Will Twinkies be shelved or live to see another day?
BY FRANCINE KNOWLES Business Reporterfirstname.lastname@example.org November 16, 2012 7:56PM
Shelves were empty by early afternoon at the Hostess Bakery Thrift Shop in Elgin on Friday. | John Konstantaras~For Sun-Times Media
Updated: December 19, 2012 1:43PM
Will there be a savior for Twinkies, Wonder bread and other Hostess Brands?
Given the power of the brands, industry experts expect buyers to emerge in the wake of the company’s announcement Friday that it is going out of business and that it has asked a bankruptcy judge for permission to sell its assets.
“This is an iconic American brand, and the snacks category is one of the fastest-growing areas in the packaged foods space,” said Morningstar Inc. senior equity analyst Erin Lash. “A lot of companies have been looking to build out their snacks business.”
Among players that could have a taste for Hostess, the No. 2 player in the fresh bakery and snack cake business, are the No. 1 player, Grupo Bimbo; the No. 3 player, Flowers Foods; as well as Kellogg Co. and Campbell Soup Co., analysts and retail food consultants said.
Hostess Brands include Hostess, Drakes and Dolly Madison, which make Twinkies, CupCakes, Ding Dongs, Ho Ho’s, Sno Balls and Donettes. Besides Wonder, bread brands include Nature’s Pride, Home Pride and Butternut, among others.
The company’s operations include 33 bakeries, 565 distribution centers, 570 bakery outlet stores and approximately 5,500 delivery routes.
Georgia-based Flowers Foods, with 2011 sales of $2.8 billion, operates 44 bakeries that produce breads, buns, rolls, snack cakes and pastries, and “would be very interested in acquiring a number of Hostess assets,” contends BMO Capital Markets food and beverage industry analyst Amit Sharma. “Those could be either the bakery plants or the brands themselves because the brands are really powerful and that gives them access to markets, to customers where they may not have a current footprint.
“Brands are important in this bakery industry. The plants, if you can get a plant for cheap, you don’t have to invest behind building that plant, and it gives you production capacity either to expand or to shut down and increase capacity utilization in your plants. Both make sense, buying just the plants or buying the brands or buying both.”
Flowers Foods’ brands include Nature’s Own, Tastykake, Whitewheat and Cobblestone Mill, among others.
The company would not say whether it’s interested in pursuing any of Hostess Brands’ assets. But Flowers Foods has completed 13 acquisitions in the past decade.
Potential buyer Mexico-based Grupo Bimbo is one of the world’s largest bakeries. It has 153 plants and more than 1,000 distribution centers in 19 countries. Last year, it acquired Sara Lee’s Fresh Bakery business, which gave it the Sara Lee and Ball Park brands among others.
Kellogg, which recently acquired the Pringles brand — now its second largest brand — could be interested in Hostess assets, according to Lash.
“They’re still working to digest [Pringles] and to leverage that business, so it remains unclear whether they would want to bite off the Hostess brand as well,” she said.