Dive Brief:
- Hostess Brands' second quarter sales for fiscal 2017 fell short of industry expectations, earning $28.2 million compared to $21.9 million in the year-ago period,according to a company release. Company shares fell 3% late Tuesday night after earnings were released.
- The maker of Twinkies saw revenue rise 5.6% to $203.2 million compared to $192.3 million in the year-ago period, driven by new product offerings such as Chocolate Cake Twinkies and White Fudge Ding Dongs.
- Hostess president and CEO Bill Toler said in the release that growing traction in opportunities in in-store bakery, food service and international distribution also helped the latest results. "We are on-track to achieve our annual revenue and adjusted EBITDA outlook and remain focused on the execution of our three growth drivers: to further rebuild our core business, deliver compelling product innovation and line extensions, and pursue significant white space opportunities," he said.
Dive Insight:
Hostess' Q2 earnings weren't as sweet as the company had hoped, but its investment in indulgent new product innovations continue to drive sales growth. Rather than roll out completely new products, Hostess has been wise enough to leverage its biggest asset: its iconic brands. By launching new versions of beloved Twinkies, CupCakes and Ding Dongs, Hostess is simultaneously tapping into consumer love for nostalgia and desire for variety.
This trend has become prevalent in the snacks and confections space, but Hostess continues to keep a step ahead of its competition, expanding into the frozen aisle withDeep Fried Twinkiesandthe hot dispensed beverage segmentby teaming with Kerry Convenience. The baker has also partnered with Nestle to launcha line of collaborative ice cream productslike Twinkies, CupCakes and Sno Balls.
Through these innovations, Hostess has stretched its brand footprint across the grocery store, cementing its ubiquity. According to Nielsen,Hostess is the second leading brand by market sharein the sweet baked goods category, holding 17.5% of the market for the second quarter of 2017. It is also the leader in both the donut and snack cake segment.
Hostess said that its Q2 results were largely in line with its expectations, and affirms its annual guidance of $781 million in sales and $235 in adjusted EBITDA for fiscal 2017. Inthe company earnings call, Toler attributedthe segment's 1.6% slipto reduced c-store trips and general weakness across many grocery categories. Still, he and the company are optimistic about Hostess' future performance.
"The lifeblood of any growing business is innovation and it's been central to our share and volume growth. Our pipeline for later this year and into 2018 is robust and includes new offerings to help elevate the category, further expand us into white space segments in Sweet Baked Goods, and add key renovations to existing items,"Toler said.
