Dive Brief:
- Hostess Brands is seeking new opportunities for retail expansion, including different product categories to integrate into its portfolio through new product ranges, according to Bakery and Snacks. "We need to decide if we're going to do it ourselves or if we're going to find a partner," Hostess COO Andrew Jacobs said. "For example we recently launched bagels in partnership with Walgreens. We also launched ice cream with Nestle. There are dozens of opportunities we're focused on."
- Hostess is rolling out a microwavable Ding Dong Lava Cake in July as its second entry into the frozen snacks category, following its Deep Fried Twinkie product.
- The company's acquisition of Superior Cake Products last year helped expand Hostess's in-store bakery footprint, leading to 7% organic growth year-over-year.
Dive Insight:
Hostess has experienced sweet revenue growth since its return to Wall Street in 2013, largely due to new product launches. Last year, the baker debuted Deep Fried Twinkies and Hostess Sweet Shop brownies, and this year combined Superior's black and white cookie with its Squiggle cupcake to create a new indulgence product. All told, the company now controls 16.7% of the market for packaged sweet baked goods.
“Our financial performance this year benefited from increased distribution and product innovation initiatives as well as continuing to build market share on our core products,” Hostess President and CEO Bill Toler stated in March. “We continue to feel confident with our momentum heading into 2017.”
Much of this success stems from Hostess' strategy to launch collaborative and exclusive products, such as the Twinkies, CupCakes and Sno Balls ice cream it created with Nestle, and its Deep Fried Twinkies, which are sold only at Walmart. The company's foray into the frozen dessert space has already proven to be lucrative, and gives Hostess opportunity to innovate in a fast-growing category.
For Hostess to maintain its healthy margins and capture more market share, it will likely need to acquire more brands like Superior to bolster its product offerings. It will be interesting to see which baker the company targets next, or if it looks to acquire a brand outside of the bakery space — like a snack or candy maker.
The appointment of Andrew Jacobs as chief commercial officer also suggests investment in further product innovation. Jacobs told Bakery and Snacks that his position was created to focus on new product and packaging launches, as well as distribution growth and improved consumer engagement.
Hostess has significant opportunity to expand into new markets, given its success in the frozen food space. However, the company may also need to invest in product reformulations as consumer distrust for sugary food and beverage products grows, though many shoppers are less concerned with the nutritional value of indulgence and novelty products.