Smucker is sweetening its portfolio with the addition of Hostess Brands, the company best known for making Twinkies, as consumers continue to shell out for desserts amid ongoing budget pressures.
On Monday (Sept. 11), The J. M. Smucker Co., parent of a range of popular brands including its self-titled line, Folgers, Meow Mix, Jif and many others, announced that it will acquire the sweet snacks company for approximately $5.6 billion.
“We are excited to announce the acquisition of Hostess Brands, which represents a compelling expansion of our family of brands and a unique opportunity to accelerate our focus on delighting consumers with convenient solutions across different meal and snacking occasions,” Mark Smucker, chair of the board, president and CEO of the J.M. Smucker Co., said in a statement.
The deal is expected to close late this year or early next, and Smucker cites the opportunity that this acquisition poses to grow sales in “convenient consumer occasions” as a key benefit, suggesting that the food giant may be looking to grow its convenience store sales.
Smucker noted in a presentation shared with analysts Monday that these products capture impulse buyers and that Hostess’s business model is a “simple, low-cost” one.
News of the acquisition comes weeks after a report circulated that Hostess was considering a sale after hearing of takeover interest from major food companies that included General Mills, PepsiCo, Mondelez International and The Hershey Company.
Consumers prioritizing purchasing sweets even at times when they are forced to make difficult tradeoffs, according to PYMNTS Intelligence from the recent study “New Reality Check: The Paycheck-to-Paycheck Report - The Nonessential Spending Deep Dive Edition,” created in collaboration with LendingClub, for which we surveyed more than 3,400 U.S. consumers in July about their nonessential spending.
The study revealed that, among the three-quarters of all consumers who buy “nice-to-have” items at the grocery store at least some of the time, sweets are the most common indulgence by a wide margin. Forty-one percent of grocery shoppers cited desserts, candy or sodas as their latest splurge — a higher share than said the same of any other such nonessential food or beverage.
Indeed, Hostess reported on a call last month discussing the company’s second-quarter fiscal 2023 financial results that it is seeing growth in snacking overall.
“The number of snacking occasions throughout the day continues to increase, and consumers are seeking out a wide range of options as they increasingly adopt a balance sheet approach when making decisions on what to snack on from savory to sweet, from the traditional to rewarding, and from mindful to indulgent,” Hostess President and CEO Andy Callahan said.
Certainly, consumers are making difficult choices at the grocery store. According to PYMNTS’ May report, “Consumer Inflation Sentiment Report: Consumers Cut Back by Trading Down,” which drew from a spring survey of more than 2,000 U.S. consumers, 57% have cut down on nonessential grocery spending, and 47% of shoppers have switched to sellers that offer better prices on groceries. In fact, about one in three consumers reported trading to lower-priced merchants for snack foods specifically.
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