JM Smucker is embracing a five-prong strategy to turn around the performance of its $5.6 billion acquisition of Hostess Brands, which raised some eyebrows given shifting consumer trends toward better-for-you options and slower than expected net sales of the nostalgic snack cakes, including Twinkies, Donettes and Ding Dongs.
“We have confidence in the Hostess Brands, and we are taking decisive actions to return the brand to growth,” JM Smucker CEO Mark Smucker told investment analysts gathered this week by the Consumer Analysts Group of New York.
He explained the company is pursuing five key tactics “designed to fuel growth,” including delivering the base portfolio, expanding distribution, driving innovation, continuing portfolio evolution and establishing revenue synergies.
Part of the brand’s overhaul includes a “bold new marketing campaign” that is “culturally relevant and appeals to the entire universe of sweet snackers, with a focus on driving growth in younger consumers,” Smucker said.
The campaign includes strategic signage at convenience stores and gas stations, including window clings on coolers and electronic signs at the pump featuring playful puns that replace images of the iconic snack cakes for common phrases.
For example, several ads replace the light-hearted pejorative “ding-dong” with an image of the eponymous snack cake paired with a friendly taunt or call to action, such as “Hey ding-dong, you deserve something sweet” or “Hey ding-dong, you’re only 425 feet away from one.” Other signs employ silly rhymes.
The “speaky snacky” advertising campaign, which will go live in the fourth quarter, will also include commercials that Smucker said will engage with Millennials and Gen Z.
As part of the brand’s modernization, JM Smucker also updated Hostess Brands' logo and refreshed its packaging to be more appealing, accessible and impactful in stores.
The product names now appear in an easier to read font in a standardized layout with photos and sometimes windows across the SKUs. Hostess also moves from a circle in the corner to the center of the package with a heart over the ‘o’ for a more eye-catching visual.
“Our modernized packaging is just now beginning to enter the market, and we are excited to get our new look on shelf, as we anticipate the new visual identity will drive trial and lead to more impulse buys,” Smucker said.
Expanded distribution closes gaps
JM Smucker’s updated distribution strategy includes closing gaps for its core items in existing channels as well as entering new channels.
“We are working to drive existing channel improvements with most of these activities taking full effect in the spring, given the timing of shelf resets,” Smucker said.
He added that he is particularly excited about the opportunity for Hostess in away-from-home channels, including at travel stores and universities where he said the brand has “made meaningful progress,” including shipping to several new customers in the last month.
Innovation subhead
JM Smucker also plans to inject excitement into the legacy brand by introducing new flavors, formats and limited-timing offerings that it says will keep Hostess “exciting and top of mind.”
Last year, the brand was No. 1 in the category for innovation for the fourth year in a row and delivered 40% of all innovation dollars, according to Smucker.
Among the launches are Donettes Fritter Rings, which Smucker described as a “modern twist on classic apple fritters” and inspired by the mochi bubble donut trend popular in specialty stores.
The company also is miniaturizing versions of its iconic products, including its cupcakes, which will begin shipping in the fourth quarter.
“Consumers desire mini form offerings, and this innovation offers smaller portions for consumers still looking for a sweet treat,” Smucker said.
Finally, the company is reintroducing in September Hostess Suzy Q’s, which once was a top five item in the brand’s all-day snacking portfolio for non-breakfast items.
“Consumers have continued to ask for Suzy Q’s and we listened,” said Smucker.
Sustaining growth with synergies
To help fund innovations and other investments in Hostess, JM Smucker continues to “optimize” its portfolio by shedding unwanted brands.
Late last month, the company announced plans to divest its Cloverhill and Big Texas brands along with private label products to JTM Foods in an all-cash transaction estimated at $40 million.
“This divestiture reflects our continued commitment to portfolio optimization to prioritize resources to support the executives of our Sweet Baked Snacks strategy, focused on growing the Hostess brand,” JM Smucker Senior VP and General Manager of Sweet Baked Snacks and Pet Dan O’Leary said in a release.
Smucker also called out the sale of a manufacturing facility in Chicago “to ensure our manufacturing network is optimized to mitigate costs and reduce complexity.”
Further synergies from the Hostess acquisition include expanding distribution of Uncrustables sandwiches into convenience stores, where Hostess has long succeeded.
The company also is “executing promotional events between Hostess and the legacy Smucker brands,” which are generating positive results, said Smucker.
