Milling & Baking News - September 24, 2019 - 14

Business

Four pillars fueling Hostess'
profitable growth trajectory

HOSTESS BRANDS

earlier this year as a L.T.O. for the
brand's 100th birthday, have morphed
into a permanent item because of their
"overwhelming success, high appliIn a category that is driven by fla- cable usage area and tremendous onKANSAS CITY - Since its relaunch
in 2013, Hostess Brands, Inc. has dem- vor, Hostess and its calling card of trend flavor," he said, adding that the
onstrated consistent growth. Going sweetness are well situated, Mr. Lusk Birthday variety is now the No. 2 Cupforward, the company plans to turn to said. But the possibilities for even Cake flavor.
White Fudge Ding Dongs, which
four pillars to fuel its profitable growth more growth are out there, he added.
"Despite our high awareness, our Mr. Lusk said were introduced as a
trajectory: brand strength, access to a
great category, a growth model with high availability in our consumer pref- simple extension of a long-standing
proven results, and untapped growth erence, we're still at a 32% household legacy product, the chocolate Ding
penetration with tremendous white Dong, has grown to become the No. 2
levers and potential.
In a Sept. 10 investor day confer- space in order to be able to reach sweet selling flavor of Ding Dongs.
"Proof and evidence that a flavor
ence, Chad S. Lusk, senior vice-presi- baked goods' 69%," he said. "And that
dent and chief marketing officer, elab- index is still under indexes relative to extension that hits on a high consumer
orated on each pillar, beginning with other indulgent categories like cookies preference, coupled with our brand,
and confection, which are in the low can bring high results," he said.
the company's brand.
In the Zinger portfolio, rasp"(The brand) has high awareberry has turned in double-digit
ness, and it has high consumer
growth over the past couple years
reach and availability and a
due to "focus and attention,"
highly contemporary and engagwhile strawberry Zingers, the
ing character that people want
brand's most recent innovation,
to talk about and engage with,"
has driven 5% unit growth for the
Mr. Lusk explained. "We're
overall brand, Mr. Lusk said.
part of a broader growing and
Turning to bread, Mr. Lusk
addressable market of indulsaid Hostess viewed the categogent snacking, in which there is
ry as "an opportunistic adjacenample room to grow, and we, as
cy to be able to capture a unique
Hostess, have a right to be able
growth opportunity, leveraging
to participate. And we have a Cherry Cheese Danish has driven 47% dollar growth
our distribution network with its
tested and proven playbook with to the total Hostess Danish portfolio since its launch.
unique reach against a specific
established tools that are proven
channel need."
within C.P.G. marketing for conHe said it's difficult for D.S.D. proto high 90s. So we are nowhere near
tinued growth."
viders to reach smaller-format stores,
Mr. Lusk said the power of Host- reaching our ceiling yet."
Hostess has a strong growth model such as convenience stores and drug
ess' brand is evident in its 80%-plus
brand awareness, which he said is on with proven results, and Mr. Lusk said stores, with bread offerings. But Hosttop of the company's peer group. The the company will continue to rely on ess, with its business model, has been
strength and equity of some of Host- that playbook as a pillar, with some able to provide a full-service solution
of a combined bread and sweet baked
ess' underlying sub-brands is just as tweaks.
"We have a rich history of innova- goods offering.
powerful, he added.
"Now what that's culminated in bread
"That consumer brand awareness is tion at Hostess," he said. "And what
correlated with an expansive distribu- we've seen is that because of the is putting us at a No. 1 selling branded
tion reach, which provides broad avail- highly impulsive, highly relevant, bread position in c-store and drug, but
ability to consumers across regions, highly attractive nature of our prod- it's also allowed us to be able to capiacross channels and solidifies our lead- ucts and our brands, we don't need talize and unlock opportunities on the
ership position in this space," he said. to do big product changes in order to snack cake side as well and be able to
"Consumers continue to engage with get growth. ... But what we've seen represent there," Mr. Lusk said. "We are
our brand because we are highly rel- is that what may appear like modest not bashful about using our distribution
changes in a traditional innovation model to be able to drive growth."
evant and highly contemporary."
Beyond snacking, Mr. Lusk said
The second pillar helping fuel definition actually have the ability to
growth is the strength of the snacks create meaningful impact. When ex- Hostess is applying the same playecuted well, taps into a key consumer book to breakfast.
category.
"We believe highly in breakfast," he
"Simply put, it's a great time to be in insight and can create outsized impact. We use fun, high-demand flavor said. "It's working for us. Our breaksnacking," Mr. Lusk said.
He said snacking has never been and form varieties and extensions, fast portfolio is growing, and we've
a bigger part of the American diet, exciting usage-driven limited-time of- continued to unlock capabilities and
with forecasts calling for the catego- ferings, or L.T.O.s, to be able to drive innovation based on the Cloverhill acry to grow $30 billion over the next incrementality. (We) increased the buy quisition. Take an example of Cherry
four years, or at a compound annual rates among existing consumers and Cheese Danish here as a flavor extenbring new consumers to the category." sion that has driven 47% dollar growth
growth rate of about 4.7%.
Mr. Lusk pointed to several exam- to the total Hostess Danish portfolio
"Most would want to be in a category with this kind of growth intrinsics," ples of small things that Hostess has upon its introduction.
"Another example is we're going to
he said. "And the great part is that done to create a big impact. Birthday
CupCakes, which were introduced be introducing a cream cheese coffee
Hostess sits right in the sweet spot."
14 / September 24, 2019

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