Despite an iconic portfolio of sweet treats, Hostess Brands watched for years as other snack companies grabbed a slice of the fast-growing market for smaller, bite-sized treats. Now, it’s spending big to introduce Bouncers, tiny versions of Twinkies, Ding Dongs and Donettes, in a bid to make up lost ground.
“If you look at cookies, crackers, candy, over the last 15 years, all of them have created these snack-size kinds of options that were smaller and that came in these individual package portions,” said Tina Lambert, vice president, marketing center of excellence for Hostess Brands. “But Hostess had never done that until now. It's a big focus area for us now to kind of catch up a little bit.”
To expand sales and compete against other snacking heavyweights like Mondelēz International, Hershey and Mars Wrigley, Hostess Brands is pinning its future on targeting the fastest-growing snacking occasions that collectively are valued at more than $50 billion. A big part of that is the $6 billion lunchbox segment which has grown 5.5% annually during the last three years, according to Nielsen data cited by the company.
Hostess Brands designed Bouncers primarily for student lunch boxes and after-school treats at home. The Kansas-based company knew adult shoppers were looking for a convenient bite-size snack for their kids to eat that was easier to clean up. These factors helped alleviate concerns at Hostess Brands that consumers would only be interested in a Twinkie, for example, if it was a shrunken version of the original rather than a circular bite.
In recent years, Hostess Brands has focused a larger portion of its innovation efforts on not just introducing new flavors of an existing product but tapping into additional occasions when consumers could eat them. Bouncers fit squarely into that new way of thinking.
“We’re betting big behind Bouncers because we believe this is a big idea,” Lambert said.
Hostess is among the fastest-growing companies in the snacking space. It has posted 10 consecutive quarters with net revenue growth of at least 9% and increased the Hostess brand’s market share of sweet baked goods by 2.9 points during that same period to just over a fifth of the category, according to Nielsen data provided by the company. Hostess Brands also has posted a compound annual growth rate of 10% from 2019 to 2021, outpacing its peer group’s 4% increase.
Still, Hostess found that despite its recent strong growth there are a large number of consumers in the marketplace where the brand is not the first thing they think of when it comes to snacking. Company studies found while more than 95% of people were aware of the Hostess brand, about 60% said they didn’t buy it because it wasn’t top of mind.
To promote Bouncers and Hostess, the company is spending millions of dollars on video advertising on social media, media networks run by retailers and TV platforms like Roku — the first time in over a decade that it has done anything like this. It expects to reach 65% of millennial parents with the campaign.
“This is a huge opportunity for us as we think not just about innovation, but also our marketing to really drive that top-of-mind awareness among those younger parents and bring the next generation into Hostess,” Lambert noted. “It’s not because they don’t know what Hostess is [or] they don’t have positive associations with Hostess, it’s just that they’ve forgotten.”
The product development, and the eventual launch, were delayed by six months as it took Hostess Brands longer than expected to receive the equipment from the manufacturer needed to make Bouncers. It’s proven to be a valuable learning lesson for the company, which now orders its equipment earlier in the process, Lambert said.
Bouncers hit shelves nationwide last month, including at Walmart, Kroger, Dollar General and Target.
The timing of the launch is unusual because items geared toward school children are typically added in stores in July or August, and most retailers usually aren’t resetting their sweet baked goods shelves at this time of the year.
Hostess Brands, however, benefited from its close relationship with retailers, recent strong growth and prior successful innovations like Baby Bundts to get Bouncers on store shelves. Baby Bundts, smaller versions of the popular cake launched in 2021, contributed to a 7.1% increase in the sweet baked goods category for the year ended March 26, 2022, the company said.
Baby Bundts “give our retailers confidence that we’re bringing innovation that’s going to bring incremental shoppers in and drive growth for their category,” she said.