Twinkie on its way back as rivals see sales surge

Chicago TribuneFebruary 2, 2013 

Fret not, Twinkie lovers. The snack cake could be back on store shelves by summer.

Two private equity firms agreed this week to pay $410 million for the iconic brand and its sugary brethren, including CupCakes and Ho Hos, along with five of Hostess Brands’ U.S. bakeries. The deal is subject to approval by a bankruptcy court judge and could be topped by sweeter bids.

If all goes well, it could be completed by the end of April, officials said.

The news might not be as welcome to the independent bakers and snack cake rivals that experienced a pop in sales in the two months since Hostess shut down after a bitter contract dispute with the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union. Before it closed in November, Hostess accounted for 26 percent of the $2.7 billion in U.S. bakery snack sales, according to market research firm SymphonyIRI Group.

Retailers have filled former Hostess shelf space with rival goodies — some name brand, some private label — they say were in development or on the market long before the company closed its doors. Compared with the Twinkie’s per-cake price of about 68 cents, they’re 5 percent to 50 percent cheaper.

Walgreen Inc. spokesman Jim Graham said it was kismet that its Nice! Sponge Cake and Cupcakes hit shelves the same month Twinkies disappeared. Safeway Inc. introduced its Snack Artist brand Creme Cake three months before Twinkies’ demise. Neither company would offer specific sales data.

Mike Gloekler of McKee Foods Corp., which makes Little Debbie snacks, said the Collegedale, Tenn.-based company has “clearly seen a spike” in sales of all products that resemble Hostess treats since Hostess Brands halted production.

Little Debbie introduced Cloud Cakes two years ago, re-creating the product with its own recipe after previously buying it from another baker. Gloekler said the company, which is the lead bidder to buy Hostess’ Drake’s cakes, is pleased with sales of all its competing products. The reincarnation of Twinkies under another owner won’t change that.

“We have said from the beginning … we maintain our own long-term strategy,” he said.

Analysts are divided on whether competitors’ recent gains will continue if the Twinkie comes back.

“Given the sales success that Twinkie enjoyed and the hyped-up demand lately, it looks like a great opportunity for retailers to seize the market,” said Todd Hale, senior vice president of consumer and shopper insights at Nielsen Co. “While there may be a lot of negative issues out there associated with packaged snacks, we as consumers still have a sweet tooth.”

Despite the number of competitors, there will likely never be a store-brand challenger that can recapture or rival the popularity of the Twinkie, said Neil Stern, a retail consultant at McMillanDoolittle.

“Once we get past this nostalgic bump, the business issues will remain,” he said. Those include a preference for healthier foods in lunchboxes and an explosion in the number of packaged and fresh snack options fighting for the same share of consumers’ wallets. And then there’s possibly the most basic reason — taste.

“It’s a pretty unique product that’s difficult to knock off,” he said. “No one’s ever made an Oreo (competitor) that tastes exactly like an Oreo.”

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