Milling & Baking News - December 24, 2013 - 24

Sweet Goods Update 

Back in the sweet spot
Return of Hostess products provides boost to sweet goods segment

bankruptcy, including Twinkies, Cup
Cakes, HoHos and Ding Dongs.
Six months after holding a ribbon
cutting at its facility in Emporia, Kas.,
Hostess in early December said it will
expand the plant (see related story on
Page 9). In addition to plant expansions, Hostess has been actively seeking new avenues of distribution.
In late November, Dollar General
Corp., which operates more than
11,000 stores in 40 states, concluded
the roll-out of five Hostess products:
8-count CupCakes; 12-count Ding
Dongs; 10-count Twinkies; 12-count
Zingers; and 10.5-oz bags of Hostess
Donettes Powdered Mini Donuts.
Rich Seban, president of Hostess
Brands, L.L.C., Kansas City, said Hostess' new distribution strategy has alTop-selling bakery snacks vendors
lowed the company
Per cent
Per cent
"to significantly exDollar
change from Unit
change from
pand our reach and
sales
year ago
sales
year ago
distribute through
McKee Foods Corp.
$786,446,000
25.5 527,036,600
23.4
more channels than
Tasty Baking Co.
$285,358,900
31.1 150,250,400
37.9
ever before."
Hostess Brands
$173,843,700
-75.1
83,225,320
-78.8
In early NovemBimbo Bakeries USA
$160,463,600
19.7
76,784,300
16.7
Private label
$502,341,600
9.8 204,129,100
11.6
ber, Wayne, Ind.52 weeks ended Nov. 3, 2013
based Aunt Millie's
Total U.S. Multi-Outlet with C-Store (Supermarkets, drugstores, mass market retailers,
Bakeries
entered
gas/C-stores, military commissaries and select club and dollar retail chains)
Source: Information Resources, Inc.
into a limited distribution agreement
from the same period a year ago, while with Hostess that will allow Aunt
unit sales fell 5% to 1,453,943,000, ac- Millie's to sell Hostess snack cakes
cording to Information Resources, through its direct-store delivery route
Inc., a Chicago-based market research service to convenience stores.
Other Hostess snack cake assets
firm. But the decline could almost
solely be attributed to Hostess pulling were acquired by McKee Foods. In
product from store shelves. Hostess mid-September, McKee began the
bakery snack sales plummeted 75% in gradual reintroduction of several
products under the Drake's brand.
the 52 weeks ended Nov. 3.
Meanwhile, dollar sales rose 26% Drake's products include Ring Dings,
for Collegedale, Tenn.-based McKee, Yodels, Devil Dogs, Yankee Doo31% for Philadelphia-based Tasty Bak- dles, Sunny Doodles and Drake's
ing Co. (a wholly-owned subsidiary Coffee Cake. McKee is making the
of Thomasville, Ga.-based Flowers Drake's snack cakes at its facilities in
Foods), and 20% for Horsham, Pa.- Collegedale and Stuarts Draft, Va.
Despite offering several products
based Bimbo Bakeries. Private label
bakery snacks also improved, increas- under its Little Debbie brand that are
similar to Drake's snack cake offering 10% over the past year.
Since early spring, things have once ings, Mike Gloekler, a spokesman for
again begun to settle down in the McKee, said the company does not
plan to phase out any
snack cakes industry. Hostess Brands,
products at this time.
L.L.C., a new company
Although they may
being funded by Apollo
have been left out of
Global
Management
the sweepstakes for
L.L.C. and Metropoulos
the Hostess brands,
& Co., purchased selectBimbo Bakeries USA
ed Hostess assets out of
hat a year for sweet goods.
Last winter the industry
may best have been described as "in transition," as Irving,
Texas-based Hostess Brands, Inc.
ceased operations and serious questions surrounded what would happen
to the company's popular Twinkies,
HoHos and other snack cakes.
As Hostess searched for a new owner, other major snack cakes makers such
as McKee Foods Corp., Flowers Foods,
Inc. and Bimbo Bakeries stepped up to
fill the void. As a result, bakery snack
dollar and unit sales for Hostess' competitors surged over the past year.
In the 52 weeks ended Nov. 3, dollar
sales for the overall bakery snacks segment totaled $2,656,114,000, down 4%

24 / December 24, 2013 Milling & Baking News

and Flowers Foods both took action to
grow their presence in the snack cakes
category during the past year.
Bimbo Bakeries USA introduced a
line of snack cakes under the Sara Lee
brand during the first quarter of 2013.
By introducing snack cakes under the
Sara Lee brand, B.B.U. has taken a step
Sara Lee Corp. did not during the 10
years it was a major player in the fresh
baked foods business.
With the introduction of snack cakes
under the Sara Lee brand, two different
companies (Hillshire Brands Co.) are
now selling what are broadly referred to
as sweet goods under the Sara Lee brand.
For Flowers, the acquisition of Tasty
Baking Co. back in 2011 continues to
pay dividends, especially during the
period of time Hostess was absent
from the market.
"Since we acquired the Tastykake
brand in 2011, we have increased sales
significantly, almost doubling our cake
sales," said Allen Shiver, president of
Flowers, during an Aug. 13 conference
call with analysts. "Consumers across
the South and Southwest and more recently, New England, are responding
well to the Tastykake brand. We believe
that direct-store delivery, or D.S.D., is
the most effective distribution system
for fresh snack cakes as it is for fresh
bread and rolls. Tastykake is distributed
throughout our D.S.D. system, which
serves about three quarters of the U.S.
population. Our distributors are in the
stores daily and providing the best possible service to our customers."
While realizing Hostess cakes may
have a place in the market, Mr. Shiver
said Flowers is confident that its cake
business will weather the reintroduction.
Flowers' confidence in the snack cake
business extends to its Mrs. Freshley's
brand, which is Flowers warehouse
distributed brand. Mr. Shiver said the
brand so far is "holding up."
"There are many of the qualities from a
product assortment standpoint, customer relationships are helping to hold onto
that business, but obviously as Hostess
reintroduces, that is a direct competitor
to our Mrs. Freshley's business, and we
are doing everything that we should be
doing to hold onto the gains that we have
generated," he said. "But that business is
important to us and we intend to hold
onto it just like Tastykake." MBN
- Eric Schroeder
bakingbusiness.com / world-grain.com

http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - December 24, 2013

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