Dive Brief:

• Hostess Brands opened a new innovation lab in Lenexa, Kansas, which the company said will help as the industry faces "evolving consumer taste preferences and an upward shift in snacking behaviors."
• The Hostess Innovation Lab employs about 20 researchers, product testers and bakers who work to create new snack cakes that resonate with consumers. 
• The lab will develop new product prototypes and test them through sensory booths and focus group areas. Using data collected at the lab, Hostess said it can quickly launch new products that are expected to perform well. 

Dive Insight:

Even as the pandemic has forced companies to shift priorities and resources, innovation has continued in the food space. Although quarantines have sometimes made it difficult to do lab work and hands-on or consumer-based research, companies and formulators have kept going, including at Hostess. The company said it has been working in the new lab since June 15. 

What kind of products could come out of the lab? Hostess’s SVP of Quality, Food Safety and R&D Darryl Riley said in the release Hostess Hot Fudge Sundae CupCakes were recently conceived and tested for early 2021 production. The company said the lab will also build on recent successful innovations like its Hostess Iced Lemon CupCakes and Pumpkin Spice Twinkies.

Riley said the lab also allows for consumer insight-based invention by giving consumers "a peek behind the curtain, as well as an opportunity to be a part of that process." 

Big name food and beverage brands have turned to innovation labs and incubators to create new products that meet shifting consumer demands. Diageo's innovation lab encourages its "liquid scientists" to create new drinks. Tyson Foods started an innovation lab in 2018 that creates and markets new products. Other big companies, including Kraft Heinz, Chobani and General Mills, have incubator programs to help startups develop new successful innovations — and maybe eventual acquisition.

In the last year, Hostess has made several moves to shape both its portfolio and the company's future. The company sold its Superior Cake Products to Sara Lee Frozen Bakery for $65 million, and acquired Voortman — a manufacturer of premium, branded wafers and sugar-free and specialty cookies — from Swander Pace Capital for $320 million. Hostess also moved its corporate headquarters from Missouri to Kansas last year, so the innovation lab will be in the same state as its headquarters. 

Now could be a good time for the company to invest in a new lab. Hostess' net income in Q2 was $17.4 million, up 4.2% from $16.7 million in the same period last year, according to its most recent earnings released this week. President and CEO Andrew Callahan said during a call with analysts Hostess increased its household penetration and repeat purchase rates during the pandemic.

Hostess Brands is a company that has used its many years in the business as a way to tap into consumer nostalgia. Chad Lusk​, chief marketing officer at Hostess, told Food Dive last year that the company's iconic Twinkies have a cross-generational appeal. Part of Hostess' business strategy has been to release new offerings that both reflect the company's history and embrace changing consumer tastes.