Hostess Balances Old & New in Comeback Strategy

KANSAS CITY, Mo. -- After 82 years in business, Hostess Brands products vanished from store shelves in late 2012 following the company's filing of Chapter 11 bankruptcy. When it returned under new ownership in July 2013, there were some who doubted that changes in the sweet snacks market would allow Hostess to reach its former status as an iconic American brand.

Now, as the new Hostess Brands nears the one-year anniversary of its "Sweetest Comeback in the History of Ever," its return is producing some surprising results. Not only have brand loyalists welcomed it back, but new consumers are giving Hostess a try, particularly young adult males.

"The Hostess comeback is the result of a groundswell of consumer passion," Gloria Garrett, the company's chief marketing officer and senior vice president, told CSNews Online. "A positive reception to the comeback was predicted, but even we were surprised by the magic of these beloved brands."

Rather than be dragged down by a shaky sweet snacks category, Hostess' return to the market has actually lifted overall sales of sweet baked goods, taking the market from a nearly 8-percent decline during Hostess' absence to 3-percent growth upon its return, according to Garrett.

While the new Hostess Brands benefited from the company's decades-long position as an American icon, it still wasn't a simple task to get back to business. "The company launched operationally as a start-up," explained Scott Ward, vice president of sales, convenience, for the new Hostess Brands. "Many key operating elements, including the distribution model, started from scratch."

The new Hostess is working closely with its retail partners and relying on efficiency improvements that underpin streamlined production and distribution to ensure things keep running well.

As for its actual products, Hostess is pursuing a two-pronged strategy for the future that balances the old and new. "During the comeback, Hostess received clear consumer feedback that preserving the beloved classics is our job one," said Garrett. At the same time, though, the company recognizes that ongoing innovation is the key to staying relevant.

Keeping this in mind, Hostess is innovating within the snacking and breakfast markets. During the rest of 2014, Hostess will integrate new food ingredient trends with the introduction of Greek Yogurt Coffee Cakes, which capitalizes on protein-heavy Greek yogurt's healthy perception. Hostess will also tap the portion size trend with Fun Size Twinkies, for those who want a small treat. Seasonal snacks will be emphasized as well.

Retailers can also expect special promotions and first-ever category initiatives, such as the prepacked, single-serve display shipper that's coming this year.

And the innovation is not expected to stop there. In 2015, customers can look forward to "surprising innovation" that will push Hostess Brands beyond its bakery roots.

CONVENIENCE FOCUS

Although its products are frequently sold from grocery store shelves, Hostess Brands is looking at convenience stores as a prime opportunity to grow sales.

"Many distributors offer full category management solutions enabling more functional shelf-to-space ratios. Our objective is to provide category leadership solutions that run parallel with other impulse sales categories in convenience stores," said Ward.

To take advantage of the highly impulse-driven nature of the c-store business, Hostess is recommending strategic placement of its products on the shelf and on secondary racks to capture consumer attention and maximize single-serve sales. And rather than assume all snack cakes are the same, retailers are advised to emphasize different items in promotions and bundles based on daypart.

"We know that morning traffic in convenience stores revolves around coffee and breakfast purchase behavior," Ward said. "Bundling Hostess Donettes and breakfast cakes is a natural tie-in."

As its first year back in business draws to a close, Hostess has no plans to slow down. In fact, it is keeping the momentum going strong with special appearances: The Twinkies brand has a cameo in the blockbuster film "X-Men: Days of Future Past," which is in theaters now, and Hostess CupCakes will appear on the MTV cooking competition show "Snack-Off."

It's clear Hostess has every intention of making this second lifetime even longer than the first.