Advertisement

Hostess CEO: 'It's in our DNA to bring comfort,' in all kind of economies

Hostess CEO, Andy Callahan, joins Yahoo Finance's Alexis Christoforous and Brian Sozzi to discuss impulse purchases throughout the coronavirus pandemic, the company's history as a 'comfort food' and the future outlook for the overall industry.

Video Transcript

BRIAN SOZZI: In the month of March and April, while people stayed at home, they also turned to sweets. Hostess is in the spotlight after it topped both revenue and earnings estimates in its first quarter earnings report. Joining us now to discuss is Andy Callahan. He is the CEO of Hostess.

Andy, always good to speak with you. I was thinking back. You were on with us a couple months ago. And you said people were-- they were stocking up their pantries. And now that I look back, you were at the leading edge of what a lot of people have been doing in their houses because of the COVID-19 pandemic. What are you seeing in the business right now?

ADVERTISEMENT

ANDY CALLAHAN: Thanks for having me again, Brian. Let me start by thanking all the Hostess heroes and all our partners who are out there on the front lines, bringing people both functional and emotional support and normalcy during a difficult time. You know, when we started, we saw the initial phase, phase one, was a little bit of a panic, and let's start loading up the pantry.

Phase two, we saw a shift in channels. So we heard on the earlier report, sales are generally flat. But that really varies by channel. So our individual impulse purchases have been really down. We are starting to see that come back over the last several weeks.

Think about gro-- think about C stores, convenience stores. That's about a third of our business. We saw a decline, and then a comeback. The traditional grocery stores, dollar stores, larger stores, those eat-at-home occasions, we saw a large increase.

So we're starting to see a sustained increase in those stores. But we're really starting to see the single-serve and convenience stores starting to improve over the last several weeks.

ALEXIS CHRISTOFOROUS: Andy, I understand that the Twinkie, the iconic Twinkie, was born out of the Great Depression. So I am curious what kind of innovation is going on behind the scenes at Hostess during this economic crisis and during this pandemic.

ANDY CALLAHAN: Well, you know, I'm glad you brought that up. It's in our DNA to bring comfort and joy to consumers, in good times and in times when they struggle and need comfort. So we're continuing to do that. We do well and good economies, and we do well in down economies. And our consumer base is fairly broad in that respect-- 91% availability.

We're looking now at the way consumers are shopping and the way they will engage with food. So as opposed to-- for example with bakeries, are they willing to go in and buy fresh donuts? Or can we bring packaged solutions to those consumers when they're willing to buy?

Are be looking at our multi-packs? Can we bring them into different channels, and in-home occasions where they're looking? And do we look at different forms for our online purchase?

So we're looking at a lot of ways that-- the way consumers are going to-- they're going to get back to normalcy, but there's some things that are going to probably sustain and take a little bit longer. For example, will consumers be driving more, and therefore visiting convenience stores more often than they did? So we're looking at ways to serve consumers the way they want to shop and the way they want to eat.

BRIAN SOZZI: Andy, funny you mentioned convenience stores. I've been taking pictures when I go into mine. In the donut section, where there were fresh donuts or bagels, now things are wrapped. Is that an opportunity? And are you thinking about innovating new products to go into that space?

ANDY CALLAHAN: I think that's exactly right, Brian. There is an opportunity. We bring a very safe, a very enjoyable product to consumers out of our-- with our great team and out of our manufacturing facilities. And that's a perfect example of the way that we can really innovate.

And we're already positioned to be able to do that. We have great partnerships with our distributors and convenience store customers. We have products that their consumers love, and we're branded. And we're there to help talk to them and figure out a way that they can bring their consumers the food and the joy the way they want it.

So I think it's a terrific opportunity for us to really help service those consumers and those customers.

ALEXIS CHRISTOFOROUS: How are you looking at packaging, sort of during this pandemic, post this pandemic, Andy? I think the single-serve stuff is really popular right now. Do you see that being a long-term trend? And how are you sort of pivoting to adjust to that?

ANDY CALLAHAN: Well, all of our products are individually wrapped, even if they're sold-- even if consumers buy them in the grocery store in multi-packs. That's true for all of our Hostess business. Our Voortman business, I believe we have-- or cookie business, which we purchased in Q1, which is going terrific. We have an opportunity to move to more single-serve.

So I believe individually wrapped may have a higher premium for consumers. We're looking at ways to expand that occasion, and bring that really quality that consumers are looking for with a really great product and enjoyable product. And a lot of the work we did in Q1 positions us to really come out of this middle phase stronger than really when we went into it.

BRIAN SOZZI: Andy, amidst all this, what's your top-selling product? Is it the Twinkie? Is it donuts? You sell a bunch of stuff.

ANDY CALLAHAN: Our number one product, and the number one selling cupcake in America, is our cupcake. But we have our top selling products are cupcakes, and actually our Donettes, our bag of donuts, Donettes, which consumers love, is doing terrific. And then Twinkies-- Twinkies is obviously iconic. But we have many iconic brands-- Ding Dong, Twinkies, Donettes, you name it.

BRIAN SOZZI: It should be noted, our producer, Brooke DiPalma, has never tried a Twinkie. We're going to have to change that, Andy. We're going to have to change it.

ANDY CALLAHAN: Brooke, I do-- we're available nationally. We have better distribution availability than any baking company in America. But I'll take care of you.

ALEXIS CHRISTOFOROUS: All right, I think Brooke's got Twinkies for life now. All right.

BRIAN SOZZI: Yeah, she's got-- we talked to the right guy. All right, well leave it-- let's leave it there. Andy Callahan, Hostess CEO, always good to speak with you. Have a great weekend.

ANDY CALLAHAN: Thanks, Brian. Thanks, Alexis. Have a great day.