No Wonder This Baker Is Firing Up the Ovens
Sep 24th 2013 5:21PM
Updated Sep 24th 2013 5:22PM
It started with Twinkies returning to store shelves this past summer, having taken a not-so-sweet hiatus after the bankruptcy of Hostess Brands. Now Flowers Foods is bringing another of its baked goodies back: Wonder Bread.
Whereas the tasty, creme-filled yellow cake was restored with the tag line "The Sweetest Comeback in the History of Ever," Flowers has opted to go retro with Wonder's revival, hoping the "nostalgic look creates happy memories for many and attracts new consumers with its retro appeal."
Patience is bitter...
But not everyone will be able to pick up a loaf of Wonder (or Merita, Home Pride, or Butternut brands, which are also staging comebacks), as Flowers doesn't yet have the national distribution capability that Hostess had. It has announced, however, that wherever the bread overlaps its own markets, the baker will make sure it's on shelves.
At the same time Flowers is doing this, privately held McKee Foods is restoring other former Hostess brands to their previous glory, including Devil Dogs, Ring Dings, Drake's Coffee Cakes, and, my own favorite, Yodels (try freezing them and eating them with a tall, cold glass of milk!). McKee owns the Little Debbie brand of snack cakes, and paid $27.5 million to Hostess, which is now owned by Apollo Global Management and private equity firm Metropoulos.
...but its fruit sweet
Flowers had its own successful line of breads and cakes in its Nature's Own and Tastykake brands before buying the Hostess product line for $360 million. In fact, during Twinkie's eight-month absence from stores, the baker put its time to good use -- it expanded its business and enjoyed a 35% jump in branded-product sales last quarter. It's seen the size of the Tastykake business almost double to $400 million from the $225 million size it purchased it at in 2010.
McKee also used the intervening months to broaden the appeal of the Little Debbie brand, and while retailers -- not to mention consumers -- have clamored for the return of the rival products such that they won't have difficulty garnering shelf space, it doesn't believe there will be much cannibalization when they all appear on shelves together again. In an interview with the Food Navigator site, McKee notes that while they were being outsold 3-to-1 in some areas by Hostess, the hiatus converted a lot of snackers to its own line of cakes, and as a result doesn't believe they will lose much business.
Yet in a nod to the love consumers hold for Hostess cakes, McKee fastidiously rebuilt the recipes, even going so far as to make sure there was just the right amount of creme left on the wrapper of a Devil Dog.
Wisdom begins in wonder
Flowers is also being careful about how it rolls out Wonder. While acknowledging the bread has brand awareness among 96% of consumers, and that at one time it had the highest household penetration of any white bread brand, there are now regional preferences the baker must remain mindful of. While the goal is to restore Wonder to its former national brand status, due to brands like Lewis Bakeries' Bunny in Louisiana and Flowers' own Dandee in Miami, they'll be rolling it out further on a market-by-market basis.
In short, with its own strong portfolio of brands coupled with the return of household favorites from Hostess, Flowers Foods looks ready to bake up some tremendous growth and perhaps even start rolling in the dough.
How sweet it is
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The article No Wonder This Baker Is Firing Up the Ovens originally appeared on Fool.com.Fool contributor Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends Flowers Foods. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.