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Hostess Brands Inc Class A TWNK

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COVID-19-Related Growth Led to Soaring U.S. Packaged Food Valuations; We Still See Pockets of Value

Erin Lash, CFA Sector Director

Analyst Note

| Erin Lash, CFA |

While growth abounded for domestic food manufacturers as consumers rushed to stock up on essential wares as COVID-19 took hold, it hasn’t been a pure panacea for this intensely competitive space. And we think the future trajectory hinges on which of the trends that took center stage the past few years will hold. In this context, while we concede many consumers honed their cooking skills while sheltering at home, as busy schedules resume, we think food consumption will revert such that a greater portion of budgets are expended outside of the home, in line with prepandemic levels. Further, although grocers simplified shelf assortments to maximize productivity during the peak in demand, we think variety will return as supply chains normalize.

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Company Profile

Business Description

Hostess Brands is the second- largest U.S. provider of sweet baked goods under the Hostess, Voortman, and Dolly Madison group of brands, including Twinkies, Cupcakes, Ding Dongs, Ho Hos, Donettes, and Zingers. In 2018, Hostess expanded its breakfast offerings with the purchase of Aryzta's breakfast assets (the Cloverhill business), including a branded business and private-label deals, and in 2020 entered the cookie category via the Voortman tie-up. Although its roots stem from the 1919 launch of the Hostess Cupcake, the company filed for bankruptcy in 2012. Investors purchased the brands and restarted production in 2013, followed by a 2016 initial public offering. Most products are sold in the U.S., although third parties distribute some product to Mexico, the United Kingdom, and Canada.

7905 Quivira Road
Lenexa, KS, 66215
T +1 816 701-4600
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Speculative Growth
Employees 3,000