What Can Twinkies Teach Product Managers About New Markets?

by drjim on August 22, 2016

Hostess product managers are back from the brink, now what?

Hostess product managers are back from the brink, now what?
Image Credit: Christian Cable

So how do you feel about the snack foods made by the Hostess company: Twinkies, Ho Hos, Ding Dongs, etc.? I must confess that these days I get a little overwhelmed when I think about just how rich they are; however, in my childhood I suspect that I ate more than my fair share! The Hostess company has had a rough few years, but now they are back. Their product managers have the task of trying to figure out where the company needs to go now.

The Fall And Rise Of Hostess

You would think that a company that makes foods that we all love to eat would never have any financial problems. However, you’d be wrong. The Hostess company fell in to some very serious financial problems back in 2013 and ended up being bought out by a private equity firm. At the time Hostess employed 19,000 workers and ran a large number of bakeries that were spread all over the place. It was an inefficient and poorly run company.

Its new owners started things out by shutting everything down and dismissing all of the company’s employees. They then restructured how they wanted to go about making Hostess products. The company now operates three bakeries which are located in Indianapolis, IN; Columbus, GA; and Emporia, KS. Everything that they make is then shipped to a central warehouse that is located in Chicago, IL.

The new Hostess now employees only 1,000 workers They have been able to grow their sales volume back to just about where it used to be at US$1.3B. Hostess today sells only Twinkies, Ho Hos, and other snack foods. The old Hostess sold other lines that were purchased by other companies when Hostess was sold. The product managers at the company have been very successful in getting their products into new locations that they’ve never been in before such as Carl Jr’s restaurants and movie theaters.

Next Steps For Hostess

The Hostess product managers have been thinking about what they can do next. Sure, bringing the company back from the edge is good, but now what? They need to find new markets and rethink their product development definition so that this company can enter them in order to continue to grow the bottom line. They have a very clear idea of what the company does – they are a baker. Now the only real question that they are facing is just exactly what should they add to the line of products that they are baking?

It turns out that the Hostess customers had the answer. When Hostess took surveys of their customers, what they discovered is that their customers thought that they had a bread product. Hostess has never created a Hostess-branded bread. However, the customer is never wrong, right? When Hostess talked with their convenience and drug store customers about providing them with bread, they got a lot of interest. The reason was because these customers wanted one brand to provide them with both bread and other baked goods. They currently were not getting very good service from their local bread companies because these stores don’t sell a lot of bread and so it’s hard for bread company drivers to justify making a stop at them. If the Hostess product managers can meet this need, then they’ll have something to put on their product manager resume.

The product managers studied the market for bread. Currently the major bread companies provide direct-to-store deliveries of their bread and their drivers then stock it on the store’s shelves. The Hostess product managers decided to do things differently. The first thing that they got rid of was the direct to store model. Instead, they now bake the bread in their three bakeries and ship it to their warehouse in Chicago. In the warehouse, the bread is then bundled with each retailer’s full order of the complete line of Hostess products. This complete package is then sent to the retailer’s distribution center to then be sent to individual stores. One key advantage of the Hostess product is that it is replacing frozen bread and it does not have to be thawed before being put on display.

What All Of This Means For You

The product managers at Hostess have been through a lot in the past few years. Their company ran into financial problems, various product lines were sold off, and eventually the entire company switched owners and was shut down. Now the company has come back as a more streamlined firm and they’ve been able to regain the level of sales that they had. However, the pressure is now on the product managers to do what their product manager job description says they can do– find the answer to the question what’s next?

It turns out that the answer to that question has been provided by the customers that Hostess serves. They’ve told Hostess that they thought that they already made bread and that they’d be willing to buy it from Hostess in order to streamline their purchasing. The Hostess product managers have now started to make white and wheat bread as well as buns for hotdogs and hamburgers. They won’t be shipping directly to individual stores, instead they’ll send their bread to a retailer’s centralized distribution center along with other Hostess products.

The strategy of expanding from their home market of indulgent treats does carry some risk for the Hostess product managers. They need to make sure that they don’t end up confusing their customers about just exactly what types of products they are offering – treats or staples. As long as they can make life easier for their customers, they can expect that they’ll keep ordering their bread from Hostess.

– Dr. Jim Anderson
Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: After bread, what product do you think that the product managers at Hostess should introduce next?

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What We’ll Be Talking About Next Time

When someone mentions UPS to you, what do you generally think of? Probably one of their brown trucks that we see everywhere or perhaps it is one of their delivery employees dressed head-to-toe in their traditional brown uniform. However, this may all be changing. The product managers at UPS believe that they have seen the future and it’s all about 3D printing.

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