Getting Twinkies Out of a Jam | Saving Smucker's Hostess Acquisition

We Fixed It, You're Welcome

This episode of 'We Fixed It, You're Welcome' examines the failed acquisition of Hostess by Smuckers, focusing on the decline of Twinkie sal

Key takeaways

• Twinkies' short 65-day shelf life conflicts with Smuckers' long-term pantry product strategy.
• Legacy brands like Hostess require reinvention to meet modern snacking trends without relying solely on nostalgia.

Main topics

• Smuckers' acquisition of Hostess
• Twinkie sales decline and operational challenges

Notable quotes

'Tastes like growth' – Mark Smucker's initial optimism, now contradicted by three years of sales decline.

Conclusion

The episode concludes that Smuckers' acquisition of Hostess failed due to operational misalignment and a

Transcript preview

Speaker 1 (0:00) Welcome to We Fixed It. You're welcome. The show where we take over companies, you come along for the ride, and we try to put them back better than we found them. Speaker 1 (0:12) Welcome back to We Fixed It, you're welcome, with an all-new episode and the kickoff of season four. I can already tell this is going to be our best season yet. We are rested up and ready to take on anything and everything that needs fixing. That includes culture, business, questionable industry trends, and when specific companies need a helping hand to get them out of a tough situation, we're on it. Such is the case today. We're talking about that icon of cuisine, that staple of youth diets, the dessert that passes as a casual snack, the Twinkie. Turns out, things haven't been so golden for Twinkies and parent company hosts since they were acquired by Smuckers only three years ago. If you look at the sales, it's crisis mode in Twinkieland. We're going to try to bring this brand back to what it once was. That's what we're here to fix. That's going to take effort, so I know we'll need some help here. Please say hello to Rebecca Johnson. Rebecca devoted much of her career to Frito-Lay, where she was VP of marketing. Among many things, she launched Baked Lays, so you can already thank her for that. She's worked with Chili's, Maggiano's, Applebee's, and a host of restaurant brands. In addition, she was a senior vice president for the American Heart Association, so she might bring some health consciousness to our conversation too. And now she's leveraging her expertise in new ways. Rebecca, welcome to our show. What did I miss and what are you up to these days? Speaker 2 (1:29) Thank you for that. And I am so excited to be here today talking about things we love to eat. So I am a lifelong marketer and now I'm a board advisor and what I call a CMO whisperer, where I help CMOs bridge the gap between strategy and execution. And also what I love doing decades in the food world and the brand world is taking legacy brands and reimagining them, reinventing them, rejuvenating them, and make them connect with what made them so great to begin with. Speaker 1 (2:04) That's great. Thank you, Rebecca. I love that work too. And we're thrilled to have you here. Twinkies is maybe the ultimate legacy brand. So we got a lot of work to do and you'll see that we always get hungry on our food themed episodes. I could use a sugar spike, but what Hostess needs is a sales spike. So take us into it, Chino. Yeah, Speaker 4 (2:22) so today we're talking about a very sweet deal that turns sour. Smokers 5.6 billion dollar bet on Hostess, the brand behind iconic sweet treats like Twinkies, HoHos, Donettes and Ding Dongs. As you mentioned, Darren, back in 2023. The company called it expansion and a clever way to enter the snack aisle. And at an industry event, Mark Smucker, the CEO of Smuckers, even bit into a Twinkie and said, tastes like growth. But three years later, the numbers tell a completely different story. Smucker's snack division has been in a sales decline for six straight quarters. The company has booked nearly $3 billion in impairment charges. And the iconic Twinkie has become a lesson in what happens when a famous brand doesn't quite fit the system trying to run it. So what went wrong? Well, Twinkies doesn't behave like the well-known shelf-stable pantry smugglers products that we know and love, predominantly sold in grocery stores and big box retailers. In fact, Twinkies has a 65-day shelf life and... 40 % of all Hostess brand sales run through convenience stores. So this week we'll be unpacking where Smoker's strategy went wrong and asking the big question every brand should ask before it buys a legacy icon. Are we buying growth or are we buying a problem? Let's dive into Speaker 3 (3:54) it. Speaker 1 (3:55) The poor Twinkie. Speaker 3 (3:56) I love a Twinkie. So this is making me kind of very, it's making me very sad. But I think one of the things, and I think Rebecca, you and Aaron can talk about this from a brand and marketing perspective, is I do feel like operationally, that's my expertise. They miss the mark, as Chino mentioned, because you're talking about something that has a very short shelf life versus something that has a longer shelf life. But there are examples where bigger companies have been merged together that aren't exactly the same. They're adjacent brands, but the acquisition actually worked. So an example would be Hershey and Dots Pretzels and Skinny Pop, right? They really, Hershey's bought Amplify Skinny Pop in 2017 and Dots Pretzels in 2022. Those are not sweet treats. Those are not chocolatey sweet treats that we're used to from Hershey's. But it was going into a move into the salty snacks. The one thing that they did is they really kept those brands kind of singular in the sense that they didn't force those brands to kind of come into like the candy aisle. They kept them separate and the founders operating instincts invested in these dedicated salty snacks because this is how they were going to grow. And they have grown 103 % in retail sales in those arenas. So I feel like there was a miss on Smucker's side because really, if you think about it. It is a very different idea. And then the thing is, there is that growth opportunity because I'd love to talk about this a little bit. I know, Rebecca, you talked about transformation in marketing and expansion and growth. But what about the fact that for so many of us, we grew up on Hostess. So I love the foil-wrapped ding-dongs. I had Twinkies in my lunchbox, those kinds of things. Now we have kids. What about bringing that nostalgia angle back into it? So instead of saying it tastes like growth, Chino, maybe you say it tastes like home. That's Speaker 2 (6:06) such a great point. Adi is a former CMO that got my hands on a number of legacy brands. The legacy brands have something most new brands would love to have. They've got awareness. They've got shelf space. They've got an infrastructure that works, right? But at the same time, the problem with iconic brands is that they're competing in a changed snacking world. And while the core challenge for legacy brands is balancing their iconic status with today's evolving snacking and lifestyle preferences, right? So a brand cannot live off nostalgia alone. They have to be able to drive growth and innovation with modern consumers meeting their needs. And sometimes the needs of the consumers are diametrically opposed to the operating system. Right. So think about Frito-Lay, a wonderful, I mean, just an amazing company with amazing portfolio brands where Lay's potato chips, those potato chips have a very unique manufacturing process. while Bakelays has a very different manufacturing process. So there had to be a strategic shift and an investment in a baked platform to be able to drive that innovation into the marketplace. And we also had to shift our target audience. It was no longer men. It was women who actually bought Bakelays, took them into their closet, and ate them while no one was watching. All right, so we had to take a total pivot. The organization had to pivot from what its core competencies were, maintain the core, and added more. And that kind of thinking is difficult. It's challenging. But what choice do you have? Right. Well, Speaker 3 (7:52) and I think the consumer, you really brought up a really important component of it, which is the consumer tastes are different now, right? So as a parent, Chino. You're looking at veggie snacks, you know, you're looking at all the good things, low sugar, low trans fat, you know, that is something that our society in general is really trying to get more healthy. So I agree with you, Rebecca, that the nostalgia angle of like a Twinkie where you don't know, I mean. I'm kind of surprised it only has a 65-day shelf life. I kind of thought, you know, I don't know what's in it. Speaker 1 (8:30) I thought it was 65 years. Speaker 3 (8:32) You could put it in a time capsule, I thought. So I think that that is a very big component of it as well. And you really bring up a really good point because operationally, when you think about the shifts, we talked about this with Brad Reese. You know, we talked about Reese's and Hershey's. You know, there's... So much that goes into that and you have to invest in that future and not knowing, right, like whether or not that's going to take is a huge Speaker 2 (9:02) risk, I think, for a lot of these companies. Absolutely. Absolutely. Even in the restaurant world, when they introduce to-go or just delivery, that is a whole different way to deliver the service, the food, than in-restaurant experience. So being able to flex and add to that operational competency takes a lot of work. But again, what option do you have if you're following the consumers and their needs to stay relevant? The only way to grow is to deliver value to the consumers, and that comes from understanding what their needs are. Speaker 1 (9:37) Rebecca, you've done this kind of work on the biggest stages there are. Were hostess and smugglers, were they incompatible to start? Was there ever a chance? Is this a missed opportunity or just never meant to be? Speaker 2 (9:50) So Hostess has strong distribution in C-stores, convenience stores, while the other brands have strong distribution in grocery stores. So you would think they would be expansive in nature. You think that they would be able to increase snacking occasions because they offer a wide variety of products. But in some cases, the financials get in the way. So if the distribution system is built on grocery stores and large packages and now C-stores are built on small packages, those are two very different ways to drive your P &L. So I think the organization has to be able to manage all kinds of business models. And that can be difficult when the organization is accustomed to a business model that has been very successful for a very long time. It throws a monkey wrench into everything. Speaker 4 (10:50) Yeah, Rebecca, I think you hit the nail right on the head because Smuggers actually reportedly split the grocery store. convenience store sales team. So they were speaking to each other from an operational perspective. This is two separate different ways to go about selling a product. Not to mention the shelf life, right? We know that Smucker's, I don't know the last time I checked my peanut butter or jam, I have no idea when the expiry date is in my current pantry compared to a Twinkie, which is only 65 days. So in... by nature, it's a different way of consuming that product. And so how you sell and what your go-to-market strategy is, even though it's an iconic brand, is different. And I think those operational... That operational mismatch has been one of their biggest challenges, not to mention they absorbed a lot of some of the debt that Twinkies had had already. So they were coming in at a bit of a deficit. And then with kind of these, you know, quarter after quarter sales decline, it hasn't really helped the picture. And another big thing we continue to talk about is the consumer habit. Right. So, you know. Pre-COVID, during COVID, we were all snacking, snacking a lot. And that was the time that they were starting to negotiate a lot of these deals. And so obviously post-COVID, that snacking boom has really cooled off. And so, you know, I think the challenge here. is that Hostess was not able to really change those tastes and that snacking habit. And Smuckers bought into that when the snacking phase is cooled. So I think, again, looking at a different strategy when right now consumer behavior is all about health and, you know, macros and protein is everywhere, right? I don't think making a protein Twinkie is the answer, but I think. branding it in that nostalgia way that you mentioned, Melissa, is a brilliant idea. Speaker 1 (12:54) If you've ever worked for any company anywhere, you know there's the process that's supposed to happen, and then there's what everyone actually does. The problem is most leaders can't see that gap, which makes it pretty hard to know what's actually worth fixing. That's why I like Scribe Optimize, which automatically discovers workflows across your approved business applications. No interviews, no workshops, just how work actually happens. Its live dashboard gives you a clear view of how work gets done across all your teams. So you can see which tools are being used, where time is being spent, and where the biggest inefficiencies are hiding. And it doesn't just point those out. It explains why they're happening and recommends ways to fix them with estimated time savings built in. That's way more useful than just knowing where the problems are. What I also like is that this is about leadership visibility, not employee monitoring. In fact, user-level data is anonymized by default and sensitive information is automatically redacted. And none of it ever leaves your firewall. So you're getting true operational insights without compromising anyone's privacy. To see Scribe optimize an action like I did, head to scribe.how.com and mention Fixedit for a 30-day risk-free trial. That's S-C-R-I-B-E.how.com. Hey, I'm wearing my Quint shirt. It's blue. It's lightweight, which is non-negotiable for late summer. I'm happy. I'm Speaker 4 (14:15) wearing my Quince mini dress, which is a summer staple, particularly in this humidity. It's the hottest day of the year today, and I am cool as a cucumber in my Quince. Speaker 3 (14:27) The thing I love about Quince is that it's not just clothing. I have the luggage, and they have bedding, bath, kitchen staples, jewelry. Speaker 1 (14:38) Yeah. And I didn't have to go to the store. That's something I would have picked out anyway. I really like it, but I got it at home. Love their stuff. It's really thoughtfully designed and very intentional. Upgrade your everyday. Go