Video interview: Hostess set to sweeten its business for another century

By Gill Hyslop

- Last updated on GMT

Related tags Hostess brands Sweets & Snacks Expo Voortman Cookies better for you Twinkies Donettes health & wellbeing low sugar climate action sustainability-first bakery

A decade after bankruptcy, Hostess Brands is thriving under CEO Andy Callahan, who has prioritised innovation to turn the century-old maker of Twinkies, Ding Dongs and Donettes into a snacking powerhouse.

In 2021, the Kansas-based sweet snacks major generated net revenue of $1.14bn, up more than 12% on a year earlier, helped by higher prices but also improved volumes.

Hostess’ operating income came in just shy of $200.7m compared to $135.3m in 2020, while net income tipped $119.3m versus $104.7m the year before.

Gaining market share

“We’ve been profitably gaining market share across the snacking categories in which we compete,”​ said Callahan in March at the announcement of a new ‘green’ factory in Arkansas.

Hostess is investing around $120-$140m to retrofit an idle plant in Arkadelphia into a bakery, which will increase production capacity for its Donettes snacks and wider cake range by around 20%.

It is also destined to become the company’s most sustainable facility to date, using best practices from across Hostess’ bakery network. The 330,000-square-foot facility is expected to be operational in the second half of 2023 and create around 150 new jobs over the next three years.

“The addition of this new bakery signals our confidence that we expect the growth we have demonstrated over the last several years to continue,” a​dded Callahan.

Bagging firepower

In 2022, the group is forecasting a 5%-8% rise in adjusted net revenues. It also estimates its adjusted EBITDA could reach $280-$290m, which would equate to an increase of 4%-8% on 2021.

“Our strong 2022 financial guidance reflects our confidence in maintaining our ongoing profitable growth momentum,” ​Callahan told analysts.

Part of this growth has been fuelled by acquisitions, like the better-for-you Voortman Cookies, which Hostess bought from private equity firm Swander Pace Capital in July 2020.

Founded in 1951, Voortman Cookies has evolved from a small Onterio bakery into a business valued at approximately $320m, ranking in 2019 as the number one player in sugar-free cookies and crème wafers, according to Nielsen.

At the time, Callahan said the Bolton fits with Hostess’ strategy, creating “a larger and more diversified sweet snacking company with a unique and differentiated product suite in the adjacent $8.4 billion cookie category.

“Voortman has a well-defined consumer proposition that complements and extends the growing Hostess portfolio into the growing cookie and better-for-you snacking categories,”​ added Callahan.

“The brand is at the right phase of development to benefit from Hostess’ core capabilities and proven operating model to grow distribution and brand awareness while reducing operating costs. Voortman’s household penetration is relatively low, providing a long runway for growth. Additionally, we believe our strong merchandising capabilities and customer relationships at food, c-store, drug, mass and other key retailers can help accelerate Voortman’s growth trajectory.

“We expect to realise further benefits of scale via shared, established, efficient infrastructure and strengthening of collaborative retail partnerships in the United States and Canada.”

In the fourth quarter of 2021, Hostess said its share of the US sweet baked goods category rose 218 basis points to 21.5%, mainly driven by its Voortman-branded biscuits, which it said grew “more than two times faster than the overall cookie category”.

Sustainability-first bakery

The consumer’s lean towards health is not the only trend Hostess is fast-tracking, having recently released its latest ESG report, which prioritises Workplace Health & Safety; Diversity, Equity, Inclusion & Belonging (DEI&B); Environment; and Governance.

Last year, the company began work on its first-ever Climate Action Plan to determine the next steps to further reduce greenhouse gas emissions, energy and water usage. The plan will be finalised over the next two year, and includes initiatives like the sustainability-first bakery in Arkansas.

“I am proud of our team for placing our environmental, social and governance commitments at the heart of everything we do,”​ said Callahan.

“Our collective progress is a reflection of the hard work, shared mission, vision and values we prioritise every day. We are seeing our initiatives translate into tangible benefits for our people, our customers and our planet. While there is still work to do, we have made significant progress and are excited to continue building a snacking powerhouse that is grounded in social responsibility.”

BakeryandSnacks caught up with Chris Balach, general manager of Hostess Brands, and Adam Lisook, general manager of Voortman Cookies, at Sweets & Snacks in Chicago, to talk new products, marketing initiatives, key trends, reformulation, sustainability and the inflationary environment.

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