Elliott takes two board seats as snack category weakens
J.M. Smucker completed its acquisition of Hostess Brands in 2023 for $5 billion, beating competitors including General Mills. CEO Mark Smucker said at the time that the deal gave the company entry into a $65 billion snack market, capitalizing on pandemic-era eating habits in which 70% of consumers ate at least two snacks per day.
Three years later, Hostess sales have declined each quarter since the acquisition closed. Smucker has recorded three impairment charges totaling nearly $3 billion, and shares are down 14% since the deal was announced in September 2023. Activist investor Elliott Investment Management, which had become one of Smucker’s largest shareholders, secured two board seats in February.
“We’ve been pretty clear that we haven’t been satisfied with our performance on Hostess,” CEO Mark Smucker told investors at a conference last year. “Some of that has been some challenges in the category in total, some with our own execution.”
Broader market trends have contributed to the decline. U.S. snack sales by units fell 4% over the past four years, according to market-research firm NIQ, with sweet snack sales dropping 17%. Weight-loss drugs and the “Make America Healthy Again” movement have shifted consumer spending away from indulgent products.
Internal missteps worsened the losses, according to current and former executives cited by the Journal. Hostess products have a 65-day shelf life, but Smucker’s supply chain and IT systems were designed for products with year-long shelf lives, such as jams, coffee, and pet food. The centralized systems could not match the flexibility Hostess had used to redirect truckloads of CupCakes to stores needing inventory, leading to late and incomplete orders.
Distribution also proved challenging. About 40% of Hostess sales come from convenience stores, a channel different from Smucker’s supermarket center-aisle business. Smucker separated the sales teams for each channel, which executives said made it harder to forecast total demand. Hostess lost shelf space and display opportunities to competitors.
“It’s just a different customer, consumption dynamic, an entirely different route to market I don’t think they were prepared for,” said TD Cowen analyst Rob Moskow.
Analysts also cited changes in consumer preferences. “Ultraprocessed food with no protein is doing badly,” said Max Gumport, an analyst at BNP Paribas. “The Twinkie business is at the center of these.”
The rollout of new Hostess products slowed dramatically under Smucker, Moskow said, a problem for a brand that had relied on rapid innovation.
Smucker has worked since 2024 to stabilize the business. It reduced the number of Hostess products by 25% to focus on core brands such as Donettes and CupCakes, closed an Indianapolis plant in a move it said would save $30 million annually, and introduced $1 packs of key items. Donettes sales rose 13% in the latest quarter, helped by more breakfast-time purchases. In June, the sweet baked snacks division posted its first year-over-year profit increase. Sales declines have begun to moderate.
“It’s going to take a bit of time until we actually see top-line growth,” CEO Smucker said in a June earnings call. “But suffice it to say, stabilizing the business and improving profitability is where we’re focused right now.”
CFO Tucker Marshall told the Journal that Hostess is a roughly $1 billion business inside a $9 billion company. “Hostess is very important to Smucker, but Smucker as a total company is much larger than that,” he said. “We did have some internal execution issues that we’ve really right-sized and worked through our last fiscal year.”