The J.M. Smucker Co. is set to acquire Hostess Brands, the maker of sweet snacks including Twinkies, Ding Dongs, and Ho Hos.
The move is likely intended to bolster Smucker's standing in the rapidly expanding snacks market and provide consumers with greater availability of its product range.
The number 77 top 100 consumer goods company announced its intention to purchase Hostess in a cash-and-stock transaction, which also involves taking on approximately $900 million in debt. The acquisition is expected to be finalized during the third quarter of Smucker's ongoing fiscal year, which concludes on April 30th.
“J.M. Smucker Company’s recent acquisition of Hostess Brands extends their reach and influence in an increasingly competitive snack and bakery category and hits their strategic initiative of transforming their portfolio by extending their reach into the c-store channel,” Geoff Coltman, VP of Catena Solutions, told CGT.
Hostess was founded in 1925 and has weathered uncertainty since the millennium, filing for bankruptcy twice in 2004 and 2012. The second time, in 2012, the company sold off a number of different business segments: Wonder was acquired by Flowers Foods, while McKee Foods, known for its Little Debbie snack cakes, took over control of Drake's Cake, which includes products like Devil Dogs and Yodels in its roster.
For Smucker’s part, the consumer goods giant has been expanding into different categories for some time now. In 2008, Smucker made strides into the coffee market with its purchase of the Folgers coffee business from P&G. In 2011, the company also purchased coffee maker Cafe Bustelo.
Back in 2015, Smucker entered into the pet-food business with its acquisition of Milk-Bone dog treats and Meow Mix cat food manufacturer, Big Heart Pet Brands. In 2018, the company bolstered this interest, striking a $1.7 billion deal to buy Ainsworth Pet Nutrition.
Tapping an Increasing Appetite for Snacks
The deal is likely intended to strengthen Smuckers’ position in the fast-growing snacks market, which accelerated during the pandemic and has only continued to grow.
Changing habits and tastes are driving this shift, with consumers increasingly picking up smaller, on-the-go options. In fact, a recent survey from food and confectionary brand Mondelez shows 55% of adults reporting a higher likelihood to eat a snack across all three standard mealtimes.
Smucker’s CEO and chair, Mark Smucker, emphasized this element of ease and increased access, saying the addition of Hostess would bring an enhanced ability to “deliver brands consumers love and convenient solutions they desire,” while “leveraging the attributes Hostess offers, including its strong convenience store distribution and leading innovation pipeline, combined with our strong commercial organization and consistent retail execution across channels to drive continued growth.”
Hostess Brands’ CEO Andy Callahan said that the deal would “accelerate growth and create meaningful value for consumers, customers, and shareholders,” adding that the two companies shared similar go-to-market strategies, core business principles, and operations.
In an interview with The Associated Press earlier this year, Callahan talked about the importance of product innovation and keeping pace with changing consumer tastes: “Leveraging the good of [the] business, making it relevant to new consumers while not disenfranchising the old, is the art of what makes the consumer packaged goods market so challenging on one side but so exciting on the other. You can’t leave one for the other.”