Baking&Snack - August 2013 - 16

Hostess to compete in mega snack market
A move to warehouse distribution and away
from direct store delivery (DSD) will allow
Hostess Brands to compete toe-to-toe in the
market for snack treats, said Richard Seban,
president of the Kansas City, MO-based
company. In a July 9 interview with Milling
& Baking News, he described Hostess as
primed to win back its spot on familiar —
and new — shelves this summer.
The new distribution
approach was one of several significant changes Mr.
Seban said will help restore
luster to a brand and business diminished by struggles
dating back many years.
As part of its acquisition
of the Hostess snack cakes
business, private equity firms
Metropoulos & Co. and
Apollo Global Management
netted five plants, and Hostess
has poured $30 million into
four of these over the past few
months. The plants are located at Columbus, GA.; Schiller
Park, IL; Indianapolis; and
Emporia, KS. A fifth plant in
Los Angeles has not been reopened.
“The [four] plants structurally were
among the better plants Hostess operated
before for cakes, so the plants were structurally in reasonably good shape, but they
did need some upgrades, and we spent
about $30 million in opening these four
bakeries,” Mr. Seban said. “We did invest in
upgrading various systems and processes
as well as putting in new equipment. Over
the next year, we’re putting another $70
million in, primarily in capital equipment.”
Additionally, Mr. Seban said Hostess is
looking at opening a fifth facility that he
said will be “more modern, state-of-theart and located in an optimal area for both
distribution and logistics.” He declined to
specify where the plant will be located.
According to company reports, the plant
will cost $75 million to $80 million.
Another significant change for Hostess is
a shift in its distribution system, from one

/ Baking & Snack / August 2013

based on DSD to one geared toward delivery to warehouses.
“In a DSD system, each stop has to generate a certain amount of revenue to generate profit because we have our own driver
in a DSD system stopping,” Mr. Seban said
in explaining the differences between the
two systems for Hostess. “So if the stops
were too small, and we couldn’t service
them on a DSD route because they didn’t do enough
volume, then we couldn’t
service them. For example,
there are 150,000 c-stores
in the US. In November, we
were calling on about 50,000
of them, or about a third.
Now, because we’re going
through a warehouse direct
system, we can use independent distributors … to go after literally everywhere that
candy bars are sold. … We
feel we now have the ability
to sell wherever candy sells,
and that opens up an additional 100,000-plus operating units for us.”
Mr. Seban said the biggest challenge in
moving to warehouse delivery was making
the transition to a SAP system.
“When you’re doing DSD, your people
fill out the order,” he said. “We now have to
accept orders from customers. So it really
required us to completely reconfigure our infrastructure. But given the time we had to get
our plants started, we’ve been able to rebuild
that infrastructure with the help of Acosta,
our sales agent. They have been instrumental
in getting us up to speed and offsetting some
of the things we couldn’t do quickly enough
to get our infrastructure in shape. They’ve
been able to support us in that way. So the
warehouse direct system looks like there is an
awful lot of upside for us.”
The full exclusive interview of Mr. Seban
was published in the July 23 issue of Milling
& Baking News.
— Eric Schroeder,
Milling & Baking News

The Denver, CO, metropolitan
area has been selected as the
location for the headquarters
of Ardent Mills, the proposed
joint venture that will bring together the flour milling assets
of ConAgra Mills, Cargill and
CHS. The designated executives of
Ardent said that while no specific
office location or opening date
has been set, the new company is
expected to establish its presence
in Denver by early 2014.
Omaha, NE-based Gavilon Grain
acquired five grain elevators in the
Rio Grande Valley area of south
Texas with combined upright
storage capacity of 5.4 million bu.
Gavilon said it will use the facilities to store and handle yellow
corn, sorghum and soybeans purchased from area farmers.
Learn about the science and
engineering of bulk solids from
Kansas State University faculty and industry experts at a
Bulk Solids Handling, Storage
and Flow course Nov. 11-14
at the International Grains
Program Conference Center in
Manhattan, KS.
US District Court of Northern
California ordered the Food &
Drug Administration to publish
proposed rules for all outstanding
regulations under the Food Safety
Modernization Act (FSMA) by
Nov. 30. Furthermore, the close of
the comment period for each proposal cannot be later than March
31, 2014, with final regulations
published by June 30, 2015. The
Center for Food Safety filed the
complaint against FDA because it
failed to publish FSMA regulations
within the original timeframe that
Congress wrote into the law.

Baking&Snack - August 2013

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