BOSTON — Every major food company “has to search inward to figure out who they are,” C. Dean Metropoulos, executive chairman of Hostess Brands, Inc., told participants at the Barclays Global Consumer Staples Conference held Sept. 6 in Boston.
Mr. Metropoulos’s remarks came in response to a question from an analyst seeking more color on investor activity as it relates to a shift away from large, center-store packaged food assets. In addition to Hostess, Mr. Metropoulos has had a stake in Pinnacle Foods, Ghirardelli Chocolate Co., International Home Foods and Pabst Brewing Co., giving him a broad perspective on investor activity.
“I think activists are participating very strongly to force a different cultural orientation in these companies,” Mr. Metropoulos explained. “Thinner, leaner, more decisive, less bureaucratic, certainly not as fat as maybe it has been historically. And moreover, there’s so much innovation going on that is really transforming the landscape. A lot of that innovation is very difficult to play because every time you have a new idea, there’s five or six of them. So it’s very hard to sustain some of these ideas with a critical mass that I think it takes to efficiently begin to build a business around it.”
Mr. Metropoulos said the time is “very critical” for executives in the food business space. He stressed the importance of business leaders to assess strengths and weaknesses, and to focus on becoming leaner and more decisive.
“You can’t have 10 focus groups to help you make a decision,” he said. “You’ve got to be agile. You’ve got to be aggressive. You’ve got to be resourceful. And I think the activists are trying to push American industry to be exactly that. And I think at the end of the day, it will transition to a more profitable, a more growth-oriented platform.”
Mr. Metropoulos also noted the importance in understanding changing trends. With millennials thinking differently it has become increasingly important to stay ahead of the game in terms of innovation, he said. Hostess executives meet once a month, he said, and also sit down with R.&D. groups that help the company assess and evaluate where to take the brand.
“I think we are constantly discussing, what should our next acquisition be?” he said. “Yes, there are some easy ones that are tucked in, and you certainly can never forget your indulgent, supporting consumer.”
Mr. Metropoulos said companies have to be careful not to alienate their consumer base, noting that consumers pick up on change in quality “very quickly and aggressively.”“You’ve got to be very careful to protect your indulgent base but at the same time continue to innovate and continue to be relevant to the next generation, which today might only be 5%, but in perhaps five years, it’s 15%,” he said. “I should lastly say over the history, there’s been a lot of products. Light cheeses back in the ‘70s were going to transform the cheese space. Nobody was going to eat fat cheddar. But it didn’t. There’s a place for it that’s going to take a certain part of the future consumption pattern. I suspect it’s going to accelerate a little bit. Water, for example. … Every time I turn around, I’m seeing a different brand of water. Yet 90% will still be in these basic water products. But you have to be aware, particularly as you’re an innovative company, that you want to play, and you’ve got to watch these trends. Agility, resourcefulness and open-mindedness and being lean, I think, is the answer that I think a lot of us have to transition to.”