Hostess aims to sweeten market share with innovative treats
- Hostess Brands is appealing to the public's sweet tooth with new products designed to expand market share, according to Food Business News.
- The company’s innovations in 2017 include cinnamon sugar crunch Donettes, white fudge Ding Dongs, chocolate peanut butter Twinkies, chocolate cake Twinkies, Golden CupCakes and peanut butter Ho Hos.
- "We now sell more Twinkies than (the old Hostess) ever did, and it’s a product and a business that essentially is the signature of the company and a product that we believe has enormous equity within consumers today," William Toler, Hostess' president and CEO, said during a Sept. 6 presentation at the Barclays Global Consumer Staples Conference in Boston.
Not so long ago, Hostess emerged from a near-death experience and today the company is on much more solid footing. The most recent earnings report showed sales were up in the second quarter of this year to $28.2 million, which were below expectations, but exceeded the $21.9 million in sales reported for the same quarter of 2016.
Hostess also saw revenue rise 5.6% to $203.2 million, compared to $192.3 million in the year-ago period, driven by new product offerings such as Chocolate Cake Twinkies and White Fudge Ding Dongs. Market share was reportedly up 120 basis points in the second quarter from a year earlier, more than double the company's goal.
Besides successfully rolling out innovative sweet treats, the company's recent turnaround has been credited to a corporate restructuring, a successful warehouse-centered delivery model and an in-store bakery system, among other changes.
Hostess' products have managed to buck the consumer trend toward healthier snacks by appealing to brand nostalgia and the desire to indulge in treats, particularly Twinkies, Ding Dongs and Ho Hos, that are tantamount to culinary cultural icons.
Following an eight-month absence from the marketplace after the company went bankrupt and liquidated, Hostess relaunched in 2013 around its Twinkie and CupCakes brands. The company also tapped into these well-known brands for growth, a common trend throughout the food industry. In just the last year alone, the company has introduced or announced plans for a Twinkies Cappuccino for the convenience store channel, a line of collaborative ice cream products under Hostess brands and Deep Fried Twinkies found exclusively at Wal-Mart.
Toler acknowledged Hostess is looking at additional targets for acquisition besides the Superior Cake Products deal it completed last year. That was the company's first acquisition since being bought by Apollo Global Management and Metropoulos & Co. in 2013.
Any future M&A initiatives would need to deliver Hostess distinct advantages, which Toler described as leveraging the brand and/or warehouse model; expanding baking capabilities, including further into the in-store bakery space; building scale for the company as a broader snacking platform; and providing additional cash flow and earnings per share.
While Hostess seems to be on the right track with its overall positioning strategy, it might be tempted in today's expansive M&A climate to prematurely extend its resources. However, Hostess Executive Chairman C. Dean Metropoulos indicated at the Boston meeting that a thoughtful and disciplined approach would used for any acquisition moves the company makes.
"I can assure you when the time is right and we have the right opportunity, we will be disciplined. We will deliver when we speak about it," he said, according to Food Business News. "And delivering for us is a six-month play, not a two-year play. So clearly, acquisitions will be an important part of the future while also focusing on organic growth."
Hostess seems like it is on the right track by expanding its existing product line and looking outside the company for other areas of growth. The snacks market is an increasingly competitive one so Hostess will have plenty of work as it expands and distances itself from a difficult period in the company's history just a few short years ago.
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