Hostess

Hostess boasted of its “pricing power,” saying “When all prices go up, it helps.”

Hostess CEO boasted to analysts and investors about the company’s “proven pricing power.” “Andy Callahan — President and Chief Executive Officer: We have not just faced unprecedented volatility in consumer buying patterns and our supply chain, but also a historically high inflationary environment, particularly in the last 12 months. Even with that, we were able to maintain our gross margins during this period, one of the very few food companies to achieve this. This is all a testament not just to the tremendous nimbleness and agility of our supply chain, as we talked about a few minutes ago, but also to our premium portfolio, proven pricing power, and our superior operating model, driving our ability to maintain industry-leading EBITDA margins. We are very proud of our strong and sustainable best-in-class margin structure and see it as a key enabler of the next phase of our growth.” (Hostess Brands Q4 2021 Earnings Call Transcript, 3/1/2022)

Hostess CEO: “Our success at retail has come during a period in which we implemented multiple pricing actions.”“Andy Callahan — President and Chief Executive Officer: Our success at retail has come during a period in which we implemented multiple pricing actions. We have continued to upgrade our data, analytics, and shopper insight capabilities. And that’s clearly visible in the agility, nimbleness, and timeliness with which our sales team proactively and successfully engaged with our retail customers for multiple pricing actions in a fast-paced inflationary environment. We are proud of our top-line growth, and we are equally proud of our strong margins during a period of unprecedented inflationary headwinds, labor challenges, and supply shortages.” (Hostess Brands Q4 2021 Earnings Call Transcript, 3/1/2022)

Hostess CFO: “We expect our revenue growth to be driven primarily by price mix… We expect relatively stronger growth in the first half of the year given the wraparound benefit of pricing actions taken in the second half of 2021.” “Mike Gernigin — Interim Chief Financial Officer and Chief Accounting Officer: We are encouraged by our strong performance in 2021 and expect this momentum to continue in 2022. For 2022, we expect net revenue growth of 5% to 8%, adjusted EBITDA to be between $280 million and $290 million, and adjusted EPS of $0.93 to $0.98 per share. We expect our revenue growth to be driven primarily by price mix, along with flat to positive volume for the full year. We expect relatively stronger growth in the first half of the year given the wraparound benefit of pricing actions taken in the second half of 2021 and continued favorable consumer trends.” (Hostess Brands Q4 2021 Earnings Call Transcript, 3/1/2022)

Hostess CEO: “We’re also seeing the consumers experience a lot of disruption. And it’s a large range of variability as we flow throughout the year. They’re losing benefits. They’re moving to a normalized COVID environment. They haven’t fully recognized they were absorbed pricing.” “Andy Callahan — President and Chief Executive Officer: We’re also seeing the consumers experience a lot of disruption. And it’s a large range of variability as we flow throughout the year. They’re losing benefits. They’re moving to a normalized COVID environment. They haven’t fully recognized they were absorbed pricing. Our guide, as a reminder, is at the high end of our long-term algo as we sit here this year, but we still haven’t seen everything that consumers have absorbing. Now admittedly, we are off to a strong start to the year. We’re certainly seeing that. But we expect as time goes on and we normalize, we expect that to get closer to normal. If we’re off, we’ll adjust that in May when we talk to you more, which we’ve typically done.” (Hostess Brands Q4 2021 Earnings Call Transcript, 3/1/2022)

Hostess CEO: “ Pricing, by definition, is a change model. It’s temporary. Consumers get used to it. When all prices go up, it helps.” “Andy Callahan — President and Chief Executive Officer: Hey, Bill, thanks for joining us. I’m going to let Mike take the pricing, but just a real quick thing on pricing, at least the way we look at it. Pricing, by definition, is a change model. It’s temporary. Consumers get used to it. When all prices go up, it helps. So there’s a relative pricing thing that I think every food business has experienced. It’s also just one component, so price is short term. The macro trends that we’re seeing that are giving tailwinds to our occasion model, they last forever. So we’re in a real good place. We’re experiencing very good consumer volume-driven growth despite our pricing, but I’ll let Mike talk about the way we think about it with single-serve and multipack.” (Hostess Brands Q4 2021 Earnings Call Transcript, 3/1/2022)

Hostess Brands CEO said their profit margins remained stable despite inflation thanks to “taking pricing actions across our portfolio and customer base.” “ANDREW P. CALLAHAN, PRESIDENT, CEO & DIRECTOR, HOSTESS BRANDS, INC.: Switching gears, our executional excellence extends to our supply chain, which has enabled us to hold our margins relatively stable despite labor challenges and very high inflation. We are taking pricing actions across our portfolio and customer base. These pricing actions began to flow through our P&L during the quarter and will provide increasing benefit in Q4 and into 2022. We are actively monitoring the operating environment and are prepared to take additional pricing as necessary. We are continuing to experience strong consumer demand for our brands despite higher retail prices. Although it’s still early and retail shelf price resets by our customers continue to increase to fully reflect the new prices.” [Q3 2021 Hostess Brands Inc Earnings Call, 11/9/2021]

Hostess said it would see “an increasing benefit of our pricing as we’re moving into Q4,” suggesting further price increases throughout the holiday season. “ANDREW P. CALLAHAN: Yes. So we haven’t quantified the pricing, but we have priced in the mode. If you look at the first half, our pricing was a component of some of our growth, but a lot of that was really driven by volume and mix. We’ll see an increasing benefit of our pricing as we’re moving into Q4, and that will be more balanced with the pricing on the margin side and a little bit more driving growth on the revenue side. Relative to pricing and managing our margins over time, we have a full toolbox to be able to do that. We look at pricing, we look at managing our productivity, revenue management toolbox. And we see inflation, as I said, approaching 10% in the back half, and we’ll be prepared to price as needed, and we believe our — that our brands can sustain that in the marketplace because of the previous investments that we’ve made.[Q3 2021 Hostess Brands Inc Earnings Call, 11/9/2021]

Hostess Brands CEO credited pricing for increased sales and nearly $100 million in additional gross profit for Q3 alone.  “ANDREW P. CALLAHAN, PRESIDENT, CEO & DIRECTOR, HOSTESS BRANDS, INC.: Now I’ll turn to the quarterly financial results and our revised outlook in greater detail. Third quarter net sales increased 10.4% to $288 million. The increase was primarily due to continued strength in Sweet Baked Goods, which increased by 10.6% during the quarter, in addition to a 9% increase in cookies. Year-to-date, consolidated adjusted net revenues increased by 10.1% and showcasing our remarkably consistent top line momentum, reflecting year-to-date growth of 9.5% in Sweet Baked Goods and 15.6% in cookies. Adjusted gross profit of $99.3 million increased by 8.9% for the quarter as higher volume, favorable product mix, pricing and productivity more than offset transportation and input cost inflation. As expected, adjusted gross margin declined approximately 45 basis points to 34.5% as higher Sweet Baked Goods gross margins were modestly offset by Voortman due to the timing of pricing actions. On a year-to-date basis, adjusted gross margins were essentially flat at 35.5%.” [Q3 2021 Hostess Brands Inc Earnings Call, 11/9/2021]