- Hostess Brands said it will spend between $120 million and $140 million to convert an idled factory in Arkadelphia, Arkansas, into a bakery. The facility is expected to be operational in the second half of 2023 and bring approximately 150 new jobs to the area during the next three years.
- The snacks maker said the 330,000-square-foot facility will increase its capacity across its bakeries for its Donettes and cakes by about 20%. It also will allow the company to respond to future production demand.
- Hostess is the latest company to announce an investment to build a new plant or retrofit/expand an existing one as businesses increase their production capacity in response to growing demand for their food and beverage products.
The shift in consumer habits sweeping the CPG space has prompted food and beverage manufacturers to spend hundreds of millions of dollars to capture a bigger portion of the ensuing growth. Increasingly, one major strategy more companies are turning to is plant construction.
Hostess, with a portfolio that includes Twinkies, Ding Dongs and Voortman cookies and wafers, has benefited from the ongoing expansion in snacking behaviors as well as consumer demand for well-known brands throughout the pandemic.
During its investor day presentation last week, Hostess said it posted eight consecutive quarters of more than 9% revenue growth. At the same time, its market share in the sweet baked goods category has increased from 19.2% in the fourth quarter of 2019 to 21.5% in the same period last year, according to Nielsen data.
"We've been profitably gaining market share across the snacking categories in which we compete," Andy Callahan, president and CEO of Hostess Brands, said in a statement. "The addition of this new bakery signals our confidence that we expect the growth we have demonstrated over the last several years to continue."
The decision to provide more capacity for Donettes and cakes reflects a rise in consumption for the popular offerings as consumers eat breakfast more frequently at home and look to other parts of the day for a treat to indulge. The surge in snacking has been especially beneficial to Hostess, with an estimated 90% of its retail sales coming from this trend, according to the company. Donettes is one of Hostess' flagship brands with roughly a half-billion dollars in sales.
New construction also has the benefit of allowing companies to improve their sustainability footprint by reducing their water usage and waste output while increasing their use of renewable energy. Hostess said renovating an existing building will lower the company's costs for the new bakery as well as minimize environmental impacts.
"We are emphasizing a sustainability-first approach to this project while leveraging best practices from across our network of bakeries and we anticipate this bakery will be our most efficient and greenest operation yet," Callahan said.
Hostess joins a long list of CPG companies that have announced new construction plans in the last year.
Nestlé USA announced in July it would invest $100 million to expand its frozen foods factory in South Carolina that manufactures brands such as Stouffer’s and Lean Cuisine and another $70 million to renovate a Wisconsin plant previously used for candy bars to make cookie dough.
A few months later, Mondelēz International said it would invest $122.5 million over three years to boost capacity at its Richmond, Virginia, location where it makes Oreos, and J.M. Smucker committed $1.1 billion to build a new manufacturing facility and distribution center in Alabama to produce its Smucker's Uncrustables sandwich.