KANSAS CITY — “We meaningfully are a more valuable company today.”
With that statement, Andrew P. Callahan kicked off his presentation as part of the virtual Evercore ISI Consumer and Retail Summit held June 15, a presentation that explored the different ways the Kansas City-based baking company has found ways to grow during a challenging past 18 months.
Mr. Callahan said a key advantage for Hostess is also a pretty basic one: availability.
“One of the advantages that we have is the breadth of our availability to consumers to find us,” he said. “And we compete in both the immediate consumption snacking or when you’re on the go and in-home business, and right now both of those are working for us…. We are in occasions that are naturally growing. We’re in snacking, which is growing, and we’re in things like a.m. sweet snacks for breakfast, afternoon snacking that are growing at a greater rate. When the pandemic hit and there was that disruption to consumers’ lives, that breadth of availability really served us well, but we didn’t walk away from some of the areas that consumers had to put on hiatus because we knew that was important for us sustainably. So we were able to grow our distribution within, for example, the convenience channel and continue to service them. We were able to expand breakfast shelvings since it’s growing at a greater pace beyond total sweet baked goods. We continued to be ready and bring innovation and continue to fuel and improve the innovation we launched back in 2019, which is having strong repeat rates and becoming what I call ‘very sticky.’ In other words, it’s not just a trial and we’re done. It’s trial and then you build consumers over time.”
Coming out of the pandemic, Mr. Callahan said Hostess is benefiting from both parts of its business. Consumers are more mobile, which is leading to greater rates of purchase within the company’s immediate consumption business, but they also are still snacking at home, which is helping that part of Hostess’ business.
Speaking specifically to the breakfast category, Mr. Callahan said the segment is a “priority growth opportunity.”
“It’s large, and it’s growing,” he said.
Mr. Callahan said Hostess had a 15% share of the sweet goods breakfast category back in 2018 and now is at about 21%. He pointed to strong innovation such as Donettes snack packs, Cream Cheese Coffee Cakes and, more recently, Baby Bundts.
“Just because we’re at 21 share within sweet baked goods we’re not losing focus,” he said. “We believe we have a great runway to go and it’s going to continue to grow at a greater rate for Hostess and at a greater rate for total snacking within that segment.”
Within the convenience channel, Mr. Callahan said Hostess is growing in absolute and growing in share.
“We’ve invested in data,” he said. “We’ve invested in our Hostess partnership program. We’ve been able to add stores. We’ve been able to add quality within our mix and our shelf. And through those real fundamental opportunities we’ve brought in innovation, and therefore when the consumers’ mobility increases and therefore they’re going through the convenience channel and purchasing our products it lifts all boats. I don’t know if it’s going to continue to grow (because) it is really driven by consumer mobility. They are driving more prior to the pandemic. They are walking more. And our presence is better. So I expect us to be in a really good position in that very important channel to us.”
Asked whether the convenience channel can maintain its strong growth rates, Mr. Callahan was optimistic.
“I think we’re going to come out of this consumer disruptor in a higher water level than we went in,” he said. “… I also believe that for Hostess we’re going to grow at a greater rate and continue to grow at a greater rate than the category because we’ve transformed the portfolio to be in consumer occasions that are growing at a greater rate and we’re innovating within a broader need for the consumer outside the category. I think Hostess is going to continue to grow share and the category will, too.”