On November 20, Hostess announced that mediation with its bakers union had failed and that the 82-year-old company would proceed with liquidation plans. The good news is that the company’s iconic brands, such as Twinkies and HoHos, may not be gone for good. There may be multiple buyers of the individual product brands under the Hostess umbrella or there may be a single buyer who acquires them all. But rest assured, they will be sold because they have real market value. Estimates are that the combined sale of Hostess could be worth over $2 billion.
Obviously, we’re been seeing a lot of interest from many different sectors; currently, there are more than 100 potential bidders. Among them are Grupo Bimbo (the largest baking conglomerate in the world), Thomasville, Flowers Foods, and Metropoulos & Co. (a private equity group specializing in food investment). But in my mind, the smartest play would be for a big retailer to step in and scoop up the entire Hostess basket of brands. There are numerous and powerful benefits that would accrue specifically to a retailer, rather than a baker or investor.
Having the exclusive rights to the Hostess brand and sub-brands would be an enormous overall boost to retail store traffic. We know that a large number of consumers would still be actively purchasing these products. By offering Hostess brands as a lure, a retailer would dramatically increase its profile as a destination for these loyal Hostess fans, thus exposing its overall inventory to millions of new customers.
In my opinion, a company like Kroger is the ideal candidate to acquire Hostess. Not only is it one of the biggest retailers in the world, it is the largest grocery store chain in the United States. In addition, Kroger owns about 10 bakery companies. If Kroger acquired Hostess, it would be able to market Hostess products across its multi-brand grocery chain empire. Hostess could become Kroger’s “store brand” for baked goods, creating enormous point-of-difference.
Also, the production of the new Hostess product offerings would be absorbed into its own vertically integrated baking operations. This would not only allow Kroger to produce Twinkies, Ding Dongs, etc., at a controlled unit cost, it would give the grocer substantial savings in operational costs across its bakery holdings due to enhanced economies of scale from increased output.
That, to me, would be the best end result for the retailer, Hostess brands, and consumers. What are your thoughts? Is there another key player that would be better suited to purchase Hostess brands?
CEO of Global Icons