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March 8, 2022

Hostess Brands to set up new bakery amid share gains

The US baker said the new factory would support production of its Donettes snacks.

By Dean Best

Hostess Brands, the US bakery major, is to add a factory to its production network amid confidence the company’s recent growth can continue.

The company said the currently “idled” plant in Arkadelphia in Arkansas is expected to be up and running in the second half of next year.

“We’ve been profitably gaining market share across the snacking categories in which we compete,” Andy Callahan, Hostess Brands’ president and CEO, said. “The addition of this new bakery signals our confidence that we expect the growth we have demonstrated over the last several years to continue.”

In 2021, Hostess Brands generated net revenue of US$1.14bn, up more than 12% on a year earlier, helped by higher prices but also improved volumes.

The Twinkies maker’s operating income stood at just shy of $200.7m – versus $135.3m in 2020 – and its net income reached $119.3m, against $104.7m the year before.

In the fourth quarter of 2021, Hostess Brands said its share of the “sweet baked goods” category in the US rose 218 basis points to 21.5%. The company also pointed to a rise in the manufacturer point-of-sale of its Voortman-branded biscuits, which it said grew at “more than two times faster than the overall cookie category”.

The new factory will increase Hostess Brands’ production capacity for its Donettes snacks and wider cake range by around 20%. Hostess Brands said the site can “accommodate production growth in the future”.

In 2022, the group is forecasting a 5-8% rise in “adjusted” net revenues. It also estimates its adjusted EBITDA could reach $280-290m, which would equate to an increase of 4-8% on 2021.

“Our strong 2022 financial guidance reflects our confidence in maintaining our ongoing profitable growth momentum,” Callahan said last week as Hostess Brands reported its 2021 results and its forecasts for 2022.

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