J.M. Smucker to buy Hostess Brands for $5.6 billion

The J.M. Smucker Company (SJM) is in the process of acquiring baked goods company Hostess Brands (TWNK). The takeover deal is expected to be completed by January 2024. Yahoo Finance Reporter Brooke DiPalma breaks down the snacking industry’s value to the U.S. economy, noting the majority of consumers ages 18 to 44 snack at least 3 times a day, and J.M. Smucker CEO Mark Smucker's hopes for increased visibility.

Video Transcript

RACHELLE AKUFFO: Well, America is turning into a nation of snackers. It's a big lifestyle in the US. Take a look at these numbers. 49% of consumers enjoy three or more tasty treats a day. Now, those numbers increasing 8% in the last two years. Yahoo Finance's Brooke DiPalma is here to weigh in. So Brooke, it's clear that the snacking economy is extremely valuable to consumer staple companies.

BROOKE DIPALMA: Good morning, Rachelle. That's right. All eyes on snacking this morning after the major acquisition of Twinkies parent company hostess by SJM Smucker. Now of course, with that being said, we're seeing younger generations really drive growth when it comes to the snacking economy.

According to a recent survey, 18 to 44-year-olds are leading the charge when it comes to snacking three times a day. Now younger generations, as you can see here, really fueling that growth with 25 to 34-year-olds saying that they snack three times a day. That's a majority of them coming in at 68%.

Now Hostess executives say that consumers are taking more of a balanced approach when it comes to snacking. They're saying that about 20%-- they're saying that indulgent snacks are growing at a 20% rate faster than healthier occasion snacks, those healthier options. When it comes to that balanced approach, they're saying that the number of snacking occasions throughout the day is growing as well with consumers, sort of picking and choosing more times throughout the day that they want to grab that Twinkie, perhaps.

And so with that being said, we saw, in Hostess latest quarterly results that, they considered themselves a pure play snacking company. And while demand dropped slightly due to higher prices. They did get a boost in revenue last quarter. Executives have since said that they paused price hikes, hoping to, once again, fuel growth in snacking.

And James Smucker also said that revenue growth. And that was boosted by a 13% increase of volume and price mix. And so certainly, other names to watch in that snacking price include Hershey's, General Mills, as well as Mondelez. And so all snacking we'll be watching very closely, especially after that acquisition.

RACHELLE AKUFFO: I mean. And you have to imagine between the stress of the pandemic, the pandemic and everything else, you've got stress eating, comfort eating. It makes sense that the snacks would be doing well. Now Brooke, you also spoke to James Smucker's CEO Mark Smucker on the company's acquisition of Twinkies maker, Hostess Brands. So then what will this mean for Smucker's portfolio?

BROOKE DIPALMA: Right, Rachelle. Well, that deal coming in at $5.6 billion. Now, it's expected to close in early January, at the end of Smucker's fiscal third quarter in, and Mark Smucker, J.M. Smucker, CEO, jumping right to what this means when asked about his portfolio jumping right to snacking saying, quote, "It expands our access to snacking occasion like different times of day. People are looking for sweet snack versus a salty snack versus a protein based snack. This obviously expands us into that sweet sort of reward if you will kind of snack."

Now, in addition to, that other assets that he said will add to the portfolio is better access for convenience for JM Smucker. Think of those Uncrustables and opportunity there. Whereas on the flip side, for a hostess Mark believes that this will present hostess with an opportunity for better middle aisle of retail stores that JM Smucker knows very well, especially with that assortment of jams.

And once again, in the frozen aisle with those Uncrustables, which is nearly an $800 million company. In addition to that, JM Smucker also weighing in that this presides solid innovation capabilities that both brands bring to the table. And so of course, I had to ask if we'll see a jelly infused donut. He said never say never.

And lastly, in addition, to that, he said that he hopes to take this opportunity to amplify Hostess Brands consumer marketing. And so certainly, consumers can expect more marketing play when it comes to getting Twinkies in front of consumers similar to what we've seen with that mega growth of Uncrustables. But both here major snacking companies really looking to get in front of consumers as once again people are snacking more than perhaps pre-covid

RACHELLE AKUFFO: Indeed. Even looking at the stock prices, I mean, we're seeing both hostess and jm Smucker. Now, I'm Yahoo Finance's trending typekit. James Smucker, though, under some pressure but hostess at least seeing some gains they're up almost 20% on the day a big Thank you there to our very own, Brooke DiPalma Thanks so much.