Corporate Profiles - 2020 - 82

COMPANY OVERVIEW

Hostess Brands, Inc.
Voortman acquisition, new innovation lab highlight exciting 2020
ostess Brands, LLC kicked off 2020 with a
bang, finalizing its acquisition of Voortman
Cookies Ltd. from private equity firm Swander Pace Capital in a transaction valued at approximately $320 million in cash.
Over the next nine months, Hostess worked at
a feverish pace to integrate the Voortman business,
a process that paid off in strong second-quarter
financial results that company executives said exceeded expectations.
Net income at Kansas City-based Hostess in the
second quarter ended June 30 was $17.37 million,
equal to 13¢ per share on the common stock, up
4.2% from $16.7 million, or 11¢ per share, in the
second quarter last year.
Sales were $256.23 million, up 6% from
$241.06 million. Adjusting for the $6.8 million cost
of obtaining warehouse space needed to facilitate
the Voortman transition, adjusted net revenue was
$263 million. Hostess said the increase in adjusted
net revenue was driven primarily by the acquisition of Voortman, which contributed $30.4 million
of adjusted net revenue during the second quarter.
The second quarter was a key period for the integration of the Voortman business as Hostess transitioned Voortman's direct-store delivery distribution
model to the Hostess warehouse model in both the
United States and Canada, said Andrew P. Callahan,

H

president and chief executive officer, in early August.
Targets for growth for Voortman include what Mr.
Callahan called "cracks in distribution," including
selling into convenience stores, and the development of products for club stores.
At a higher level, Hostess is exploring ways to
capitalize on the two different consumer sets between the Hostess and Voortman categories, the
mix between snack cake and cookie assets and the
mix of manufacturing capabilities.
"We acquired some cookie capability that I think
has a lot of opportunity and is under leveraged," Mr.
Callahan said. "Remember we're the No. 1 wafer.
We're also the No. 1 sugar-free cookie."
Mr. Callahan said Hostess has increased its
household penetration and improved repeat purchase rates during COVID-19. During the second
quarter, the number of households buying Hostess
products increased 10%. Hostess branded pointof-sale was up 9.2%, representing continued
growth ahead of the sweet baked goods category

and demonstrating "the strong consumer demand
with a well-known and trusted Hostess brand during this time.
Going forward, Hostess hopes a new innovation
laboratory that opened in early August will support
ongoing product development.
Located in Lenexa, Kan., the laboratory employs
around 20 researchers, product testers and bakers.
It houses a laboratory where product prototypes are
developed along with custom-built sensory booths
and a focus group room.
The new facility builds on the recent introduction of several new products, including Hostess Iced
Lemon CupCakes and Pumpkin Spice Twinkies, the
company said.
"The Innovation Lab gives us the testing capabilities, analytics and market research insights we
need to support innovation that meets consumer
needs and expectations - such as the Hostess Hot
Fudge Sundae CupCakes recently conceived and
tested for early 2021 production," said Darryl Riley, senior vice president of quality, food safety and
R&D at Hostess Brands. "As the category leader, we
take it upon ourselves to make a sustained investment in this consumer-centric area of our business."
Innovation was in the headlines in September as
well, when Hostess unveiled plans for Apple Cinnamon Donettes and Maple Glazed Donettes. CP

Chief executive officer -
Andrew P. Callahan

Hostess Brands net income

Hostess Brands net revenue

Hostess Brands share price
$15

$258

$81

$78

in millions

in millions

$13

$776

$850

$908

$11

$9

2017

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Corporate Profiles



Corporate Profiles - 2020

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