Dive Brief:
- Hostess Brands reported a 9.7% increase in net revenue to $196.2 million in its fourth-quarter earnings report, led by the introduction of Hostess Bakery Petites, a premium snack made with no artificial colors, flavors or high fructose corn syrup. The upscale baked treat contributed 3.1% of the net revenue increase.
- Net income was reported at $189.6 million, which includes $163.1 million of one-time gains relating to the recently enacted tax law.
- Another noteworthy factor was convenience store growth, where Hostess reported a leap to 140 basis points to 21.9% in Q4. This upped point of sale growth for the quarter up 5.3% compared to last year.
Dive Insight:
A brand best known for its convenience store staples, like Twinkies, is getting a boost from revamped treats and a breakfast strategy.
Hostess Brands reported impressive earnings on Thursday, which it credits largely with the success of its new Petites line. The more upscale snack boasts real chocolate and vanilla and is free-from several artificial ingredients. The new platform offers Crispi Thins, brownie delights and cake delights in a variety of flavors.
Hostess hit a sweet spot with consumers, combining a desire for more natural ingredients while indulging in familiar flavors. By cutting out high-profile ingredients, like high fructose corn syrup, Hostess helps shoppers feel better about adding cake rounds or brownie bites to their basket.
Considering the popularity of the Petites line and Hostess's recent success with innovating new flavors and products, expect to see more options pop up under this premium label.
The Petites line is only the most recent success for Hostess, which has gone from filing for bankruptcy twice to new ownership and a successful IPO in recent years. Product innovation has been one of the hallmarks of the "new" Hostess.
Bill Toler, president and CEO of Hostess, said in the fourth-quarter earnings call transcript that the Petites snacks are bringing in new households for the brand, which "We believe [is] the key to our driving incremental distribution in food, mass, and C-store for 2018."
Hostess may also be looking to explore acquisitions or develop new products that skew more savory than sweet. Dean Metropoulos, executive chairman of Hostess, said growth beyond sweet baked goods is in the plan.
This could mean a foray into any number of taste profiles, but the company would likely stay within its popular snacking format.