Apollo and Metropoulos will have to work hard to drive forward Hostess’ snack cake brands in a saturated market but dollar stores could hold promise, an analyst says.
As part of its continued lay-offs, Hostess Brands has sold the majority of its snack cake business to two investment firms Apollo Global Management and Metropoulos & Co after no other bids came forward. Court approval of the sale is set for March 19.
Apollo and Metropoulos paid $410m for Hostess and Dolly Madison brands including Twinkies, Ding Dongs, Ho Hos and Donnettes, five bakeries and certain equipment.
Matthew Hudak, packaged food analyst at Euromonitor International, said that given the saturated nature of the US snack cake market, the two firms will have to work hard to drive the brands forward.
“It would definitely take some investment and a hard look at what consumers they should target and where,” said Hudak told BakeryandSnacks.com.
“Dollar stores could be a big opportunity in this instance,” he said.
Hudak said it is important to make the brands relevant and visible to US consumers.
Active investments, but within the US?
“Everyone knows that these snack cakes are not very healthy, but there are things like introducing new and smaller portions that might be appealing to consumers and better setups in c-stores for impulse purchases would also help.”
He said that the safest bet would be to keep these snack cakes in the US due to strong consumer knowledge of the products.
“That said…Internationally, there could be big returns in developing markets where food safety is a concern and they have been adopting packaged foods more and more. Of course, the big risk there is that they [consumers] end up simply rejecting the product for one reason or another,” he added.
Rebuilding ‘heritage brands’
In January when the two firms submitted their bid for the snack cake brands , C. Dean Metropoulos said: “For more than 25 years we have had the opportunity to acquire and grow some of the world’s most widely recognized consumer food and beverage brands, and I look forward to working with Apollo in rebuilding these heritage brands and ensuring their long term availability to their loyal consumers.
“Never before have we seen such a groundswell of support and desire for a brand’s return and revival.”
Hostess Brands has scheduled the auction for its Drake’s snack cake business and Sweetheart, Standish Farms, Grandma Emilie’s and Eddy’s bread businesses for March 15.