Smucker’s + Twinkies = Brand Driven Growth In A TikTok Supply Chain

Legendary jam brand Smucker’s is buying legendary snack brand Hostess (of Twinkies fame). Investors disapprove, but CEO Mark Smucker sees plenty of upside based on channel, product innovation and marketing synergies. I agree with him because the supply chain synergies needed to make this work are easier than ever, while the marketing bump is amplified by something we at Zero100 call the TikTok supply chain.

The Demand Chain Bullwhip

Supply chains have been digitizing their factories, warehouses, and planning systems since the earliest days of PCs and server networks running MES and ERP systems in the 1990’s. Demand chains, meanwhile saw very little serious digital investment until the dawn of ecommerce and smart phones in the early 2000’s. Since then, we estimate that total investment spending on consumer facing technology (Facebook to eBay) is at least six times greater than on the supply chain side.

This massively powerful digital toolkit that consumers have at their disposal 24 hours a day on their smartphones means consumer power, expressed everywhere from Amazon
AMZN
to Yelp is jerking supply chains around with demand spikes and troughs that come and go in days. The power of influencers, including sharp marketers, to shape demand is high and still rising. For supply chains who’ve failed to keep up with this newly volatile demand it can be tough to manage inventories, promotions, and delivery promises.

The good news is that hot brand stories drive sales faster than ever, and often without much price sensitivity. Winners can win big.

Supply Chain Synergy and Product Innovation

Investors whacked Smucker’s on the news to the tune of an 8% drop in share price because most thought the acquisition price was too high. That all depends on whether Mark Smucker is right about appropriate brand family fit and complementary channels enabling faster growth. On the first count, it seems logical that iconic comfort brands like Milk Bone, Jif, and Dunkin, let alone Smucker’s itself align in terms of nostalgia driven consumer loyalties. I’m not a marketing guy so forgive my naivete, but if Twinkies doesn’t belong on this list what does?

As for channels, Smucker’s is strong in traditional grocery retail, while Hostess is at home in convenience stores. The potential to cross sell and use mixing centers to consolidate shipments offers a natural way for combined commercial teams to chase growth, assuming case handling is largely the same in distribution. This is a small win in terms of cost savings but could be meaningful in terms of promotions and order management. For impulse purchase items where brand can more easily dominate unit pricing, this growth vector might be a big help as input costs rise.

Most important though is whether Smucker’s can spark product innovation with the Hostess team, which CFO
CFO
Tucker Marshall says is not going to be reduced. I bet the answer is yes in part because Smucker’s plans to keep Hostess plants in the family for the foreseeable future. In foods, this is important since scaling a new formula depends on the often-quirky chemistry of R&D working with plant engineers to get the taste right. Smucker’s is a 125-year-old family company grounded in yumminess first and foremost. They get why people love Twinkies and won’t overthink it.

You Get What You Pay For

Finally, I expect the Hostess team from top to bottom to feel good about this deal. First because the premium price makes some people rich, and everybody proud. Second, because Hostess’ long, weird history includes ownership by such inappropriate corporate masters as International Telephone & Telegraph, so joining Smucker’s will feel like coming home culturally. And finally, because the deal meshes with a zeitgeist where sentimentality for the past matters more than ever to consumers.

Innovation under these conditions should be fun. New product development in an era when mega consumer brands are still casting about for growth drivers is a supply chain job that benefits from being neither too big nor too small. Add the innovation accelerator of generative AI to a nimble, confident, close-knit team and I expect good things.

Smucker’s is playing the long game, to win.