Dean Best
6 min read
In This Article:
JM Smucker’s eye-catching move for Twinkies owner Hostess Brands in 2023 divided opinion, with some concerns on Wall Street about the US manufacturer’s big bet on sweet snacks. It’s clear the $5.6bn deal has turned a little sour.
The company, home to brands Uncrustables frozen sandwiches and Café Bustelo coffee, made a big bet on indulgence two years ago with its move for Hostess and its portfolio of brands like Twinkies, Ding Dongs and Voortman Bakery.
However, the latest results filing from JM Smucker, published earlier this week, underlines the transaction has proved a little hard to digest.
The deal was “a compelling expansion of our family of brands”, chair and CEO Mark Smucker said when the move for Hostess was announced. However, among analysts there was some disquiet about such a significant foray into less-healthy snacks amid growing signs of increased interest in better-for-you options.
“There are multiple ways that consumers will continue to snack,” Mr Smucker told analysts when the transaction was announced. And, of course, he’s right – but perhaps more punters are now choosing the indulgent option less often – and, when they do, looking for different brands, be they pricier or, simply, more current or contemporary than a Twinkies.
JM Smucker’s acquisition of Hostess Brands was finalised in November 2023 and, in a matter of months, the company was reporting its new Sweet Baked Snacks unit was performing below expectations. Last August, when the group filed its first-quarter results for its 2024/25 fiscal year, the company blamed a “cautious consumer” for weighing on sales at its sweet baked snacks and pet-food businesses. The Q1 numbers led JM Smucker to lower its annual net sales and adjusted EPS forecasts.
In October, JM Smucker surprised some industry watchers with a move to sell part of the Hostess business. US-based snacks maker Second Nature Brands snapped up the Voortman cookies brand in an all-cash deal valued at $305m.
TD Cowen analyst Robert Moskow, who covers the publicly listed JM Smucker, said at the time the sale of Voortman cookies was “disappointing”, pointing out the company had sold the brand for less than Hostess had paid.
Fast-forward to March this year and a clear sign of problems within JM Smucker’s sweet-snacks business emerged with the recording of goodwill impairment charges of more than $1bn linked to the division. The charges were posted alongside the publication of the group’s fiscal third-quarter results, a period when the sales JM Smucker generated from its Sweet Baked Snacks division fell 7%. Two months later, the company announced it would close a manufacturing facility in Indiana as part of the “continued optimisation” of its Sweet Baked Snacks unit.
