Across sweet baked goods, Hostess Brands is inextricably tied to the convenience-store category, which accounts for 44% of the company’s retail sales, compared to 25% via grocery, according to UBS Global Research.
Hostess holds a 32% share of the $1.7 billion snack-cake category and 25% share of the $1.5 billion mini-doughnut segment. With the breakfast category—a $1.4 billion market—Hostess has the opportunity to gain $100 million in retail sales, according to Steven Strycula, an analyst with New York-based UBS.
Its Chicago baking plant, Strycula said in a recent research note, offers an opportunity for breakfast category growth by:
- Producing Hostess breakfast products in new categories.
- Baking breakfast products Hostess already sells that are produced by co-manufacturers.
- Migrating volume mix from private label to value-branded products, such as Cloverhill and Big Texas.
“Hostess remains in the early innings of this multiyear category buildout,” Strycula said. “Hostess’ recent acquisition of the Chicago [Cloverhill] bakery provides Hostess new manufacturing capability for breakfast products. Previously, Kansas City, Mo.-based Hostess had outsourced breakfast pastry production to third-party co-manufacturers, which is a low-margin trade-off.”
Click through to view six anchor products that are helping fuel Hostess' brand revitalization.
Images courtesy of Hostess Brands