubbub. Clearly the main selling point of Trix and Cocoa Puffs for kids is that they offer something akin to dessert for breakfast. It's hard to believe that kids wouldn't find the new cereals, which contained 75% less sugar, inferior and demand the original versions. For time-pressed parents who want their kids to eat breakfast, giving in to such demands would have been all too easy.

General Mills is now taking a smarter approach to childhood obesity concerns. Low-sugar Trix and Cocoa Puffs will be replaced by cereals branded with Disney (NYSE: DIS  ) characters. If there is one thing that kids like almost as much as sugar, it's cartoon-themed foods. As for nutrition, the new Disney cereals will adhere to House of Mouse guidelines that limit sugar and fat content for Disney-branded products. Furthermore, unlike low-sugar Trix and Cocoa Puffs, the new Disney cereals won't have to compete with higher-sugar incarnations.

In the end, General Mills appears to have learned a valuable lesson. Responding to competition quickly is important, but the response has to be well thought out.

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Fool contributor Brian Gorman does not own shares in any of the companies mentioned. The Fool has a disclosure policy.


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