Donut category leaders on the move

by Jeff Gelski
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Krispy Kreme Doughnuts, Inc. turned into a private company after JAB Beech, Inc. acquired it in July 2016.

KANSAS CITY — Acquisitions have two leading donut makers taking different paths. Hostess Brands, Inc., after being acquired by Gores Holdings, Inc., became a publicly traded company. Krispy Kreme Doughnuts, Inc. turned into a private company after JAB Beech, Inc. acquired it.

U.S. retail sales of donuts reached $1,971,202,966, for the 52 weeks ended Nov. 27, 2016, which was up 3.4% from the previous 52 weeks, according to Information Resources, Inc., a Chicago-based market research firm.

Hostess Brands, behind its Donettes brand, leaped into the No. 1 vendor spot. Company sales rose more than 11% to $357,369,229, accounting for 18.1% of the market share. Second-place Grupo Bimbo saw sales dip 1.3% to $349,807,603, accounting for 17.8% of the market share.

Hostess Brands Donettes
Hostess Brands, behind its Donettes brand, holds the No. 1 vendor spot.

Donut sales for Hostess still failed to reach a pre-bankruptcy mark of $470,377,700 for the 52 weeks ended Dec. 2, 2012, which captured a 29% market share. That year Hostess liquidated because of bankruptcy, and Donettes came off retail shelves. HB Holdings, L.L.C., an affiliate of private equity groups Apollo Global Management L.L.C. and Metropoulos & Co., then bought the Hostess and Dolly Madison snack cake business in 2013.

Company sales bounced back for donuts and more items, drawing the attention of Gores Holdings, Inc. The publicly traded affiliate of Gores Group completed its acquisition of Hostess Brands L.L.C. on Nov. 4 of this year. Gores Holdings was renamed Hostess Brands, Inc. Stock trades on the NASDAQ under the symbol TWNK. Stock was trading at $12.95 per share on Dec. 23, 2016, which compared with a close of $11.48 per share on Nov. 4, 2016.

Along with the $375 million of Gores Holdings’ shareholder equity, additional investors comprising C. Dean Metropoulos and Gores affiliates participated in a $350 million private placement. C. Dean Metropoulos and family will continue to hold about a 42% combined stake in the company.

“We are excited to introduce Hostess as a public company, and I am extremely proud of the job our team has done in repositioning and growing Hostess during the past four years,” said Mr. Metropoulos, executive chairman of Hostess. “I believe the company has strong growth potential and can think of no one better to partner with in this next journey than Alec Gores and the Gores team, who have a well-earned reputation for not only identifying, but adding value to the businesses with which they affiliate.”

Mrs. Freshley's mini donuts

Following Hostess and Bimbo in U.S. retail sales of donuts were McKee Foods Corp., Collegedale, Tenn., up 1.3% to $273,739,370 in the 52 weeks ended Nov. 27, 2016; Krispy Kreme, up 6% to $252,166,704; and Flowers Foods, Inc., down nearly 5% to $156,782,931.

Flowers Foods, Inc. in April unveiled new packaging and a new slogan “Make life sweeter!” for its Mrs. Freshley’s brand. The logo features a color scheme of red, white and gold tones to complement a large font.

In food service, Krispy Kreme Doughnuts had 1,133 stores worldwide when the first quarter ended May 1, 2016, which compared with 1,003 at the end of the previous year’s first quarter. Krispy Kreme stopped trading on the New York Stock Exchange after JAB Beech, Inc., an indirect controlled subsidiary of JAB Holding Co., completed its acquisition of the company on July 27, 2016. The portfolio for JAB Holding Co. includes coffee companies Keurig Green Mountain and Jacobs Douwe Egberts. The transaction had a total equity value of about $1.35 billion.

Krispy Kreme zombie donuts

“JAB’s experience and industry knowledge make them the ideal partner to help grow the iconic Krispy Kreme brand throughout the world,” said Tony Thompson, chief executive officer of Krispy Kreme, when the deal was first announced May 9, 2016. “We remain focused on our long-term strategy and continuing to offer our premium, high-quality donuts and sweet treats to consumers around the world.”

Krispy Kreme Doughnuts continued to focus on limited-time offerings in 2016, featuring the Zombie donut, the Pumpkin donut and the Spider Web donut in October; and the Melted Snowman donut and the Santa Belly donut in December. Also in December, the company introduced a Nutty Cocoa Ring donut that is dipped in Nutella hazelnut spread, topped with crunchy hazelnut pieces and drizzled with chocolate icing.

Dunkin' Donuts
Dunkin' Brands is expanding its footprint.

Dunkin’ Brands Group, Inc., Canton, Mass., named David Hoffman president of Dunkin’ Donuts U.S. and Canada, effective Oct. 3, 2016. He spent 22 years with McDonald’s Corp., most recently as president of high growth markets, which includes China, South Korea, Russia and several other European markets. He replaced Paul Twohig, who retired. Internationally, Dunkin’ Brands had a target of opening about 200 net new restaurants in 2016 across its two brands, Dunkin’ Donuts and Baskin-Robbins.

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