Hostess Brands, the Kansas City-based manufacturer and marketer of such iconic baked sweet goods as Twinkies and Ding Dongs, is paying $320 million to acquire Voortman Cookies Ltd., a bakery in Burlington, Ontario, Canada whose products are positioned as “better for you.”
Swander Pace Capital, a private equity firm with offices in San Francisco, Bedminster, New Jersey and Toronto, acquired a majority stake in Voortman in 2015 for an undisclosed sum.
"The acquisition will give Hostess Brands the opportunity to compete in the $8.4 billion cookie category,” Keith Nunes points out for Food Business News.
“Voortman is the No. 1 player in crème wafers and sugar free cookies, as reported by Nielsen for the 52-week period ended Nov. 2, 2019, and has achieved compound annual point of sale growth over the last three years of approximately 5%, according to data provided by Hostess Brands,” Nunes reports.
Founded by two Dutch immigrant brothers, William and Harry Voortman, in Hamilton, Ontario in 1951, the bakery has been positioning itself as a "challenger brand.”
“Gone are the days when the big manufacturers are telling consumers what they need. Consumers feel that the big manufacturers really aren’t listening to them,” says marketing director Maureen Pharand in a corporate video featured on Voortman's website. “As a challenger brand, we really want to celebrate consumers’ individuality. They really want to join in with a brand that shares their values. They’re reading labels more. They’re more aware of what they’re putting in their bodies and on their bodies. It’s really important as a challenger brand that we meet those consumers needs.”
According to the news release announcing the deal, “in 2004, Voortman Bakery was the first North American food brand to announce the removal of trans fats from its retail food products. Most recently, Voortman announced its new packaging, new logo and new recipes featuring real ingredients.”
“Voortman’s wafers come in a range of flavors, from lemon to chocolate hazelnut to pumpkin spice, and are made with and without sugar. American consumers have expressed concerns about sugar amid changing dietary preferences, with 38% saying in a Pew Research Center survey last year that they had limited their intake of the ingredient,” Micah Maidenberg reports for The Wall Street Journal.
Americans in 2015 consumed roughly six and a half times the amount of sugar that Americans consumed in the 1820s, according to a blog post titled “America’s Sweet Tooth” by Georgia Tech professor Lauren Klein.
“Still, Mondelez International Inc. has seen gains due in part to its Oreo cookies. Hershey Co. said in October that North American retail-level sales were up in a 12-week period compared with the year earlier,” Maidenberg adds.
Indeed, “the only thing faster than the expanding market for cookies is the expanding waistline of consumers. A recent study from the University of Bordeaux ‘has revealed that sugar and sweet reward can not only substitute [for] addictive drugs, like cocaine, but can even be more rewarding and attractive. At the neurobiological level, the neural substrates of sugar and sweet reward appear to be more robust than those of cocaine,” writes Kristian Dyer for FoxBusiness.
“In announcing the acquisition on Monday, Hostess cited Voortman’s ‘uniquely positioned and differentiated products’ and the potential for ‘greater growth opportunities provided by a more diverse portfolio of brands and products,’” Matthew Heller writes for CFO.
“Hostess expects the deal will provide at least $15 million in annual run-rate cost synergies and approximately $20 million of incremental adjusted EBITDA in 2020, growing to $40 to $50 million by 2022,” he adds.
The deal is expected to close next month.
“Voortman is a leading brand with a well-defined consumer position that complements and extends the growing Hostess portfolio into the growing cookie and better-for-you sweet snacking categories with meaningful runway for future growth,” Hostess president and CEO Andy Callahan states in the news release.
“Since its resurgence in 2016, [Hostess] has been bulking up its portfolio to attract consumers in adjacent areas where it didn’t have a major presence. Last year, the purchase of Big Texas and Cloverhill brands allowed Hostess to expand its breakfast product lineup with items like honey buns, Danishes and cinnamon rolls,” writes Christopher Doering for Food Dive.