LENEXA, KAN. — Hostess Brands, Inc. has prioritized five of the fastest-growing consumer snacking occasions, part of a plan designed to provide meaningful and sustainable upside potential for future growth.
The five segments — morning sweet start, lunchbox, afternoon reward, immediate consumption and afternoon sharing — account for more than $50 billion in sales and are growing at a compound annual growth rate of 5.6% over the past three years, said Andrew P. Callahan, president and chief executive officer of Hostess, in a March 1 Investor Day presentation.
The five segments were identified as part of Hostess’ research that found 18 unique consumer occasions.
The first segment, morning sweet start, was described by Daniel J. O’Leary, chief growth officer, as “a modern way to look at breakfast, taking into account that consumers snack their way through the morning.”
“As the day has gotten longer, we see consumers increasingly adding a mid-morning snack, or if they’re like me, two snacks to give them the energy to start their day,” Mr. O’Leary said.
Hostess said the morning sweet start segment has annual sales of $5.8 billion, of which $1.1 billion is sweet baked goods, and three-year CAGR of 5.5%. Top snacks in this segment include refrigerated pastries, breakfast cookies, donuts, Danish, muffins and scones.
“Meeting our consumers’ needs in this occasion will unlock a larger source of volume for our morning snacking growth,” Mr. O’Leary said.
The lunchbox segment, meanwhile, has annual sales of $6.2 billion and three-year CAGR of 5.5%, Hostess said.
“Lunchbox includes both adult and kid lunch and captures the midday snacks at both a company lunch on the go and sometimes replace it completely,” Mr. O’Leary said.
The third segment, afternoon reward, is an occasion when consumers are looking for “something sweet and tasty to either keep them focused through the afternoon or give themselves a rewarding break,” Mr. O’Leary said.
The afternoon reward segment has annual sales of $13.6 billion and three-year CAGR of 5.9%, Hostess said.
Immediate consumption takes place all day when consumers are on the go, Mr. 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 immediate consumption segment has annual sales of $8.4 billion and three-year CAGR of 4.7%, Hostess said.
The fifth and largest targeted snacking occasion identified by Hostess is afternoon sharing. The afternoon sharing segment generates $19.3 billion in sales and 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 coworkers,” Mr. O’Leary said. “This occasion is one of the largest we identified and is an incremental opportunity for Hostess Brands.”
Mr. O’Leary said Hostess Crispy Minis were designed specifically to meet the afternoon sharing occasion’s needs.
“We found that it was as much as 40% incremental to the Hostess business and up to 20% incremental to the category as a result, meaning not only has this innovation brought incremental growth to Hostess through a consumer insight, it also brought growth to our category and retailers,” he said.
“Taken together, we believe these five occasions provide huge upside potential for our future growth,” Mr. O’Leary said.