Milling & Baking News Corporate Profiles - 2019 - 84

COMPANY OVERVIEW

Hostess Brands, Inc.
New consumer research center, breakthrough innovations on tap in 2020
ince its relaunch in 2013, Hostess Brands,
Inc. has generated consistent growth.
Along the way, the company has changed
out key leadership and delved into new product
categories.
Heading into 2020 the Kansas City-based
company is preparing for another change: the
relocation of its corporate headquarters to Kansas (Lenexa) from Missouri (Kansas City) and the
addition of a new consumer research center.
The company said the research and development center will feature a laboratory, a sensory
test kitchen and focus group space and will "enhance the company's in-house innovation capabilities and expand capacity for new product research and development." The center is expected
to open in the first half of 2020. The lack of such
facilities has created challenges, said Andrew P.
Callahan, president and chief executive officer.
"It's been cumbersome to kind of collaborate,
coordinate," he said during an Aug. 7 conference
call with analysts. "Sometimes, it's not as hard.
We don't have 100% access to the equipment
and facilities we need, and, therefore, we do a
lot more in our actual full, scaled-up facilities.
And therefore, the ability to be able to do benchtop samples or to run sales samples and all of
those things are more expensive; they take more

time. So the ability to co-locate makes us ...
much faster, makes us much (more) nimble. It
enables us to look at a breadth of ideas a lot
faster, so our R.&D. team can really do faster
prototyping and testing and other things related
to our products."
The announcement came just a few months
after Hostess said it was opening a new corporate office in Chicago to serve as its hub for marketing and category management.
Structural changes aside, Hostess has identified four pillars to fuel its profitable growth
trajectory: brand strength, access to a great category, a growth model with proven results, and
untapped growth levers and potential.
"(The brand) has high awareness, and it
has high consumer reach and availability and
a highly contemporary and engaging character
that people want to talk about and engage with,"
Chad S. Lusk, senior vice-president and chief
marketing officer, said during a Sept. 10 investor

day conference call. "We're part of a broader
growing and addressable market of indulgent
snacking, in which there is ample room to grow,
and we, as Hostess, have a right to be able to
participate. And we have a tested and proven
playbook with established tools that are proven
within C.P.G. marketing for continued growth."
Mr. Lusk said the power of Hostess' brand is
evident in its 80%-plus brand awareness, which
he said is on top of the company's peer group. The
strength and equity of some of Hostess' underlying sub-brands is just as powerful, he added.
Mr. Lusk also spoke of the power of the snacks
category as well as the opportunity Hostess sees
in breakfast.
"We believe highly in breakfast," he said. "It's
working for us. Our breakfast portfolio is growing,
and we've continued to unlock capabilities and innovation based on the Cloverhill acquisition."
Lifted by strong sales and operating profits in
its core Sweet Baked Goods segment, adjusted
net income of Hostess surged in the first half
ended June 30.
In the first half of 2019, Hostess net income
was $43,281,000, or 32c per share, down 20%
from $53,922,000, or 43c, in January-June
2018. Sales were $463,798,000, up 9% from
$424,592,000. CP

Chief executive officer -
Andrew P. Callahan

Hostess Brands net income

Hostess Brands net revenue

Hostess Brands share price

per share
$15

$82

$258

$81

in millions

$14
$13

$728

$776

$850

$12
$11

2016

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