Dive Brief:
- Hostess Brands is selling Superior Cake Products to Sara Lee Frozen Bakery for $65 million,the companies said in a statement.
- The divestiture comes just three years afterHostess acquired the in-store bakery company以5100万美元——它reentere以来的第一笔交易d the market under new ownersfollowing its second bankruptcy in 2012.
- The maker ofTwinkies, Ding Dongs and Ho Hosexpects to use the cash from the transaction to reinvest in its business and pursue other strategic acquisitions.
Dive Insight:
After returning to the market in 2013 under new owners Apollo Global Management and Metropoulos & Co., Hostess focused on innovation and expansion beyond its Twinkies and Ho Hos snack staples. Recognizing even health-conscious consumers still looked to the company for indulgent treats, it acquiredin-store bakery company Superior Cake—a maker of premium eclairs, madeleines, brownies, cookies and handheld pies.
At the time, former Hostess CEO Bill Tolercalled the acquisition an opportunityto capitalize on the growing trend of “upward indulgence” in baked goods. The company seemed poised to grow through innovation and further acquisitions in the sweets space.
Despite growing Superior’s net revenue 30% in three years andHostess acknowledgingit as a “high performing business,” the sweets maker is shoring up its focus. Historically, Hostess has succeeded in developing creative new variations on its mainstay, center-of-the-store brands, so it may have found it difficult to make a move tothe premium and fast-growing in-store bakery channels.
In a statement,Andy Callahan, CEO of Hostess, said the company will "focus our future investments on areas of our business that better leverage our core competencies and pillars for growth."
After spending $51 million to buy Superior, Hostess is turning a nice profit with the sale to Sara Lee. It could be handy capital for Hostess to use in its core business rather than keep spending money to invest in a larger bakery sector that may be a distraction to its underlying core business model.
Earlier this year,Hostessbid $1.5 billionon Kellogg’s Keebler, Famous Amos and fruit snack businesses. Thebrands were ultimately sold to Ferrero. Even though it lost out on the purchase, the brands seemed to be more in line with what Hostess currently has in its portfolio and could hint at where the company might look for future deals.
Sara Lee has embraced a similar approach to Hostess in purchasing Superior to advance its "goal of expanding our presence in the high-growth in-store bakery category,"Craig Bahner, the company's CEO, said in a statement.Sara Lee was acquired from Tyson Foodsby private equity firm Kohlberg & Company last year.
With Tyson’s main portfolio focused on protein, moving itsfrozen bakery business — including Sara Lee, Van’s, Chef Pierre and Bistro Collection brands —into a standalone companymade sense.Kolhberg was tasked with reinvigorating the brand. For Sara Lee, the addition of Superior gives it a new product that seems to be a better fit for the offerings it currently has, but it will need to tread carefully as it makes further inroads into thein-store bakery channel.
