C-stores fill the empty spots the Hostess liquidation left on their shelves
Sweet snack lovers got a rude awakening in November when news broke that negotiations between Hostess Brands Inc. and members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union had broken down. It wasn't long before the 85-year-old maker of America's iconic snack cakes, which had filed for bankruptcy the previous January, announced it would liquidate.
Hope appeared briefly when U.S. Bankruptcy Court Judge Robert Drain assisted in a last-ditch mediation effort, but ultimately no agreement could be reached.
What has this meant for those outside the conflict?
For consumers, it meant an immediate spike in demand for the remaining Twinkies, Ding Dongs and other Hostess products that were already on shelves. Spire LLC, a Monroe, Conn.-based shopper intelligence firm, tracked daily sales of Hostess products using its Shopper Network Loyalty Card Data and saw a dramatic increase the day of the bankruptcy announcement. Sales of Twinkies, in particular, rose to a record-breaking $49 per store. The sales boost, though, could not be sustained as stores quickly ran out of Hostess stock.
Opportunistic resellers were offering the sweet snacks for inflated prices on websites such as eBay.com, but most people simply had to select other snacks when shopping.
While consumers continue to mourn the loss of some of America's most recognizable snack names â even though the iconic brands are not likely to be gone for good â on the retail side, it's been business as usual since the Twinkies ran out.
"We're looking at a temporary void rather than a permanent one," said Bob Goldin, executive vice president of Chicago-based research and consulting firm Technomic Inc., noting that the media furor has not reflected the realistic impact on the convenience and grocery channels, or the prominence of the snack cake segment.
"People think it's a lot bigger and more prominent than it really is," he said. The outcry over the loss of Twinkies is "more iconic and symbolic than anything."
With so many innovative products competing for shelf space and customer attention, c-store shoppers still have hundreds of choices when it comes to picking up a sweet treat or a pick-me-up snack. As a result, it hasn't been difficult for convenience stores and other retailers to fill the gaps Hostess left on their shelves with other items.
"For the time being, we are using a combination of other grocery items and local bakery/bread products to fill the space left by the Hostess bankruptcy," said Michael DeAngelis, director of public relations for drugstore chain CVS Caremark Corp.
Goldin speculated that national brands such as Little Debbie and well-known regional brands such as Tastykake will likely benefit the most from the need to fill shelf space. But, as with CVS, retailers will not â and perhaps should not â feel obligated to replace the missing Hostess items with other sweet snacks.
"The category hasn't been performing that well," Goldin said. "Tastes have changed."
While convenience stores may feel the loss of Hostess slightly more than grocery stores, the adjustment should be a smooth one, according to Goldin, with items like granola bars and energy bars doing just as well in Hostess' space.
Since there is no obvious replacement for Twinkies, retailers will likely stock "whatever's trending" that will provide a better profit margin. This means that Hostess' departure isn't necessarily going to be a boon to its major competitors, as store owners may find there is not increased demand for the other sweet snacks they stock.
Ultimately, whatever strategy retailers take will almost certainly be a temporary one. "The [Hostess] brand has value," said Goldin. "It's not going to disappear."
As of press time, numerous reports had circulated of interested buyers, including The Kroger Co. and Wal-Mart Stores Inc. Financial advisor Joshua Scherer of Perella Weinberg Partners LP told Judge Drain that more than 100 companies had initially expressed interest in acquiring Hostess. In late December, lawyers for Hostess reported to the court that the brands may sell to separate buyers rather than being acquired as a whole.
No matter who comes out of the process as the new owner of the Twinkie and Hostess' other brands, it appears for c-store owners that it will just be another day.
For comments, please contact Angela Hanson, Field Editor, at [email protected].