Kellogg and PepsiCo aim to get Gen Z to eat Doritos and cereal for dinner

Tired of meat and potatoes or chicken and rice for dinner?

Food conglomerates like WK Kellogg and PepsiCo are pushing palatable alternatives like Frosted Flakes and Doritos cereals. Fast food brands are asking customers to consider their products beyond their conventional uses, as sales of snack products continue to fluctuate amid inflation-induced price increases.

WK Kellogg co-chairman and CEO Gary Pilnick encouraged consumers to consider “cereal for dinner” in a recent interview with CNBC. “The cereal category has always been quite affordable and tends to be a great destination when consumers are under pressure,” he said. PepsiCo is also asking consumers to get creative with their carbs. At an industry conference in Florida last week, CEO Ramon Laguarta said he expected consumers to opt for salty snacks, such as Doritos and Rold Gold pretzels, as “garnishes and ingredients” in meals, extending their purpose beyond a midday or midnight snack .

Taco Bell consumers are already familiar with Doritos for dinner , as in Doritos Locos Tacos. PepsiCo wants to take this innovation further. At last week's New York Consumer Analyst Group Conference, PepsiCo's presentation included a nod to Dorilocos, or "walking taco," a Mexico City street food consisting of an open bag of chips. tortilla with cucumbers, lime juice and chamoy, among other ingredients. Last year, Doritos posted a recipe video on TikTok for Sweet Hot Chili Chocolate Cookies using the namesake Doritos flavor.

Doritos is PepsiCo's ground zero for engaging with Generation Z, who have put aside soft drinks in search of a healthy lifestyle. In December, PepsiCo launched a Doritos-flavored cocktail, joining the beverage ranks with Starry, PepsiCo's offering for Gen Z's preferred soft drink. WK Kellogg attempted to appeal to Gen Z's healthy sensibilities by launching its Eat Your Mouth Off vegan cereal last month.

Generation Z loves snacks.

They don't mind making meals from an amalgam of bites, known on TikTok as "girl dinner." More than half of the 2,000 American Zoomers surveyed by Ketchum indicated that they combine snacks into a meal on a weekly basis.

These efforts to innovate come after shaky fourth-quarter financial reports from snack companies: PepsiCo reported a drop in revenue this quarter—after years of sharp price increases—including a 2% reduction in Frito volume Lay North America. Kellogg's fourth-quarter sales, which also saw a 10% drop in volume, tell a similar story, as the company continues to raise prices.

Executives from Fortune 500 companies calling for creative uses of cereals and chips come at a tumultuous time for snack companies. WK Kellogg's "cereal for dinner" strategy has been around for years. In 2022, the company awarded $5,000 to five sweepstakes participants who posted a photo on Instagram of themselves eating breakfast cereal with the hashtag #KelloggsCerealforDinnerEntry. The strategy has been used to boost sales after the pandemic's initial cereal boom cooled. Cereal sales have been declining for decades as consumers look for healthier breakfasts or fast food alternatives. Weight-loss drugs like Ozempic have dampened food sales at retail giants like Walmart, pressuring junk food brands to cut portions.

But there's a reason for these big snack brands to remain hopeful. Kellogg's profits have remained stable as price increases offset sales declines and demand for classic products like Frosted Flakes remains resilient. The US salty snacks market is expected to grow 6% annually from 2022 to 2027.

The continued profits of these companies mean that, while they recognize that consumers are struggling to keep up with extremely high prices, they are unlikely to reduce them anytime soon.

Should we get used to higher prices?

Beyond fast food brands, all supermarket products have become more expensive. While inflation has increased by 19% in the last four years, food prices in supermarkets have risen by 25%. Generation Z is particularly sensitive to these increases as a cost-conscious generation. Nearly two in three members of Gen Z frequently purchase store private labels, according to a 2023 Private Label Manufacturers Association survey of 1,000 American Zoomers.

Despite trying to address declining sales, PepsiCo plans to raise prices "modestly" this year. One reason for price increases is "greedflation," or companies choosing to raise prices even as inflation cools, taking advantage of consumers who were previously willing to pay more when the economy was more volatile. Big food companies like Kraft Heinz and Bunge were among several corporations whose profits outpaced inflation in 2022, according to a 2023 study by IPPR and Common Wealth.

Braden Douglas, CEO of consumer marketing agency Crew Marketing Partners, told Fortune that food manufacturers are not entirely to blame for high prices. "It's easy to point the finger" at manufacturers like PepsiCo, Douglas said, but every part of the food chain is being squeezed. Mondelez CEO Dirk Van de Put told YahooFinance that Oreos and Ritz prices are likely to rise as a result of rising sugar and cocoa costs. Supermarkets like Kroger are eager to raise product costs not only to maintain margins, but also to increase them by pushing customers toward their own cheaper private-label products. Manufacturers want to raise prices because they are also raising wages to combat labor shortages.

No one wants to give in, Douglas said, but there will have to be interventions on multiple dimensions if consumers want to see well-loved products. That means companies absorbing costs to counter inflation—like Ikea, which spent $1.1 billion to absorb inflation and lower the price of its products—or government intervention to subsidize production costs. "If people really cared about the consumer — which they always say they do, but if they really did — I think their profit expectations have to change," Douglas said.

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