Sweet success

by Eric Schroeder
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Despite a relatively quiet period of new product innovation and continued consumer focus on health and wellness, the sweet goods category is closing 2009 on a high note.

In the 52 weeks ended Nov. 29, dollar sales in the bakery snacks category totaled $1,081,011,000, up 6% from the same period a year ago, while unit sales rose 2% to 570,512,100, according to data from Information Resources, Inc., a Chicago-based market research firm.

Leading the way is Hostess Brands, Inc., Irving, Texas. Since emerging from bankruptcy earlier this year, the company formerly known as Interstate Bakeries Corp. has been more aggressive in its promotions and new product introductions than in recent years. The strategy appears to be paying off in improved sales.

In the 52 weeks ended Nov. 29, bakery snacks dollar sales at Hostess totaled $299,216,100, up 9% from the same period a year ago, according to I.R.I. The growth was spurred by an impressive 20% gain in unit sales during the period.

A catalyst for the charge at Hostess has been the November re-launch of Hostess Danish to the convenience channel. The Danish were first introduced in November 2006 in four flavors in 5-oz packages. The re-launch included cheese, apple and bear claw — blueberry was not re-released — in 4-oz packages, and the product has quickly become the second most popular brand in the category in two months time, according to Hostess. Dollar and unit sales of the Hostess brand rose 17% and 28%, respectively, in the 52 weeks ended Nov. 29, according to I.R.I.

Looking ahead to 2010, Hostess Brands will be extending its 100 Calorie Packs line of snack cakes with the introduction of 100 Calorie Packs Lemon Cupcakes. Each pack contains three golden cupcakes with lemon icing and Hostess signature creme filling. The 100 Calorie Packs line has been a solid performer for Hostess during the past two years, generating dollar sales of more than $38 million in the most recent 52 weeks.

“The success of our 100-calorie snack line has encouraged us to develop a wide range of delicious flavor combinations that stay true to the taste Hostess fans love and expect from our 100 Calorie Packs,” said Rich Seban, chief marketing officer at Hostess Brands. “Now consumers have even more ways to stay dedicated to their New Year’s resolutions while still being able to enjoy a sweet treat.”

In addition to the new Lemon Cupcakes, the 100 Calorie Packs line includes chocolate cupcakes with chocolate icing, carrot cake cupcakes with cream cheese icing, cinnamon coffee cakes with streusel topping, strawberry cupcakes with cream cheese icing, and Twinkie Bites with filling.

The No. 2 player in the bakery snacks segment according to I.R.I. data is McKee Foods Corp., Collegedale, Tenn. And while the company’s unit sales were down 8% in the 52 weeks ended Nov. 29, dollar sales rose 8% behind a 10% gain in Little Debbie Cosmic Brownies and 3% jump in Little Debbie snacks.

As 2009 comes to a close, a focal point at McKee Foods has been Little Debbie Chocolate Cupcakes. The product — a chocolate cake filled with creme and topped with chocolaty icing and a white squiggle stripe — was introduced in late September. In conjunction with the product launch, McKee Foods is holding two giveaways, the first of which included the company giving out 125,000 cartons of the new cupcakes between Sept. 22 and Oct. 17. The second giveaway, known as the Little Debbie Cupcakes Share-a-Thon Giveaway, runs through March 31, 2010, and includes prizes such as a smart cupcake car, GPS devices, a year’s supply of free cupcakes, MP3 adapters, and collector’s edition cupcake cars.

Mike Gloekler, communications and public relations manager for McKee Foods, said the company’s marketing campaign and sweepstakes is wrapping up this month.

“The product has been a huge success,” Mr. Gloekler said. “I.R.I. data put it at No. 2 just four weeks after launch. After eight weeks, it became the No. 1 cupcake in the category. A high quality product at a great value for consumers is always a successful equation.”

In March, Flowers Foods, Inc., Thomasville, Ga., introduced four snack cakes under its Blue Bird brand. Two of the products — Blue Bird Creme-filled Carrot Cake Bingles and Blue Bird Creme-filled Frosted Bingles — have been discontinued, but the other two items have performed well, said Brent Bradshaw, brand manager for Flowers Foods.

“The Banana Pudding Cupcakes, which are being sold under both our Blue Bird (direct-store-delivery) and Mrs. Freshley’s (warehouse) brands, have enjoyed the greatest success,” Mr. Bradshaw said. “Cupcakes are a longtime favorite in the snack cake category and have actually been growing in popularity of late. That, combined with their unique flavor, has made the Banana Pudding Cupcakes a success.”

The fourth product introduced — 100-Calorie Mini Lemon Cupcakes — has done well since its launch, and Mr. Bradshaw said Flowers is “waiting to see how they perform during the upcoming ‘diet season’ after the first of the year.”

In general, Mr. Bradshaw said Flowers has noticed a “slow down” in the better-for-you cake category.

“Since these items are typically a bit more expensive than other types of snack cakes, we expect this to turn around when the economy improves, especially as we anticipate the healthy eating trend to continue,” he said. “We believe there is a future for both better-for-you and indulgent snack cakes and Flowers Foods will continue to offer consumers both.”

Another company with better-for-you offerings is Weight Watchers International, Inc., New York. The company is in the fifth year of its partnership with Dawn Food Products Inc., Jackson, Mich.

The two companies introduced the line of bakery snacks in 2004, expanded it in 2006 with additional flavors, in 2008 launched the products in 7-Eleven stores, and earlier this year added products to its retail line, including a chocolate brownie, banana nut muffin and peanut butter cookie.

The new items are being counted on to spur sales for the brand, which saw dollar sales drop 35% to $28,471,630 in the 52 weeks ended Nov. 29, according to I.R.I. Unit sales of Weight Watchers, meanwhile, fell 36% in the period to 8,276,149. At least part of the reason for the decline may have to do with the economic environment, as the Weight Watchers brand, at $3.44 per unit, had the highest per unit price of any of the top 15 brands tracked by I.R.I.  

Private label push

Like most grain-based foods categories, the branded sweet goods segment has felt pressure from private label competitors. According to Information Resources, Inc., Chicago, private label bakery snacks amassed $123,828,300 in dollar sales in the 52 weeks ended Nov. 29. While this total was not quite half of what top players Hostess Brands, Inc. and McKee Foods Corp. generated during the period, the 12% gain in dollar sales bested both companies and the 14% gain in unit sales was equally impressive.

Early in the year, QuikTrip Corp., Tulsa, Okla., opened a QT Kitchen in Ellenwood, Ga., that further strengthens its ability to distribute baked goods. The company also plans to open a facility in Dallas. Meanwhile, La Crosse, Wis.-based Kwik Trip Inc., which operates a chain of 365 convenience stores in Iowa, Minnesota and Wisconsin, moved forward on plans to double the size of its bakery in La Crosse to produce a variety of donuts, cookies, sweet rolls, bagels, muffins and bread.

More recently, 7-Eleven, Inc., Dallas, added 15 packaged private label bakery items — including snack cakes and pies, mini-donuts and breakfast pastries — to its line of products.

“Our goal was to match or improve on the taste and quality of the baked goods by the national brands,” said Joe Hermes, 7-Eleven senior product director for bakery and produce. “If you can do that and save a customer money, they’re more likely to become loyal to that product.”

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