Milling & Baking News Corporate Profiles - November 2013 - (Page 104)

Company Overview Hostess Brands L.L.C. Snack cakes return to market with a flourish W hile Hostess Brands has been synonymous with "struggle" for several years, new owners are hard at work to restore the name's luster. Early in 2013, HB Holdings L.L.C., an affiliate of private equity groups Apollo Global Management L.L.C. and Metropoulos & Co., agreed to buy the Hostess and Dolly Madison snack cake business of Hostess brands for $410 million. When production resumed and the company's snack cakes returned to store shelves in mid-July, the company said it experienced "record demand for products." The aggressively marketed resumption of sales resulted in numerous retailers running out of product within hours of when the snack cakes were back on the shelves, Hostess said. "We knew this comeback would be historic and interest would be significant," said Rich Seban, president of Hostess Brands, L.L.C. "But the demand has far outpaced even our most ambitious projections." Brands in the acquisition included Twinkies, Mini Muffins, Cup Cakes, Ho Hos, Zingers and Suzy Q's. The acquisition included the purchase of more than 300 recipes sold under the brand names. Five plants acquired in the transaction are located in Los Angeles; Columbus, Ga.; Schiller Park, Ill.; Indianapolis; and Emporia, Kas. HB Holdings also acquired depots in Kansas City, Schiller Park and Los Angeles. Each of the plants except for the one in Los Angeles were reopened as part of the relaunch of the brand. Mr. Seban said that ahead of the return to market, the company invested $30 million into the four plants. "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 President - Top brands - Richard C. Seban 104 \ November 2013 Twinkies Ho Hos Zingers $70 million in, primarily in capital equipment." The purchase also included the longtime headquarters building of Interstate Brands Corp. at the intersection of Armour Boulevard and Main Street in Kansas City. Headquarters for the business moved to Irving, Texas, in 2009 when Interstate emerged from its first bankruptcy and changed its corporate name to Hostess Brands. A key to the company's new approach is a shift to warehouse distribution and away from direct-store delivery, Mr. Seban said. He explained the warehouse focus will allow Hostess to compete toe-to-toe in the market for snack treats. Commenting on the shift to a warehouse system of distribution, Mr. Seban highlighted drawbacks to have trucks make delivery store by store. "In a D.S.D. system, each stop has to generate a certain amount of revenue to generate profit because we have our own driver in a D.S.D. 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 D.S.D. route because they didn't do enough volume, then we couldn't service them. For example, there are 150,000 c-stores in the U.S. 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. ..." CP Milling & Baking News * Food Business News * Baking & Snack * Meat & Poultry Corporate Profiles

Table of Contents for the Digital Edition of Milling & Baking News Corporate Profiles - November 2013

Milling & Baking News Corporate Profiles - November 2013