The Sweetest Comeback: How Hostess Brands Returned to Growth

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Hostess Brands sweetest comeback

Rumors of the demise of Hostess Brands have turned out to be premature, as the company has made good on its post-bankruptcy campaign and promise: “The sweetest comeback in the history of ever.”

Yes, the maker of the iconic Twinkies, Ding Dongs and Ho Hos snacks did shut its doors in 2012, liquidating its factories and other properties and ending 18,500 jobs, hampered by high labor and distribution costs. But new owners Apollo Global Management and Metropoulos & Co. have been working hard to return the consumer packaged goods snack king onto a growth track — and now it’s nearing its former glory by paying attention to what consumers want from bakery products these days.

In addition to getting back on track by making 1.5 million Twinkies a day as part of its revved up production of its classic treats, Hostess has been making a comeback brand twists (such as Sea Salt and Caramel CupCakes) and new products including the Hostess brand’s first brownies, made with Milky Way and M&M’S candies; revamped Mini Muffins with whole grains; and its first bread line, which boasts a shelf life of more than two months.

In addition to refreshing its product line, it has also revamped its supply chain and got smarter about forecasting supply and demand. Such moves have helped make Hostess a billion-dollar brand again and have revived it US sales in the category of sweet baked snacks. “That’s our role,” CEO Bill Toler said at a recent conference, according to Food Business News. “And there’s a lot of runway in front of us.”

Hostess Brands the sweetest comeback ever

Critically, the new leadership of the brand has made these gains while heeding modern trends in eating, including responding to consumer demand for simpler ingredient lists, greater transparency and more nutritious fare even from their indulgent snacking brands — and let’s face it, there are few treats more purely indulgent than a Twinkie.

Brand extensions are also a big part of the Hostess turnaround story. Brownies previously “were a white space for us,” Toler said of the market opportunity. As Toler told the Wall Street Journal last year, brownies is “a $400 million category that you would think Hostess would be in. There are things we can keep doing with this business. There also are questions around cookies, but we don’t want to go too far afield.”

Hostess Brownies

To break into the crowded brownies category, which rival Little Debbie is also testing, Hostess solicited the partnership of Mars, which licensed Milky Way and M&M’S as mix-ins and the company may cooperate on other co-branded brownie varieties given its success.

Hostess also brought back its fan favorite Suzy Q’s cakes, using its traditional creme-filled formula. But in a move reflecting its increasing mastery of social marketing, the new Suzy Qs reflect the current trend of package customization by using social media messages from fans demanding the product’s return on its packaging, such as “Casey has waited long enough” for Suzy Q’s to return, and “Chris demanded we deliver it.”

Hostess Mini Muffins

In relaunching Mini Muffins, Hostess used whole grains and eliminated controversial high fructose corn syrup without sacrificing taste, Toler said. “It gives us an opportunity to provide some news in the category and provide a little differentiation for our consumer base who is looking for some permissible indulgence or friendly labels and healthier snacking.”

Hostess Valentine's Day cakes

The company is also getting more agile in creating limited time offerings and seasonal snacks, such as its Valenine’s Day cakes. Overall, Toler added, “We are continuing to look at opportunities to improve our ingredient panel, whether that’s simplification, to remove our ingredients that are sensitive or we don’t think are optimal for our products. But first and foremost, we are an indulgent snack and we want to deliver on taste (and) we want to do that in as reasonable of a way as we can.”

Hostess BreadThat “reasonable” way also has included the introduction of the first Hostess-branded bread line that — recalling the legendary stamina of Twinkies due to preservatives — the company says lasts up to 65 days on shelves.

Toler said that some retailer customers, such as convenience stores, had been asking for a Hostess bread so the brand could round out its offerings, which already include a variety of snack cakes.

As a result of all these changes, Hostess Brands was one of the fastest-growing mid-size US CPG companies last year, according to The Boston Consulting Group and IRI. By innovating, streamlining, having some fun and flexibility with its brands and — most of all — listening to consumers and retail partners, it’s a growth story and business model for other brands fighting for relevance and survival.

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