From Near Extinction to Billions: The Twinkie’s Sweet Comeback Story

A decade ago, the unimaginable occurred: Twinkies vanished from store shelves. Hostess Brands, the creator of those golden, cream-filled sponge cakes, declared bankruptcy for the second time in a decade. As the company shuttered its factories and initiated liquidation, consumers flocked to supermarkets, filling their carts with Twinkies, Ho Hos, and other quintessentially American treats they feared might be lost forever.

However, what transpired next was a remarkable resurgence that few could have foreseen. Two investment firms came to the rescue, acquiring Hostess’s brands for $410 million and launching a decade-long revival mission. This journey culminated in a recent deal to sell Hostess to J.M. Smucker for a staggering $4.6 billion.

The sale of Ding Dongs, CupCakes, and Donettes at such a sumptuous price was made possible by Americans’ enduring love for snacks, a love that has deepened over time and intensified during the COVID-19 pandemic. This narrative underscores a fundamental truth that anyone who’s ever tasted a Twinkie can attest to: Betting on the American sweet tooth is rarely a bad idea.

Hostess’s remarkable journey from the brink of extinction, not once but twice, to the center of a frenzied bidding war unfolded against the backdrop of food giants striving to connect with consumers after hiking prices on nearly every item in grocery stores. Some are embracing their junk food origins while quietly working on making their products somewhat healthier. Others are seeking to carve out a bigger share of the snack market.

This enduring American obsession with snacks is currently intersecting with the growing popularity of new weight-loss drugs designed to curb appetites.

Hostess executives firmly believe in the resilience of their brands. Having weathered past trends, such as low-fat and low-carb diets and the rise of organic foods, they assert that Americans’ penchant for indulgent treats is here to stay. According to them, consumers are adopting a “balance-sheet approach” to snacking, choosing healthy options sometimes and indulging in sweets at other times.

The CEO of J.M. Smucker, Mark Smucker, who outbid General Mills for Twinkies, echoes this sentiment. He reassured investors that his multibillion-dollar bet on these 140-calorie cakes is sound.

The Twinkie, now worth billions, has a storied history that dates back nearly a century. James Dewar, an early figure in the food industry, stumbled upon the idea during the Great Depression when he sought a product for financially struggling consumers. He repurposed idle machinery to create the iconic sponge cake filled with banana cream and aptly named it “Twinkies.” The original banana flavor eventually gave way to vanilla during World War II due to banana rationing, but the product’s appeal remained unchanged.

While Hostess faced challenges as consumers became more health-conscious, it made a triumphant return to the market after a period of bankruptcy and eventual acquisition by private-equity firms Apollo Global Management and Metropoulos & Co. They resurrected the brand, dubbing it the “sweetest comeback in the history of ever.”

To make Hostess more efficient and competitive, the new owners downsized the workforce, invested in automation, and extended the shelf life of Twinkies through technological innovations. These changes enabled a shift to a more cost-effective distribution model and opened new avenues to serve convenience stores across the country.

With the brand’s resurrection underway, Hostess began exploring new products and expanding into different snack segments. This strategic shift aimed to appeal to both loyal customers and new target demographics, such as millennial parents and convenience store shoppers.

Hostess’s innovative efforts have yielded mixed results, including some discontinued products and other successful additions to their lineup. Despite challenges, the company’s annual revenue surged by 60% between 2018 and 2022, with its stock doubling in value over the past five years.

The broader trend of “snack-ification” in American diets has played a pivotal role in Hostess’s resurgence. Nearly half of U.S. consumers now consume three or more snacks a day, a trend that has boosted snack sales across the board.

J.M. Smucker’s recent acquisition of Hostess underscores the enduring appeal of these beloved snacks. The deal offers Smucker entry into a thriving segment of the supermarket industry and access to the company’s loyal customer base.

In summary, Hostess’s journey from bankruptcy to a multibillion-dollar acquisition showcases the enduring love for classic American snacks and the company’s ability to adapt and innovate in response to changing consumer preferences. As Americans continue to embrace their sweet tooth, Hostess is well-positioned to remain a cherished part of the nation’s snack culture.