J.M. Smucker otherwise known as ‘Smuckers’ is an American food juggernaut with revenue of $8.5b. However, the business has a weak international footprint, 96% of revenue is in the US (5% of sales are in Canada and only 1% elsewhere).
Smuckers last week agreed to buy Hostess brands, famous for Twinkies, for a total value including debt of US$5.6b
For those who don’t know, Twinkies aren’t a jewellery line or fashion item, they’re a golden sponge cake with a creamy filling.
Twinkies too is an American icon with brand awareness topping 90%. Although Twinkies has a long and illustrious brand history, its parent company, Hostess brands, has been through two bankruptcies, various private equity owners and a cull of manufacturing plants before being listed on the stock market in 2016.
Twinkies is available in Canada, licensed by Saputo, a large dairy company. Whilst Twinkies have also been spotted in the UK and Australia, relatively speaking Twinkies is nothing of the size it is in North America.
Derided as an ‘iconic junk food’ in some quarters, detractors have opined Twinkies best days may long have passed.
Is indulgent snacking in long term decline?
Far from it. In 2022 Hershey posted 16% sales growth on top of 10% the previous year. Mondelez grew 9.7% in 2022. (I’ll admit some of this growth is driven by price inflation, not simply underlying volume growth)
Indulgent snacks grew 20% faster than ‘healthy alternatives’ over the past 3 years
J.M. Smucker CEO, September 2023
Nonetheless the deal has some investors worried. Smuckers won after outbidding rival General Mills paying a 17% multiple. Another concern is the lack of Smuckers’ international reach.
Is there low hanging fruit for Smuckers beyond North America?
Certainly! The Twinkies name whilst reminiscent of the 1970s (in my mind at least) is catchy and memorable. I assume its been trademarked successfully by Hostess. There’s probably product development work to be done, some UK consumer comments derided the artificial colourings and flavourings. They’re not a tough fix. Finding a good licensing partner, a strong RTM model is more critical. Twinkies is a short shelf product meaning a chilled business is the ideal sales & marketing partner.
Besides Twinkies, Smuckers has substantial interests in coffee think Folgers for one. It also has a substantial pet food business including brands like Meow Mix, 9Lives and Nature’s recipe.
I’ve done many projects in Snacking, Coffee and Pet around the world. There’s definitely an interest in American snacks, Hershey has done great job is the last 10-15 years of deepening its international footprint, for example. Similarly, coffee and pet food are both categories with high consumer loyalty and strong growth prospects.