The Wonder of It All

An oft-overshadowed aisle sees more action than it has in a long while.

If nothing else, the recent, widely publicized financial travails of Hostess Brands LLC, which ended up selling off many of its famous product lines, taught consumers to appreciate their favorite commercial baked treat. To be sure, there were always Twinkies fanatics, but the threatened loss of the iconic snack cake seemed to spark a veritable feeding frenzy.

Luckily, Twinkies are still with us. In fact, Hostess was even able to turn the situation to its advantage, touting the product line’s triumphant mid-July return to store shelves as “the Sweetest Comeback in the History of Ever.” The memorable tagline was part of a multimillion-dollar integrated marketing, advertising and public relations campaign that took advantage of “a once-in-a-lifetime opportunity to leverage the nostalgic sentiment [of the product] and, at the same time, reintroduce the Hostess brand with a bolder attitude and a more contemporary voice,” noted Daren Metropoulos, principal of Metropoulos & Co., which, along with fellow investment firm Apollo Global Management LLC, bought select Hostess assets out of bankruptcy, along with five bakeries and certain equipment, for $410 million in March.

Wal-Mart Stores Inc. was even able to get in on the action a whole day ahead of the official July 15 return date, with all of the Bentonville, Ark.-based mega-retailer’s domestic U.S. stores fully stocked by 12:01 a.m. Sunday, July 14 (locations in Alaska and Hawaii got theirs a few weeks later). Thus, consumers unable to wait another 24 hours could pick up the first-run batch of Twinkies with collectible packaging exclusively at Walmart.

Other grocers shared the enthusiasm, too. “Food Lion was one of the first retailers to deliver the products to our customers, and they responded positively,” says Benny Smith, spokesman for the Salisbury, N.C.-based grocery chain, a division of Delhaize America. The grocer even tweeted about the occasion in its Food Lion News Twitter feed.

All told, about 100 million SKUs – CupCakes, Donettes, Zingers, HoHos, DingDongs, fruit pies and mini muffins, in addition Twinkies — hit store shelves over the first two weeks of the comeback, with SnoBalls and SuzyQs set to follow in the next few months. Due to overwhelming demand, Hostess had five times more Twinkies on the market during the first two weeks of the comeback than during the same two-week period last year. Retail customers representing more than 100,000 stores placed significant orders before the comeback, with requests for product spiking as news of the official return date was revealed.

“We are committed to investing in this company, reinvigorating these beloved brands, innovating to meet evolving consumer preferences with new products and continuing to bake the high-quality, fresh and delicious snack cakes that have given Hostess its enduring appeal,” Dean Metropoulos, CEO of Kansas City, Mo.-based Hostess Brands, noted in July. “Judging by the incredible reception we’ve received, Hostess has a very exciting future.”

And what of other Hostess product lines? While Grupo Bimbo, McKee Foods and United States Bakery each snapped up smaller pieces of the company, Thomasville, Ga.-based Flowers Foods, owner of the Nature’s Own and Tastykake brands, acquired 20 bakeries; the Wonder, Merita, Home Pride, Butternut and Nature’s Pride brands; and 36 depots for $355 million.

“These assets fit very well with our strategy to grow our fresh baked foods through market expansion and acquisitions,” Flowers President and CEO Allen L. Shiver said when the deal closed in late July. “Consumers across much of the country can expect to see these well-known and -loved bread brands returning to store shelves over time.”

Over the past decade, Flowers, the second-largest baker in the United States, has more than doubled the reach of its bread and baked goods brands, from 38 percent of the U.S. population in 2003 to 77 percent of the population currently.

Focus on Price

Aside from all of the Hostess drama, retailers are striving to bring excitement to the commercial bread and baked goods aisle. “A number of factors seem to be impacting the category: the decline in ‘sandwich occasions’ as a lunchtime staple, an increase in bread options across the store and an increase in other substitutable offerings available across the store,” says Daniel Donovan, spokesman for Pittsburgh-based Giant Eagle. “As such, the bread category is down in dollars and units nationally, as well as in our markets.” He does note, however, that “premium bread offerings are trending better than mainstream white and wheat breads.”

One key to getting shoppers to buy commercial bread and baked goods is pricing.

“Our customers are looking for great values in bread products and continue to search for our lowest prices on high-quality offerings,” affirms Food Lion’s Smith, who notes “syndicated data shows that we continue to outpace our competitors in many key bread segments. We attribute this to our focus on offering customers the products they want most at a lower price.”

As part of its value proposition, the chain offers various store-brand bread products under the My Essentials label “as an option for our customers to receive quality bread products at lower prices,” says Smith. “Our store-brand bread and buns are very popular among our customers.”

Giant Eagle, meanwhile, carries “a full line of own brand products, which perform well in the category, outpacing the branded bread performance,” notes Donovan. “Within the own brand assortment, there are value-positioned items as well as national/regional brand-equivalent items, which are also a consumer value based on like ingredients and favorable pricing compared to the brands.”

Additionally, Food Lion offers a wide variety of weekly promotions to meet customers’ needs. “We promote our bread segments (sandwich bread, hot dog buns, breakfast, etc.) weekly to ensure all shopping occasions are represented,” observes Smith, who adds: “We have seen good success with our promotions, especially when they are linked to new bread-type items. Additionally, we launched a new online flyer format this summer, which has created greater ease of savings for our customers.” By contrast, Donovan concedes, “Increased promotional activity has not offset the decline” in Giant Eagle’s commercial bread sales.

When it comes to emerging consumer trends, “Food Lion is starting to experience good results in specialty-type breads, such as wraps and flats, as consumers become more health-conscious,” says Smith. “At Food Lion, we believe a healthy shopping experience should still be affordable. We will continue to make these type of offerings available to customers at low prices to meet their needs.”

Another rising consumer interest is in gluten-free products. “We have experienced an increase in demand for gluten-free bread offerings as they become more readily available in the market,” he notes. “However, this category still does not outperform our traditional offerings.” Donovan characterizes the gluten-free segment at Giant Eagle as “small but … growing at a rapid pace as our customers are requesting and purchasing these items.”

“Premium bread offerings are trending better than mainstream white and wheat breads.”
—Daniel Donovan, Giant Eagle