Analyst Note| Rebecca Scheuneman, CFA |
We continue to be impressed with Hostess’ ability to realize robust organic sales growth, particularly for a 100-year-old brand. In its 2021 second-quarter, Hostess realized 10.8% organic year-over-year sales growth, or 14.5% growth versus the second quarter of 2019. Increased mobility drove a sharp 19.4% recovery in single-serve formats popular at convenience stores, while sales of multipacks (generally consumed at home) remained strong, chalking up 5.4% growth. We see several catalysts that should drive 3% annual sales growth over the long term, such as Hostess’ continued push into the breakfast category, expanded distribution of the recently acquired Voortman cookie brand, and the development of new platforms to tap into additional usage occasions. As an example of the latter, after engaging in data-driven research to better understand what drives sweet treat usage, Hostess launched Crispy Minis, a bite-size snack in convenient to-go pouches with a satisfying crunch, an item that has been very popular with millennials.