Apr 10, 2024 - Economy

Smucker weighing new product "mashups" after Hostess acquisition

Photo illustration of Dan O'Leary next to a swirl shape resembling the icing on Hostess Cupcakes.

Photo illustration: Annelise Capossela/Axios. Photo courtesy of J.M. Smucker Co.

J.M Smucker's $5.6 billion acquisition of Hostess closed in November, setting up the peanut-butter-and-jelly food giant to diversify its business into the snacking category.

Why it matters: Hostess — which makes Twinkies, Ho Hos, Ding Dongs, Zingers and other treats — operates in a space where Jif maker Smucker has historically not had much of a presence.

The big picture: Smucker plans to invest heavily in digital advertising, distribution and new products, says Dan O'Leary, Hostess' former chief growth officer who now oversees Smucker's sweet baked snacks and pet products businesses.

  • Smucker's smash-hit Uncrustables brand, for example, could be paired with Hostess for new product innovation, he tells Axios.

The following interview has been condensed and lightly edited for clarity:

Nathan: My dad is a Twinkies fan. So, are Twinkies going to change?

O'Leary: No. We have generations of consumers who love these products. We will always innovate. We always find new twists on them.

Why did it made sense to bring these two companies together?

If you look at what's driven growth in the market over the last 20 years, it's been snacking. Consumers today eat fundamentally different than they did 20 years ago. It's more frequent, small eating occasions, eating throughout the day.

The idea of an impulse buy has changed a lot because now we're seeing more delivery, whether it's through an Amazon order or an Instacart order. How does that affect the way you approach the business?

We have to change our marketing mix as consumers change how they shop. It's making sure we've got the right offerings. Now, through Smucker, we have access to (more) channels and can continue to grow the distribution footprint.

When you pair together a company like Smucker and a company like Hostess, it brings up the possibility of very interesting new product combinations. You've got Jif sitting there, for example. Will we see some of that?

Yeah, that is something we are working on now. There are places that you could do some mashups. I think there's a lot of exciting potential.

With all this conversation about weight loss drugs and the impact that could make on snacking, have you been able to assess how it might actually play out for you?

We're not seeing a material effect on sales to date. That being said, we're going to make sure that we're always meeting the needs of our consumer.

When it comes to inflation, how hard have you been hit and how have you reacted? Have you shrunk the size of some of your products?

As costs started to go up, we first of all looked at productivity initiatives. And then from there, we've done more on the pricing side.

Who do you see as your top competitors?

Consumers like to have a lot of variety in terms of what they snack on. And so I don't really think that there's one competitor.

So in other words, you don't sit there with a little Hershey voodoo doll.

No, we think big and we think broad.

It does seem — culturally, at least — that we've had a shift toward at least the perception of eating healthier. Whether or not people are actually eating healthier is a whole different discussion. How does that affect you?

We've spent a lot of time thinking about this. There's the better-for-you products and there's more indulgent products. The indulgent products have actually grown faster over the last three years than the BFY space.

Do you think work-from-home has helped you because people have more access to be able to just grab stuff, or hurt you because people are less likely to be stopping at a store on the way to work?

I think work-from-home has actually been a neutral factor for us. I think the bigger factor is just the fact that consumers are snacking more and they're doing it regardless of location.

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