LENEXA, KAN. — Hostess Brands, Inc. has prioritized five of the fastest growing consumer snacking opportunities, as part of a plan designed to provide significant and sustainable growth potential for future growth.
The five segments – Morning Sweet Start, Lunch Box, Afternoon Reward, Immediate Drink and Afternoon Share – account for over $50 billion in sales and are growing at a compound annual growth rate 5.6% over the past three years, said Andrew P. Callahan. , President and CEO of Hostess, during a presentation at Investor Day on March 1.
The five segments were identified through Hostess’ research which found 18 unique consumer occasions.
The first segment, Morning Sweet Start, was described by Chief Growth Officer Daniel J. O’Leary as “a modern way of looking at breakfast, taking into account that consumers snack throughout the morning”.
“As the day gets longer, we’re seeing consumers increasingly add a mid-morning snack, or if they’re like me, two snacks to give them the energy to start their day,” said said Mr. O’Leary.
Hostess said the sweet morning starts segment has annual sales of $5.8 billion, including $1.1 billion of sweet baked goods, and a three-year CAGR of 5.5%. The main snacks in this segment include refrigerated pastries, breakfast cookies, donuts, danishes, muffins and scones.
“Meeting the needs of our consumers at this time will unlock a greater source of volume for growth in our morning snacks,” said O’Leary.
The lunch box segment, meanwhile, has annual sales of $6.2 billion and a three-year CAGR of 5.5%, Hostess said.
“Lunchbox includes both adult and children’s lunch and captures midday snacks during a corporate lunch on the go and sometimes replaces it completely,” Mr. O’Leary said.
The third segment, the Afternoon Reward, is an occasion where consumers are looking for “something sweet and savory to keep them focused through the afternoon or to treat themselves to a rewarding break” , said Mr. O’Leary.
The afternoon rewards segment has annual sales of $13.6 billion and a three-year CAGR of 5.9%, Hostess said.
Immediate consumption occurs throughout the day when consumers are on the go, O’Leary said, adding that snacks for this segment are purchased at convenience stores, vending machines and other outlets when consumers are in a hurry. The consumer-consumer segment has annual sales of $8.4 billion and a three-year CAGR of 4.7%, Hostess said.
The fifth and greatest targeted snack occasion identified by Hostess is the afternoon sharing. The afternoon sharing segment generates $19.3 billion in sales and a three-year CAGR of 5.9%, Hostess said.
“Afternoon Sharing is unique because it’s an occasion that involves other snackers, whether they’re family, friends or co-workers,” O’Leary said. “This opportunity is one of the most significant we have identified and is an additional opportunity for hostess brands.”
Mr. O’Leary said the Hostess Crispy Minis were specifically designed to meet the needs of the afternoon sharing occasion.
“We saw that this was an increase of up to 40% for the hostess business and up to 20% for the category, which means that not only has this innovation brought additional growth to Hostess through consumer insight, but it has also brought growth to our category and our retailers,” he said.
“Taken together, we believe these five opportunities offer tremendous upside potential for our future growth,” Mr. O’Leary said.