Hostess Brands, Inc. (TWNK) Q3 2020 Earnings Call Transcript

Hostess Brands, Inc. (TWNK)
Q3 2020 Earnings Call
Nov 05, 2020, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Hostess Brands, Inc. third-quarter 2020 earnings conference call. [Operator instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr.

Chris Mandeville, managing director of investor relations at ICR. Thank you. Sir, you may begin.

Chris Mandeville -- Managing Director of Investor Relations at ICR

Good afternoon and welcome to Hostess Brands third-quarter 2020 earnings conference call. Joining me on today's call are Andy Callahan, Hostess Brands' president and CEO; and Brian Purcell, chief financial officer. By now, everyone should have access to the earnings release for the period ended September 30, 2020, that went out this afternoon at approximately 4:05 p.m. Eastern Standard Time.

The press release and an updated investor presentation are available on Hostess' website at www.hostessbrands.com. This call is being webcast, and a replay will be available on the company's website. Hostess would like to remind you that today's discussion will include a number of forward-looking statements. If you will refer to Hostess' earnings release as well as the company's most recent SEC filings, you will see a discussion of factors that could cause the company's actual results to differ materially from these forward-looking statements.

Please remember the company undertakes no obligation to update or revise these forward-looking statements. The company has made a number of references to non-GAAP financial measures. The company believes these measures provide investors with useful perspective on the underlying growth trends of the business and is included in its earnings release a full reconciliation of non-GAAP financial measures to the most comparable GAAP measures. Now, I will turn the call over to Andy Callahan.

Andy Callahan -- President and Chief Executive Officer

Thanks, Chris, and good afternoon. We appreciate you joining us today. Before we get started, I wanted to continue to send my thoughts to all those impacted by the pandemic. Special thanks to the incredible Hostess heroes for the remarkable dedication and commitment on the front lines every day in our facilities, in transportation, grocery stores and beyond ensuring our communities are supportive.

As we continue to deliver strong results, the health and well-being of our entire team, their families and the communities we serve remains our top priority. Hostess is executing very well. I am very pleased with the quality of our results that demonstrate the strength of the Hostess brand with consumers, the strong execution and agility of the team and the benefit of a transformed portfolio with Voortman. More exciting, we are well positioned to sustain profitable growth moving forward.

A couple of points to emphasize the quality of the results that I will talk about more in a minute. Hostess new and onetime consumers are increasingly becoming more frequent buyers at a rate twice the category. Despite overall consumer trips to the store being down, consumers' purchases of Hostess trips are up. Additionally, these consumers are younger and have longer potential for growth overall for the brand.

We do not see a change in the strong at-home consumption in the short term but do see an improvement opportunity in immediate consumption for our single-serve business as consumers gradually become more mobile and retailers adapt front-end checkouts to the new normal. Lastly, we have a terrific innovation slate across Hostess and Voortman as we build the Hostess brand in both breakfast and all-day snacking and extend Voortman into single-serve form, expanding the usage occasion into the convenience channel and entering into an ancient grain-based platform. In summary, we are performing well now and have a high degree of conviction for continued strong results ahead as we remain actively focused on our five foundational pillars: grow the core, growth through innovation, improve through agility and efficiency, cultivate talent and capabilities and leverage our strong cash flow. Now let's discuss some of the numbers.

Net revenue grew 18.5%, excluding the in-store bakery or ISB business. The Voortman acquisition contributed $26.8 million to this growth ahead of our acquisition economics. Core Hostess-branded revenue led our growth versus low-margin value brands, which was disproportionately impacted by bending an independent C-store decline. Multipack sales continue to lead the growth for single-serve given the increase of at-home eating.

However, single-serve revenue did grow this quarter as consumers were on the road over the summer, all while we continue to see elevated demand due to more people eating at home. And as stated previously, we do not see this subsiding anytime soon. As I mentioned before, Hostess has been very successful at gaining new consumers this year, and we are increasing our repeat buyers twice the category rate with repeat buyers of our multipack up 11% and bagged Donettes up over 15% versus year ago, building an even larger, high-quality consumer base. Even better, some of our strongest household penetration and repeat buyer growth is coming from younger consumers.

This gives us confidence in our future growth potential as consumers, young and old, are continuing to demonstrate their preference and loyalty for Hostess products. These trends are supported by our point of sale, which increased 6.7% with a market share of 19.7%. Hostess-branded point-of-sale was up 8.5%, and market share was up 20 basis points, representing continued growth ahead of the sweet baked goods category and demonstrating the strong consumer demand for the well-known and trusted Hostess brand during this time. During the third quarter, we were able to achieve 7.8% point-of-sale growth in the convenience channel despite continued albeit less challenging conditions versus prior quarters.

This was well ahead of the 1% category growth. This drove the highest share position in the history of Hostess in C-store, with an increase of 1.7 points this quarter. Based on our recent market data, the convenience channel trends are showing continued improvement through October. And given our increased share position, we are well positioned to disproportionately grow in Hostess most developed channels as traffic fully recovers.

Turning to our merchandising efforts. The adjustments we made to our programs to address changing consumer behaviors, including the smoothing of our historic back-to-school programs and our Bring Hostess Home for Halloween promotion, are working. The growth of our limited-time offers for fall and Halloween alone was up almost 18% this year on top of our strong summer program, which was up 32% versus a year ago. These programs have resulted in strong year-over-year growth, and we are excited to continue to tailor our programming to best maximize our growth potential as we move forward.

In addition, our marketing efforts are increasing in key areas to accelerate growth, including developing new digital program, which will continue to support our next phase of growth. We are also pleased that our mix initiatives launched at the beginning of the year and the strategic emphasis to prioritize more profitable Hostess-branded SKUs during this period of unprecedented demand have continued to help our industry-leading margins and support our profitability in the quarter. We believe the diversification we have across sales channels, value tiers and now categories with cookies will continue to provide us multiple avenues for growth as we are able to address changing consumer behaviors with our broad-based agile network. As a result of the strategic actions the team has successfully executed during the quarter, adjusted EBITDA significantly outpaced our adjusted net revenue growth with an increase of 29.2% compared to Q3 last year, excluding ISB.

Our adjusted EBITDA growth was primarily due to accretive margin expansion generated from the successful integration of Voortman and strong core Hostess revenue growth. We are very excited to bring a great new slate of innovation to the market in '21, which leverages key consumer insights and trends and is tailored to address our broad channel distribution and capturing new consumer use indications to drive incremental growth. Keenly aware of the consistent and growing trends in snacking, we embarked upon a robust need-states study. We captured the data from thousands of eating occasions and generated insights that give us precise understanding of the sweet snacking landscape.

In addition to understanding the who, where, when and why consumers choose the snacks they do, our insights have covered the unique product and packaging attributes consumers expect from various occasions. With this foundation and knowledge of our category, we have developed new Crispy Minis to tap into the mindless munching need state, which significantly over-indexes with Gen Z consumers and no other brand in SPG is currently addressing. New Crispy Minis are bite size layer wafers filled with cream and topped with icing line priced with the balance of our snacking portfolio to leverage our merchandising scale and backed with outstanding pre and post-use feedback from consumers. We're confident that this need state and format expansion will drive growth for Hostess and the category.

Our innovation slate for breakfast will accelerate our already growing share of this day part. Over the past 13 weeks, Hostess-branded breakfast sales grew 14.3%, bringing our share of the breakfast day part in SPG up 80 basis points to 17.5%. This is behind the strength of our iconic Donettes brand, which is up 14.5%, and the growth of coffee cakes, up 29.3%, led by our new cream cheese coffee cakes innovation. We define this space as morning snacking, and our insights into the occasion and its relationship to our brand is sharp.

Consumers want to joyfully start their day and are increasingly snacking in the morning. AM snacking is driving snacking occasions with early morning snacking, in particular, up four points since '15. Additionally, the share of morning snacks at our suite is up 130 basis points. Our new Baby Bundts tap into a growing form in a great-tasting and first to the retail market execution, and our new Muff'n Stix bring a familiar sweet taste in a more appealing on-the-go snacking form.

Our single-serve Jumbo Donettes are on fire, up over 45%, and we are now bringing consumers a classic glaze option. Building on our bagged Donettes momentum, we are introducing strawberry cheesecake and caramel chocolate flavors. And we continue to build our Donettes on-the-go franchise, which extends our iconic and leading brand into new usage occasions. Additionally, the Voortman innovation engine has started.

While we continue to meet consumers' increasing share of snacking occasion, we are also expanding our better-for-you portfolio under the Voortman brand. We have developed a delicious and wholesome cookie line that leverages on-trend and healthful ingredients to satisfy that need with our new Super Grain cookies. They are packed with real ingredients like real fruit and fiber-rich whole grain oats, rye and buckwheat. The target subsegment for Super Grains is expected to grow at 30% CAGR, more than six times the total cookie category.

This underserved category subsegment appeals to younger consumers with nearly half seeking grain-based cookies. Our 2021 lineup also includes exciting new pack size formats to penetrate new channels and usage occasions. Voortman mega wafers is a large-sized version of our delicious Voortman wafers that's a perfect on-the-go option for consumers in the convenience channel. Based on strong consumer testing and the seamless integration with our highly successful Hostess partnership program, this new product form has seen early strong reception within the convenience channel.

We are excited about the profitable growth potential that lies ahead. As I mentioned above, our LTO program is performing well, and we will continue to keep fresh and consumer relevant. 2021 includes new flavors like Key Lime and S'mores as well as new Cotton Candy Twinkies. We are also excited about expanding the historical Voortman LTO offerings to provide consumers additional opportunities to try new fun seasonal flavors, which are great way to entice new consumers into the brand.

We are thrilled with the expanded capabilities of our new innovation lab, which has served as a critical launching pad for the development of many of these great new consumer insight-driven innovation items and enables fast and efficient product prototypes. Related to Voortman more specifically, we remain confident about the future growth opportunities it provides for years to come. With the transition to the warehouse distribution model and key integration activities largely behind us, we are confident that we will achieve our targeted EBITDA contribution in 2020 of 27 to 30 million, with accretive margins over 30% in Q4. We are pleased that we have been able to achieve year-over-year Voortman POS growth of 2.4%, overcoming a 50% reduction we made in SKU count.

We are now transitioning into the next phase of Voortman's integration as we drive expanded depth of distribution and increasing merchandising. Relatively small gains in ACV can have a very meaningful impact, and there is ample opportunities for growth with our efficient distribution model and great sales team. The Voortman integration has driven significant value for Hostess as it diversified our portfolio, enabled new innovation platforms and added incremental revenue at accretive margins. We remain very pleased with the performance of the team as they have executed the integration and transition with excellence, and we look forward to the future profitable growth we can achieve as we leverage the Voortman brand, its great products, team members and complementary asset base that this acquisition has provided to the Hostess family.

During the quarter, I am proud of our dedicated and talented team who successfully executed an aggressive agenda, including key operational improvements, while keeping our manufacturing and distribution facilities operational in this challenging environment. Our team demonstrated their agility as we made strategic adjustments to our portfolio and merchandising in response to changing consumer behavior. The continued strong consumer demand and successful execution of our operational objectives enabled us to achieve our 11th consecutive quarter of revenue growth. I am confident in the value creation we have ahead, supported by strong organic and inorganic growth potential at sustained industry-leading margins and strong and building capabilities.

Now I will turn it over to Brian to go through the details of the quarter's results.

Brian Purcell -- Chief Financial Officer

Thanks, Andy. I want to reiterate my continued gratitude to our team. Our strong performance in the third quarter continues to demonstrate the team's ability to over-deliver results while continuing to build an organization that has significant opportunities for future long-term growth. Today, I will review our third-quarter 2020 financials and other data from today's release as we think about our business moving forward.

Net revenue for the quarter was 260.9 million, an 18.5% increase, excluding the impact of the sale of the ISB business in August 2019. The increase in net revenue was primarily driven by the acquisition of Voortman, which contributed net revenue of $26.8 million for the quarter as well as strong Hostess-branded revenue growth, which was partially offset by lower-value brand and private label revenue. We have seen a continued upward trend in the demand for our single-serve products, with the third-quarter POS up 2.6%, while continuing to achieve strong double-digit growth in our multipack products. Gross profit was $91.2 million for the third quarter of 2020, and gross margin was 35%.

Excluding ISB, gross profit increased 32.6% from the third quarter of 2019. Adjusted gross profit increased 23.9%, excluding ISB, due to the higher revenue and accretion from Voortman. During the quarter, we were able to expand adjusted gross margins by 153 basis points, excluding ISB, due to Voortman with Hostess margins staying relatively flat to prior year. As expected, operating costs were higher in the third quarter, primarily due to the addition of Voortman.

Our effective tax rate was 20.8% compared to 22% in the prior-year quarter. The decrease in the effective tax rate is primarily due to a discrete tax benefit resulting from a tax law change. Net income was $24 million and diluted EPS was $0.18. Adjusted EPS was $0.19 per share, an increase compared to $0.13 per share in Q3 last year as a result of the accretion from the Voortman acquisition and the higher EBITDA driven by the core Hostess growth.

Adjusted EBITDA for the quarter was $60.2 million or 23.1% of adjusted net revenue. Excluding the sale of ISB, adjusted EBITDA increased $13.6 million or 29.2%. The increase was primarily driven by the addition of Voortman, which contributed $9.2 million of EBITDA accretion for the quarter and the balance of growth coming from strong Hostess-branded performance. The high Voortman margins and strong Hostess brand volume more than offset the continuing COVID-related costs.

We had cash and cash equivalents of $152.3 million and net debt of $953.7 million as of September 30, with a pro forma leverage ratio of four times, factoring in the expected full-year 2020 EBITDA contribution from Voortman. We have made meaningful progress reducing our leverage from 4.5 times following the acquisition at the end of Q1 while continuing to make strategic investments in the business to drive growth, including the investments in our Donette line, our strategic innovation lab and the key integration activities enabling the Voortman transition. While continuing to make disciplined investments for growth, we remain committed to our long-term targeted leverage range of three to four times, enabled by our cash on hand and strong operating cash flows. Additionally, this afternoon, we announced the Board's approval of a $100 million share repurchase program, which provides us another tool to deliver long-term shareholder value with the flexibility to react as we continue to navigate the ever-changing economic landscape.

The buyback program underscores the confidence the board and the entire management team has in the Hostess business, our free cash flow performance with a proven track record of delevering following acquisitions and our ability to drive long-term profitability while enhancing shareholder value. The company continues to be confident that investing in the Hostess business is a great investment. We remain focused on both organic growth and value-enhancing M&A opportunities and intend to continue to prioritize use of cash for those purposes. We are pleased that our financial position provides us with flexibility to opportunistically return capital to shareholders while executing our growth strategies.

Now, moving to our outlook for the remainder of the year. As we continue to navigate the volatile and unpredictable environment resulting from COVID-19, we remain optimistic that we will be able to continue to deliver our expected operating performance for 2020. Assuming no significant disruptions from the COVID pandemic in the fourth quarter, we are raising the lower end of our previous guidance based on the continued strong performance of the business. We now expect our full-year adjusted EBITDA to be between 235 and 240 million, which is at the upper end of our previous guidance of 230 to 240 million.

This includes our expected Voortman contribution of 27 to 30 million, an increase compared to our prior range of 25 to 30 million. We expect to achieve adjusted EPS of $0.73 to $0.75 per share for the year, up from our prior guide of $0.70 to $0.75 per share and expect to maintain our leverage around four times at the end of 2020. We remain confident in our underlying business fundamentals, which support our ability to achieve our long-term financial objectives, including organic revenue growth, adjusted EBITDA margins and free cash flow conversion in the top quartile of our peers. With that, I will turn the call back to Andy for closing comments.

Andy Callahan -- President and Chief Executive Officer

Thanks, Brian. We have consistently executed a tested and proven playbook, which has driven sustained growth, and our year-to-date performance has proven no different. I am very proud of Hostess perseverance and nimbleness in this dynamic operating environment. Our foundation to grow was strong, and we have never had more opportunities to strategically invest in the business for profitable long-term growth.

Looking ahead, I am confident in our operational excellence, innovation and market position as we enter the last quarter of the year. With our strong cash flows, we continue to reduce our leverage and have many available levers to activate growth, including strategic acquisitions, while also providing the flexibility to opportunistically return capital to shareholders with our new share repurchase program. We enter 2021 in a strong position to drive continued industry-leading revenue growth and industry-leading margins and the determination and commitment to increase shareholder value. With that, Brian and I are available for your questions.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from the line of Ken Goldman with JP Morgan. Please proceed with your question

Ken Goldman -- J.P. Morgan -- Analyst

Hi. Thank you. Good afternoon, everybody. I wanted to ask -- Andy, you sounded, I thought, pretty optimistic or confident about how Halloween would turn out both in terms of sell-in and sell-through during the quarter.

I was just wondering how that holiday went for you, how you generally think it went. I know it's not the biggest deal for Hostess, but just curious, any insights you can provide would be helpful.

Andy Callahan -- President and Chief Executive Officer

Yeah. Thanks for the question, Ken. I was confident and I'm confident, and I'm actually pleased with the results. We talked last quarter about smoothing out our merchandising.

And what we're seeing is a stronger everyday at-home consumer base. And our theme around Halloween and credit off to our marketing and sales team who ride away in the pandemic shifted some of the messaging to Bring Hostess Halloween Home around usage at home and around parties, and that served really well. Our limited-time offerings around Halloween, our ScaryCakes and others, GloBalls. The enrollment on those were up mid-single-digits, 15%.

And as you can see from the numbers, the takeaway continue to be strong. So, very pleased with that. Our multipack -- the percentage of consumers for our multipack business are up 5%. That's households.

And the repeat of all of those are up even higher, up twice the category. So, I feel really good about the quality of our consumer and then the enrollment of them as everyday consumers and network certainly worked around Halloween as well.

Ken Goldman -- J.P. Morgan -- Analyst

OK. And then, my follow-up, I think it's not a very big secret or not a very -- it's a well-understood secret, I guess, that one of the things holding the stock back is that there's a pretty large shareholder who has been selling, and there's some concern that this individual will continue to sell. Is the share repo program in part designed to allow you to purchase shares from particular large holders? Or is it really more designed for -- hey, if there's just an opportunity, stock might be cheap, there's not an M&A opportunity on the table right now, so just be a little bit more tactical about that. I'm just trying to get a better sense of sort of what inspired at this point the board to go in that direction.

Andy Callahan -- President and Chief Executive Officer

Yeah. As Brian mentioned in his remarks, we believe our -- how fast we're delevering. It gives us the opportunity to provide flexibility to invest our dollars in where we think are the greatest values. We believe any time we invest in our stock, it's a great value.

We believe that's a good investment for us to create value, and that's available for all shareholders. So, we haven't purchased any shares yet, but it's available to purchase opportunistically as we see it's good value. And it should support the stock. Anything to add to that, Brian?

Brian Purcell -- Chief Financial Officer

No. I think it's right. It's available to all shareholders. And just a quick context that I mentioned, we still believe that investing in the business, opportunistic M&A are good uses of cash.

But this just gives us some additional flexibility to return capital to shareholders when the time is right. So, it's available to all shareholders, to Andy's point.

Andy Callahan -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Rob Dickerson with Jefferies. Please proceed with your question.

Rob Dickerson -- Jefferies -- Analyst

Great. Thank you very much. So, I guess the first question, I just wanted to focus a little bit on Voortman and the white space opportunities you pointed to fairly especially in the C-store channel because it sounds like that's where just the upfront push is on the revenue synergy side. So, I guess the first question is yes, as we think about next year, the next two years, it's fair to say that, yes, the innovation that we have put forth is primarily going to -- are going to push upfront for low-hanging fruit within C-stores.

And then, kind of, I guess, my follow-up question would be, how much more opportunity is there with Voortman as is or new innovation in mass, club and grocery because there's that one slide where you show just the delta on share. It seems like where you're picking up share is not in mass, club or grocery. It's really the C-stores is what's driving your home.

Andy Callahan -- President and Chief Executive Officer

Yeah. So, going forward -- so just as a foundation, we primarily have that distribution in grocery. Since we've integrated, we've expanded distribution in dollar. We currently do not have distribution in convenience channel.

We're launching -- and the selling, I might add, is going extremely well for our mega wafer, which is more on-the-go, single-serve and fits in that format. With that being said, Rob, we have a breadth of growth and innovation, I think, vectors for Voortman that I feel really, really good about. We're the #1 sugar-free brand within cookies. That is growing extremely well.

We believe there's opportunity to continue to expand that and grow it. And sugar-free is growing very well, as there's some recent industry reports coming out. We also have opportunities to grow our breadth and depth of distribution on our core business, which, as we look at this year, is also going well. So, absolutely, convenience is a large opportunity, as you stated.

But it's one of several growth opportunities we believe we have on Voortman business. Feel terrific about the go-forward business and growth.

Rob Dickerson -- Jefferies -- Analyst

OK, super. And then, I guess just quickly on the repurchase piece, I know Ken kind of asked the question, but I will sort of come in a different way. It's just you said in 2021, but as you delever, you expect to hopefully be generating some excess cash to and then absent M&A opportunities, that you could find opportunistically. I guess, to be more direct, it sounds like, yes, like we're probably going to be buying back some stock from now until year-end '21.

I'm just asking for modeling purposes because if you don't buy it back, we don't want people to be modeling that you will. I know it's authorized but trying to get a feel if you're actually going to be buying back stock.

Andy Callahan -- President and Chief Executive Officer

Yeah. I think, so for us, the way we're looking at this is with Voortman behind us, we are generating -- and all the transition costs behind us, right? It's -- and we're just kind of looking forward. And roughly, if you look forward out to next year, we can delever almost a full turn. And in terms of use of cash, as I mentioned, you still have -- M&A is a viable opportunity for us as we delever.

Investing in the business is a viable opportunity. We're not -- I think announcing the program, we haven't bought anything back as of yet. It's certainly -- we could at any time. To this point, there's nothing specifically that we're -- any amount that we're saying or time frame that we're limiting ourselves to.

It just gives us additional flexibility. And so we've got that flexibility in Q4. We've got it going forward and feel good about the ability to execute on that in addition to any opportunities such as M&A that might present themselves?

Rob Dickerson -- Jefferies -- Analyst

Fair enough. Thank you, guys. Good job.

Operator

[Operator instructions] Our next question comes from the line of Pamela Kaufman with Morgan Stanley. Please proceed with your question.

Pamela Kaufman -- Morgan Stanley -- Analyst

Hi. How are you?

Andy Callahan -- President and Chief Executive Officer

Hi, Pamela.

Brian Purcell -- Chief Financial Officer

Hi, Pam.

Pamela Kaufman -- Morgan Stanley -- Analyst

Hey. So, it came up a couple of times throughout the call that you're adapting your product assortment to adapt to consumer demand in the current environment. And I think that, I guess, Halloween is one example of how you've done this. But can you kind of talk about other areas or ways in which you're adapting to demand? And are these going to be permanent changes to the way that you manage your product lineup?

Andy Callahan -- President and Chief Executive Officer

Yeah. Thanks. Thanks for the question, Pam. So, we have a couple of things that we've done.

We've taken some of the tail end of our portfolio, and we've simplified some of the flavor assortment in the back end so that we could produce some of the highest demand items. We've obviously shifted the mix from multipacks to a little bit more mix into multipacks as our single-serve business was -- has been down. But we've certainly mixed more aggressively on some of the shared lines from our value tiered brand to Hostess brand. Relative to merchandise, we see that we are becoming increasingly part of the planned purchase behavior.

So we have smoothed out some of the merchandising from shippers, programs and big events to more everyday events and engaging consumers online in that regard. So, it's more just the flowing through the demand of our portfolio to the production of our portfolio and tailoring our merchandising program that way. So, it's driven -- and it's been a quick change, as you can imagine, but it's helped drive some efficiency, optimized our output. And we expect some of these to maintain, as I mentioned in the -- earlier, we see -- although single-serve and the traffic at C-stores has somewhat plateaued after an increase in the summer, we expect that to eventually come back.

That opportunity's still in front of us. And I would also expect the behavior that we're driving with consumers in home. Although we're eventually going to open up the economy, I think there's a lot there that's going to stay in the in-home occasion and the new consumers that we've been able to gain for Hostess. So, we've certainly smoothed out the merchandise and simplified the portfolio, maximized the output, and I think it's paying dividends now and will going forward.

Pamela Kaufman -- Morgan Stanley -- Analyst

That's helpful. And as I follow up, I was hoping you can give an update on how you think about the opportunity to grow in breakfast. How do you define the breakfast category? What do you see as your addressable market relative to other categories that are within breakfast? And how are you targeting this day part through marketing innovation?

Andy Callahan -- President and Chief Executive Officer

Yeah. Yeah. So, breakfast specifically is unique. And I talked about it.

For where we compete, it's actually a morning snack, but it has a basic simple attributes around breakfast that are different and sweets growing even greater. If you look at the total snacking landscape, it's very large. Consumers have a lot of options. They have savory options, and they have sweet options.

I mean snacking, in total, is a $150 billion market. And breakfast is about one-third of that in total but growing at a greater pace. So, we view this -- the breakfast -- our portfolio that goes into breakfast is our snack cakes, our Donuts and Donettes, our bag size large Donettes. Just within the Sweet Baked Goods category, our share is underdeveloped versus our total portfolio.

We've grown that over $70 million just in the past several years by outpacing the breakfast category. So, we're innovating by bringing unique items that have a specific Hostess twist, that contemporizes the brand and give consumers an option to choose. We've launched coffee cakes. We launched Donettes on the go to address where they're coming in.

As you know, we launched Jumbo Donettes, and we said that's on fire. We're coming out with contemporary brands. And we're continuing to mine our innovation and our insights to have more ideas going forward. So, feel good about bringing contemporary forms that fit with the equity of the Hostess brand and meet what consumers are looking for within breakfast where what we define is that AM snacking occasion, which, as I mentioned before, is growing greater than total snacking, and sweets is growing faster than all other forms within that occasion.

Pamela Kaufman -- Morgan Stanley -- Analyst

Thank you. That's helpful.

Operator

Thank you. We have reached the end of our question-and-answer session. I'd like to turn the conference back over to Mr. Callahan for any closing remarks.

Andy Callahan -- President and Chief Executive Officer

All right. Thank you. I know it's a very busy time with a lot of earnings calls here, so I appreciate all the questions and look forward to any follow-ups. But I want to thank everyone really for your participation and interest in Hostess, but most important, I'd like to thank the dedicated team and their tremendous efforts to maintain high-performance culture at Hostess in this dynamic operating environment.

Our core capabilities give us confidence that Hostess will emerge from this time stronger, and we're in a better position for long term and sustainable growth. Everybody, have a great day, and thanks sincerely for your interest in Hostess.

Operator

[Operator signoff]

Duration: 45 minutes

Call participants:

Chris Mandeville -- Managing Director of Investor Relations at ICR

Andy Callahan -- President and Chief Executive Officer

Brian Purcell -- Chief Financial Officer

Ken Goldman -- J.P. Morgan -- Analyst

Rob Dickerson -- Jefferies -- Analyst

Pamela Kaufman -- Morgan Stanley -- Analyst

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