Alright fellas. It's time to fix this one once and for all.

First a look at the facts.

1. We first answer "what is cereal".
A. Cereal is a grass, grown as a cereal grain.
B. Cereals are used as ingredients in soups, pasta and even beverages (such as beer).

2. Next we answer "what is milk".
A. Milk is made from cows, who digest grass.
B. Milk is an ingredient that is present in beverages, sauces and broths.

3. What is a "bowl of cereal"
A. A bowl of cereal is: Pecies of whole or processed cereal grains in milk.

3. The Options.
A. A Broth is a soup liquid medium reduced from another source (plant or animal).
B. A beverage is a liquid that one consumes by drinking.
C. A sauce is a condiment, added to the primary dish.

4. The question:
A. Grover is asking about what the milk is now. As in, "What is the present designation of the liquid in the bowl?"
B. Remembering that any of the ingredients could themselves validly be considered any of the options. Thus, we see that the conclusion is not based on ingredient, but rather preparation.

Conclusion:
1. The milk in bowl of cereal as a culinary dish cannot be considered a beverage. Why? Because it's purpose is intended as a treatment for the cereal grain product (though it may very well turn into a beverage at the end).

2. Likewise, it cannot be considered a sauce. Why? Because a bowl of cereal is considered a binary food. The grain and liquid are both essential to the essence of the food. A sauce is a condiment, which is an addition to a dish not the defining element of the dish's type.

3. Therefore, a bowl of cereal, prepared in the classical manner is a cold soup by way of how it is prepared. Why?
A. The milk is a grass reduction from the cow. It is also an animal product that has been (likely) proccessed for flavor and fat content.
B. It is essential to the dish and is intended to be eaten with the cereal grains as am accompaniment.

Grover's milk is a broth.