COVER STORY
Hostess Brands, the 2022 ‘Bakery of the Year,’ continues to position itself for growth.
Douglas J. Peckenpaugh, Group Editorial Director
Hostess Brands is synonymous with snack cakes. Its iconic products date back over a century. The Hostess CupCake, with its signature squiggle, debuted in 1919, and Twinkies followed in 1930, with a string of snack cake and sweet goods innovations ensuing across the decades, including Donettes (1940), Sno Balls (1947), Ding Dongs (1967), Ho Hos (1967), and Zingers (1970s).
These are the nostalgic treats of America’s collective youth—and young at heart. Their apparent simplicity belies the sophisticated spark of innovation at each product’s core. These treats endure and set the standard for their respective categories. And they bring delicious moments of pure joy.
Since its rebirth in 2013, Hostess Brands, Inc., with headquarters in Lenexa, KS, has progressively gained market share through organic category growth, and built its business through strategic acquisitions. Hostess is a clear global leader in snack cakes and sweet goods. Now, the company has implemented a range of corporate initiatives related to sustainability, workforce development, and workplace safety that will position it for continued success into the coming century.
For this combined century of innovation and forward-thinking business acumen, Snack Food & Wholesale Bakery is pleased to honor Hostess Brands as its 2022 “Bakery of the Year.”
SPONSORED BY
Courtesy of Hostess Brands
AT A GLANCE
Company: Hen of the Woods Snack Foods
Headquarters: Cincinnati
Product: Potato Chips, Dip Seasonings, Chocolate Bars
Website: www.henofthewoodsotr.com
KEY PERSONNEL
Nick Marckwald, CEO/Founder
Brady DeLong, COO/Sales & Marketing Manager
Jason Dranschak, CFO/Production Manager/Logistics Manager
Ongoing innovation
Product innovation has driven business forward at Hostess Brands through the years. In addition to the aforementioned brands, the company’s bakery snack lineup includes Fruit Pies, Jumbo Donettes, Mini Muffins, Mega Muffin, Cinnamon Roll, Jumbo Honey Bun, Coffee Cakes, Danishes, and Muff’n Stix.
This innovation at Hostess Brands is ongoing. Recent bakery snack R&D has included:
- Hostess Cr!spy Minis, launched in 2021, crunchy, crispy, poppable snacks that feature two layers of creamy filling between crisp wafers, packaged in a resealable, stand-up pouch, available in Cookies and Crème, Strawberries and Crème, and now Mint Chocolate
- Hostess Baby Bundts, released in 2021, are individually wrapped mini Bundt cakes in Lemon Drizzle, Cinnamon Swirl, and Strawberry Cheesecake
- Hostess Boost Jumbo Donettes, released in 2022, contain 50-70 mg of caffeine each (slightly less than one cup of coffee), available in Chocolate Mocha and Caramel Macchiato
- Hostess Devil’s Food Jumbo Honey Bun, released in 2022, glazed and made with real cocoa
- Hostess Bouncers, poppable, bite-sized snack cakes with a creamy filling in three varieties: Cinnamon Donettes, Glazed Chocolate Ding Dongs, and Glazed Twinkies (rollout will begin in fall 2022)
Courtesy of Hostess Brands
Voortman cookies, a brand that dates back to 1951, joined the Hostess Brands lineup after the acquisition of that business in late 2019. Voortman offers regular and sugar-free wafers and cookies in a wide range of flavors. The cookies range includes Chocolate Chip, Shortbread, Fudge Striped Oatmeal, Almond Crunch, Coconut, Oatmeal Raisin, Oatmeal Chocolate Chip, Oatmeal Cranberry Flaxseed, and Windmill cookies. Voortman wafers include Vanilla, Strawberry, Chocolate, Orange Crème, Banana, Chocolate & Raspberry, Lemon, Key Lime, Peanut Butter, and Raspberry.
Recent Voortman innovations have included:
- Originality—product format, ingredients, notable traits
- Branding—on-pack messaging
- Packaging—design, sustainability, convenience, user-friendliness
- Organoleptics—aroma, flavor, bite, texture, mouthfeel
AT A GLANCE
Company: Famous Amos
Brand: Famous Amos
Headquarters: Chicago
Product: Cookies
Website: www.famousamos.com
- Voortman Sugar Free Mini Cookies, introduced in 2022, snackable, poppable cookies in Vanilla Shortbread and Iced Oatmeal
- Voortman Raspberry Lemonade and Tropical Fruit Flavored Wafers, introduced in 2022, LTO offerings made with real raspberries, lemons, pineapple, and coconut
Courtesy of Hostess Brands
Other LTO wafers have included Pumpkin Spice and S’mores flavors.
Hostess Soft White Hot Dog Buns and Hostess Classic Wheat bread comprise the company’s fresh bread offerings.
Annual sales at the company are very strong, with adjusted net revenue growth of 11.6% for fiscal 2021. The company also saw point-of-sale (POS) growth of 14.4% in the sweet baked goods category during 2021.
Other highlights from fiscal 2021 included:
- Launched Baby Bundts, the No. 1 new product launch in the sweet baked goods category in 2021 (Nielsen)
- Installation of a new cake production line
- Announced plans in early 2022 to build a state-of-the-art bakery in Arkadelphia, AR
- Released second “Corporate Responsibility Report”
Courtesy of Hostess Brands
In August, when announcing second-quarter 2022 results, CEO Andy Callahan reported that Hostess Brands posted its 10th straight quarter of double-digit growth, with 17% organic net revenue growth:
- Net revenue of $340.5 million increased 16.8% from the same period last year, as higher prices and favorable product mix accounted for 13.8% of the quarterly growth, with remaining growth attributed to higher volume
- Raised full year 2022 net revenue guidance to at least 15% growth
- Sweet Baked Goods point-of-sale (POS) increased 15.6%, maintaining its share of category dollar sales at 21.7%
- Voortman branded POS grew 25.0%, and its share of the cookie category increased by 20 basis points, driven in part by sales momentum of sugar-free cookies
Over the past year, according to IRI, Chicago, for the 52 weeks ending March 20, 2022, Hostess Brands saw category gains across the board, and in many cases, is the category leader. Selected highlights include:
- Full-size doughnuts, up 24.1% to $559.5 million
- “Bar and finger” snack cakes, up 7.6% to $299.4 million
- Snack cupcakes, up 10.3% to $270.0 million
- Angel food, Bundt, and sponge cakes, up 31.3% to $191.8 million
- Voortman cookies, up 20.8% to $159.4 million
- Sweet rolls, up 37.2% to $100.9 million
- Coffee and crumb cakes, up 15.4% to $89.8 million
- Danish, up 18.7% to $51.6 million
- Mini muffins, up $107.4% to $37.3 million
- Individual and snack pies, up 10.4% to $37.0 million
- “All other” snack cakes, up 38.5% to $18.2 million
- Pastries, up 73.3% to $10.1 million
Climate action
As part of a larger effort to drive its business forward and position itself for continued success, Hostess Brands developed a Climate Action Plan in 2021, with the goal of reducing greenhouse gas emissions, as well as energy and water usage.
“It’s really our first step of transparency,” says Callahan. “We’re making great progress, and have reduced water by 25%, energy by 14%, and greenhouse gases by 19%.” These advancements have come over the past two years. The company will finalize this plan over the next two years.
Hostess Brands has also conducted a detailed review of its packaging to identify opportunities to further reduce its carbon footprint and has also made strides in its use of recycled packaging materials.
This work is ongoing. “It takes time to accomplish, but if you plan up front, then we can organize our activities to have the largest impact.”
Publicizing these moves not only connects Hostess fans to this important work, but also connects the company’s employees to its purpose. “It’s also good for business.” Reduced energy use saves money and has a positive impact on the environment.
Going state-of-the-art
Hostess Brands purchased a previously developed, brownfield site in Arkadelphia, AR, in February 2022 and is in the process of converting an existing idle factory into a state-of-the-art, sustainable, energy-smart bakery. The company notes the facility will become its most-sustainable facility to date. The bakery is expected to be operational in the second half of 2023 and will reportedly unlock 20% additional capacity within the Hostess Brand network. (Snack Food & Wholesale Bakery will provide an update on this new bakery once it opens in 2023.)
“We’re really excited about the Arkadelphia bakery,” says Callahan. “It’s going to be our fifth bakery in our network, and we’re able to design it from a sustainably responsibility path. We bought a brownfield site, which means we had an existing infrastructure in place that we’re able to then customize for the specific needs of our baking operation, so it reduces capital expenditures.”
“We put all of our capital expenditures through a filter to learn how it will impact the employee experience and the impact on the environment. The Arkadelphia project is going through that same process on a large scale, and our design-build partners are helping us look at each decision and filtering it through a ‘choice model’ that indicates its impact.”
Mathematical choice modeling can help companies predict outcomes, including economic and environmental, of potential business decisions.
“That will have the most-positive impact in our sustainability journey,” says Callahan. Predictive choice modeling can help bakeries manage water usage, or the decision to use of electricity vs. gas for the ovens. It can also factor into the facility layout design—and the eventual quality of the work experience for team members. “When consider your teammates at the beginning, good things will happen for a company,” he says. “It’s an exciting and motivating experience for our team.”
Workforce improvements
Hostess Brands has implemented several new programs designed to attract, develop, and retain a quality workforce, including “thank you” bonuses for its front-line bakery and distribution center employees, roundtable employee discussions, and the introduction of diversity, equity, inclusion, and belonging programs.
In August, in the wake of announcing its strong growth to date in fiscal 2022, Hostess Brands awarded bonuses to each of its nearly 2,000 bakery and warehouse employees up to $1,000 in recognition of their hard work and dedication over the past several months. This is the second “thank you” bonus Hostess Brands has given to its frontline employees in 2022.
Since 2019, Hostess has also maintained significantly lower safety incident rates compared to industry averages, a testament to its strong training programs.
Courtesy of Hostess Brands
Then COVID-19 presented a range of unprecedented challenges. “I remember shutting down a bakery early in the pandemic because we had some cases,” says Callahan. “It just wasn’t worth the risk to the employees.” This sensitive time dictated increased employee engagement. “We listened more to our employees, and we took concrete actions to improve the experience for them in a really difficult environment. We had demand go up, and we had overtime go up for some employees, which was good, because they’re providing for their families. We’ve given several bonuses to the team. They continued to be able to get the satisfaction of serving a community that really needed it.”
Hostess is also looking at production schedules and testing new models, including flexible work schedules, in one of the bakeries to see if the company and build more stability into the workforce. The company has recently increased its supervisor training and is onboarding of all of its teams with mentors.
Callahan also notes that Hostess Brands understands the value of a diverse workforce. “We want to be representative of our communities.” While this diversity includes ethnic and gender diversity, it also takes special considerations into account. “Forbes named us as one of the top employers for veterans in 2021,” he says. “Forbes also named us as one of the best midsize companies to work for in 2022. A lot of this is all about putting employees first. But there is always more we can do.”
Courtesy of Hostess Brands
Callahan notes Hostess Brands has world-class safety scores within its employee base. “I’m very proud of the safety progress,” he says. “Our total recordable incident rate is less than half of the industry average, and goes down every year.”
Operating a bakery business is a lesson in risk management. “My post-college career in flight school in the Navy taught about the balance of taking risk and being safe,” says Callahan. “One of the keys I learned in the Navy is there’s no such thing as a small violation of a safety incident because small violations add to one another, and it’s usually a chain of events that are broken that create a safety problem. And there’s nothing more sacred than keeping your team safe.”
One best practice Callahan learned in the Navy is to read the safety record before walking onto a plane—read what happened on the plane. “That’s what we do every morning at the bakeries. If something happened on a piece of equipment, we learn if it was a close call, if there was a violation, how we communicated, how we informed it,” he says. “It doesn’t matter how small, because big incidents can happen from small issues. So it starts with making safety a priority—keeping your team first, sharing best practices, and making sure there’s no such thing as a little safety violation. And it shows in our numbers.” SF&WB
