Milling & Baking News - November 17, 2020 - 16

Financial Results

Hostess details innovation plans
for breakfast, Voortman brand

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16 / November 17, 2020

Milling & Baking News

rate), more than six times the total
cookie category, " Mr. Callahan said.
" This underserved category subsegment appeals to younger consumers
with nearly half seeking grain-based
cookies. "
Assuming the COVID-19 pandemic causes no significant disruptions,
Hostess Brands raised its outlook for
the fiscal year to the upper end of the
previous outlook. The company now
expects adjusted EBITDA of $235 million to $240 million, which compares

HOSTESS BRANDS

Facilitate

KANSAS CITY - Andrew P. Callahan, president and chief executive
officer of Hostess Brands, Inc., spoke
about current and upcoming innovation, particularly in breakfast items
and the Voortman brand, in a Nov.
5 conference call as the company
turned in another strong quarter.
Net income in the third quarter
ended Sept. 30 more than doubled to
$24 million, or 18Â¢ per share on the
common stock, from $10.7 million, or
8Â¢ per share, in the previous year's
third quarter. Net revenue increased
15% to $260.9 million from $227.2 million. The recently acquired Voortman
Cookies business contributed $26.8
million of net revenue. Not counting
the divested in-store bakery business,
which had sales of $7.1 million in the
previous year's third quarter, net revenue increased 19%.
Hostess-branded breakfast sales
grew more than 14% in the quarter,
and innovation there will accelerate,
Mr. Callahan said. In the quarter new
Cream Cheese Coffee Cakes led to
coffee cake sales growing 29%.
" Our single-serve Jumbo Donettes are on fire, up over 45%, and
we are now bringing consumers a
classic glaze option, " Mr. Callahan
said. " Building on our bagged Donettes momentum, we are introducing strawberry cheesecake and caramel chocolate flavors. "
While snacking is a $150 billion
market, breakfast accounts for about
one-third of that figure, Mr. Callahan
said.
" Just within the sweet baked goods
category (of breakfast), our share
is underdeveloped versus our total
portfolio, " he said. " We've grown
that over $70 million just in the past
several years by outpacing the breakfast category. So we're innovating by
bringing unique items that have a
specific Hostess twist, that contemporizes the brand and gives consumers
an option to choose. "
Hostess limited-time offerings
planned for 2021 are new flavors like
Key lime and s'mores as well as cotton candy Twinkies, he said.
Super Grains cookies are new under the Voortman brand. They contain fruit and whole grain oats, rye
and buckwheat.
" The target subsegment for Super
Grains is expected to grow at 30%
CAGR (compound annual growth

with $230 million to $240 million in
the previous outlook, and adjusted
earnings per share of 73Â¢ to 75Â¢,
which compares with 70Â¢ to 75Â¢ in
the previous outlook.
Hostess in the third quarter reported market share was 19.7% within the
sweet baked goods category, driven
by 8.5% Hostess branded point-ofsale growth. Lower sales of private
label and non-Hostess branded partially offset the higher volume of core
Hostess branded products.
" Hostess new and one-time consumers are increasingly becoming
more frequent buyers at a rate twice
the category, " Mr. Callahan said. " Despite overall consumer trips to the
store being down, consumers' purchases of Hostess trips are up.
" Additionally, these consumers
are younger and have longer potential for growth overall for the brand.
We do not see a change in the strong
at-home consumption in the short
term. "
He added repeat buyers versus a
year ago were up 11% for multi-packs
and 15% for bagged Donettes.
Over the first nine months of the
fiscal year, Hostess Brands posted
net income of $44 million, or 33Â¢ per
share on the common stock, which
was down 19% from $54 million, or
39Â¢ per share, in the same time of the
previous year. Nine-month net revenues rose 10% to $760.6 million from
$691 million. MBN
bakingbusiness.com / world-grain.com

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Milling & Baking News - November 17, 2020

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