Hostess Brands, Inc. (TWNK) Q1 2021 Earnings Call Transcript

Hostess Brands, Inc. (TWNK)
Q1 2021 Earnings Call
May 17, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Greetings. Welcome to Hostess Brands' first-quarter 2021 earnings conference call. [Operator instructions] Please note this conference is being recorded. I will now turn the conference over to Chris Mandeville with ICR.

Thank you. You may begin.

Chris Mandeville -- ICR

Good morning, and welcome to Hostess Brands first-quarter 2021 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 March 31, 2021, that went out this afternoon at approximately 7:05 A.M. Eastern 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's 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 materially differ from these forward-looking statements.

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

Andy Callahan.

Andy Callahan -- President and Chief Executive Officer

Well, thank you, Chris, and good morning. We appreciate you joining us today. I'd like to begin by offering a few highlights from our first-quarter performance to emphasize and reinforce the strength of our business. I will then turn it over to Brian to discuss our financial results in greater detail, and we'll wrap it up with a discussion of our outlook before opening it up to you for questions.

In short, Hostess continues our strong profitable growth with our 13th consecutive quarter of revenue growth in the first quarter and very strong momentum leading into the second quarter. I am extremely proud of our entire team of Hostess heroes' execution in a fluid environment. Our results are a testament to the strength of the Hostess and Voortman Brands, our leading position in consumer snacking occasions, the impact of our insight and data investments, our latest marketing and merchandising efforts, and the remarkable talent who execute against our proven playbook on a daily basis. Underpinning these very strong results and building momentum is the outstanding execution of the Hostess supply chain who are executing today to service our consumers and customers while building the foundation for continued profitable growth tomorrow.

We are consistently and profitably growing, and our solid foundation is getting stronger. A few takeaways to highlight our quality results before I provide greater color on the quarter. Net revenue grew 9% with our Sweet Baked Goods sales contributing 5 points and our Voortman contributing 4 points to total growth. Sweet Baked Goods' point-of-sale was very strong, up 8.7%, once again led by our Hostess branded growth of 10.6%.

The growth resulted in 163 basis points of market share gains across multiple channels, demonstrating our strength and growing consumer occasions and the benefit of our broad-based distribution model. On a two-year stack basis, we had point-of-sale growth of 13.7% versus the category of 5.8%, exemplifying our continued strong consumer demand and successful execution, both before and during COVID. Consumer mobility is increasing, and in-home snacking occasions remain elevated, providing a solid foundation for continued strong growth. Voortman continues to deliver strong growth as well with net revenue up over 60% year over year as we lap transition from the direct store distribution model in the prior year and drive increased distribution and velocities.

Total Voortman point-of-sale achieved 18.3% two-year stacked growth, as compared to 7.8% growth for the cookie category, demonstrating again the strong performance in faster-growing snacking subsegments. Insights and quality innovation are driving improved contribution of new products versus a year ago. LTOs are also contributing nicely to overall results. Additionally, Q2 has two big launches with Baby Buns and Crispy Minis, which are both off to a good start to help continue their momentum.

Our small format success in the quarter was simply remarkable. We touched new highs in market share for C-store, Dollar, and Drug with year-on-year share gains of 327, 786, and 570 basis points, respectively. The strategic decision to drive shelf and customer expansion, our consumer-focused innovation created for the needs of the channel, and our advantage warehouse distribution model helped drive these impressive results. We are positioned for continued growth as mobility increases, consumers are vaccinated, and communities lift the restrictions.

Now on the innovation. Our very strong three-year innovation pipeline, which leverages key consumer insights and is tethered to fast-growing consumer usage occasions is performing very well to start 2021 and has been a strong contributor to our performance of the Sweet Baked Goods category, while Voortman's innovation is realizing steady distribution gains. These offerings are more incremental and more profitable than previous years, and we expect them to drive us toward our 15% vitality target rate by year-end. Shifting to occasions.

Hostess breakfast products continue to perform tremendously well with point-of-sale growth of 17.6%, growing our share of breakfast and Sweet Baked Goods by 290 basis points to 20.5%. Strong growth of Hostess coffee cakes, including our new cream cheese flavor, updated packaging for our multi-pack Danish, as well as our early introduction to the market of our Baby Buns at select retailers are all resonating with consumers. These initiatives build off previous successful launches like Donettes snack packs and based breakfast item core growth across Donettes, Honey Buns, and Danishes. Grounded in our consumer insights and strategic investments in the on-the-go consumer, innovation specifically curated for convenience has proven critical to our success.

During the quarter, we launched Pecans Spins and Muff'n Stix with positive early consumer reception. C-store retail partners are showing good interest in our Voortman mega wafers. And in recent weeks, we launched our Crispy Minis with a key national chain. Again, heading into the all-important summer driving season, we are confident that our core business strength and new products position us well to capitalize on increased mobility as the economy continues to reopen.

Longer term, we believe we have a best-in-class innovation pipeline tailored to both on-the-go and eat-at-home snacking occasions. We are focused on four key strategic growth priorities for innovation that will help deliver sustainable growth. Invigorating our icons, growing household penetration with young families, continuing to C-store consumer growth, and establishing Voortman's distinct positioning to optimize growth potential. Underpinning the remarkable results this quarter is the success of our marketing and merchandising efforts.

We continue to drive incremental growth through our strong Hostess partnership program in the Convenience channel as we are able to leverage the data and insights we have mined to maximize our sales and profit for our retailers. These strong partnerships have been instrumental in managing through the evolving consumer demands over the last year and helped steadily increase our leading market share in the Convenience channel. We are seeing the benefits of these partnerships pay off and expect this to continue. Our Dollar channel performance is impressive.

Our Dollar channel point-of-sale grew 36.5% in the quarter as we grew share 786 basis points, driven by revitalized shelf set, expansion of our breakfast platform, and continued strong partnerships, and customer service. We continue to work with our partners in the Mass channel to develop programs that are mutually beneficial and have seen sequential improvements this quarter as we implement new changes to our product assortment and merchandising programs. We have iconic brands that consumers love. As we look forward, we are committed to building on our great foundation through targeted, proven marketing investments that we are confident will deliver incremental growth.

To that end, we executed a handful of e-commerce advertising trials during the quarter with very encouraging results. We are pleased that each of our trials delivered a return on advertising spend and response rates well above benchmarks, providing us the confidence that future programs can drive growth and unlock another lever in our already-formidable growth toolbox. Our merchandising efforts for Voortman are also beginning to pay off as total Voortman point-of-sale grew 8.7% in the quarter, fueled by accelerated growth of sugar-free, which grew 18% year over year. Contributing to the strong point-of-sale growth is the increase in our total Voortman ACV, which we have grown by 6 points since the acquisition, with good improvement across all channels, particularly within the Grocery channel, which expanded by 9 points.

We expect to continue to drive growth in Voortman as we introduce more innovation and drive awareness with targeted marketing programs. We also continue to make great strides in our ESG initiatives. With have embedded ESG goals into our operating model, including the continued focus on retention and diversity. We were also thrilled to add two new board members to our board of directors, Olu Beck and Hugh Dineen, who bring with them a wealth of experience and knowledge that will be very valuable to our organization as we move forward in our journey.

We also continue to build our management team, and last week, announced the addition of Dan O'Leary as our chief growth officer. Dan brings valuable experience of having profitably grown, iconic brands at Kraft, Mizkan, and Tyson Foods, where he was most recently the senior vice president and general manager for Tyson Prepared Foods. We are excited to have Dan on board to help drive our important growth initiatives. Hostess once again delivered industry-leading revenue growth at leading margins.

We closed Q1 strong and are headed into Q2 with momentum. Although early in the year in this dynamic market, we are very well-positioned to deliver on our full-year guidance. We will continue to prioritize the safety of our dedicated and loyal employees, while we execute with agility and efficiency to continue catering to consumer needs in a highly profitable manner. And with that, I'll turn it over to Brian to go through the quarter's financial results in greater detail.

Brian Purcell -- Chief Financial Officer

Thanks, Andy. It's a privilege to speak to another quarter of strong results. As Andy mentioned, this represents another quarter of robust growth underscoring the power of our brands and the strength of our business model. Net revenue for the quarter was $265.4 million, an increase of 9%.

This increase in net revenue was fairly balanced between continued strength in Sweet Baked Goods with 5 points of growth and Voortman contributing the remaining 4 points of growth. The Voortman growth is primarily due to a favorable lap on timing of shipments as we transition from DSD to the warehouse model in 2020. We saw POS growth in Sweet Baked Goods across both single-serve and multipack sizes. Our single-serve POS growth accelerated to 10%, driven by our strong performance and convenience where we saw share gains of approximately 330 basis points.

Our multi-pack and bagged donut business grew 7.6%, despite our lapping of last year's COVID bump at the end of the quarter, driven by continued growth in the grocery and Dollar channels. Importantly, point-of-sale growth is driven by share gains across the business. Gross profit was $95.5 million for the quarter, while gross margin came in at 36%, 140 basis points higher than the prior-year period. Approximately half of the realized margin expansion was driven by favorable mix in our core Hostess business, and the remainder was the result of the achievement of Voortman synergies and productivity efficiencies.

As we anticipated, operating costs were notably lower in the first quarter, down 24.5% to $48.5 million due to prior-year expenses incurred for the integration and conversion of Voortman's operations and the realization of synergies. Our effective tax rate excluding discrete items was 27.3%, compared to 23.6% in the prior-year quarter. The effective tax rate for the prior-year period was impacted by the write-off of deferred taxes related to Voortman and the allocation to the noncontrolling interests, which was eliminated in the fourth quarter of 2020. Net income was $26.7 million and diluted EPS was $0.19.

Adjusted net income and EPS were $26.9 million and $0.20 per share, an increase of over 40% versus the prior-year period as a result of higher volume and operating efficiencies, including accretion from Voortman. Adjusted EBITDA for the quarter was $62.5 million or 23.5% of net revenue compared to $51 million or 20.9% of net revenue in the prior year. The increase was driven by strong Hostess-branded volume and favorable mix, as well as $8 million higher Voortman, adjusted EBITDA as a result of higher revenue and operating efficiencies from the integration and transition to the warehouse model during 2020. At the end of the quarter, we had cash and cash equivalents of $197.8 million and net debt of $925.8 million with a leverage ratio of 3.6 times, down from 3.9 times at Q4 2020, driven by our strong operating cash flow growth.

Turning to our outlook. Given the strength of how we started the year, we are increasingly confident in our ability to achieve our full-year guide. We continue to expect to drive net revenue growth of 3% to 4.5% and expect adjusted EBITDA between -- to be between 255 million and 265 million with adjusted EPS of $0.80 to $0.85 per share. Looking forward, we feel confident in our ability to manage margins as we move through the remainder of the year.

We have good visibility to balance costs with pricing and productivity. Additionally, we are seeing strong consumption across our portfolio, namely in the convenience channel, which is benefiting our single-serve mix. From a balance sheet perspective, given healthy cash on hand, strong fundamentals, and increased operating cash flow as we lap transition costs related to Voortman, we feel confident that our leverage will approach three times by year-end, absent M&A or any material buyback. As we delever almost a full turn in 2021, we continue to make strategic investments in the business to help support future growth, such as the investment in our new cake line, which remains on track for a ramp-up in the back half of the year.

Longer term, we remain committed to investing for growth and generating shareholder value. We are excited by the opportunities ahead of us and confident in our team's ability to deliver. With that, I will turn the call back to Andy for closing comments.

Andy Callahan -- President and Chief Executive Officer

Terrific. Thanks, Brian. Hostess is well-positioned to deliver sustained strong growth throughout 2021 and beyond. Hostess has leading positions in snack occasions and mead states that are growing ahead of overall snacking, propelling our growth, and providing a solid foundation for sustained growth.

In 2021, we expect in-home snacking with indulgent and well-known brands will continue at elevated levels as consumers simultaneously increase their mobility, increasing the demand for Hostess on-the-go occasions. The strength of our brands, breadth of our availability across channels, and agile business model positions Hostess to realize this opportunity. Our track record of consistent execution, clear ability to innovate and grow through successful acquisitions like Voortman, in addition to the strong consumer affinity for Hostess brand, is foundational to capturing this industry-leading growth. We will continue to work to build on our consumer and customer foundations going forward.

We are deeply committed to shareholder value creation and sustainable, profitable, long-term growth. As we move forward, our strong and growing cash flow positions us well to unlock shareholder value. We will continue to reduce our leverage, reinvest in the business to support industry-leading growth at industry-leading margins while maintaining the flexibility to opportunistically pursue strategic acquisitions, as well as enhanced shareholder returns. We remain stewards of capital, and we'll always strive to optimize shareholder value.

And with that, Brian and I are available for your questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question is from David Palmer with Evercore ISI. Please proceed.

David Palmer -- Evercore ISI -- Analyst

Thanks. First question would be on the reinvestment levels that you're making and the nature of those reinvestments. I think you mentioned data and analytics. I don't know about the marketing and advertising part of that, but if you could give us a sense of how much you reinvested in the quarter and generally what your expectations in your guidance entails or includes in terms of reinvestment this year? And I have a follow-up.

Andy Callahan -- President and Chief Executive Officer

Yeah, David, I'll take that. Thanks for the question. We've been investing and building that foundation, you know, for years, and it starts with really understanding the way we build our businesses, understanding the consumer. So we've invested in understanding occasions, drivers of occasions, quantifying those occasions.

We started by just understanding our customer shelf set early. If you remember, one of my first calls, one of the first decisions I made was an investment in more data around convenience store shoppers and how they shop, how it flows through, what are the incrementality of the convenience channel, and that's paid off well. We've done similar across the board in shopper, then we moved up to consumer. And then, we have even greater insights over the last year around consumers.

We've also taken that and then invested a lot under Tina, our head of innovation and growth, and now with Dan coming in and the great team that we built around that, of understanding our consumer investment. This quarter, we've invested in the e-commerce marketing, as well as test in both Voortman and Hostess. And we're taking a build as we go. We're now -- as we go forward, there are some modest investments.

You'll see them come through on the SG&A line as we move out. I'll let Brian kind of talk about that. But we do it concurrent with our growth. And we do it in a way that when we validate that it's very successful.

Then when we look forward, when that happens, we'll continue to build it. But the good news for us is we don't have -- I've lived in large businesses that had a deep, you know, heavy spending that was inefficient, and it was a lot and you had to build off it. We have all that growth in front of us. So we're really excited about validating and then investing in our customers and in our consumers to continue to drive growth.

So that's mostly where it is. It's around foundational on consumers and then testing it in the market with some modest increase. And when we get to the point where we really believe that it's going to, you know, continue to drive our growth, that's another lever we have. Brian, anything to build on that?

Brian Purcell -- Chief Financial Officer

Yeah. Just a couple of quick numbers. I mean, if you look at our advertising and marketing expense, we were up about $1.5 million to $2 million versus prior year. Last year, we kind of ramped up A&M spend.

So it was largely in line with Q4, just kind of year on year. So there's some incremental investments we're making there. There's a little bit that hits G&A as well, just to complement what Andy's talking about.

David Palmer -- Evercore ISI -- Analyst

Great. Thanks. And then just some color on gross margins. I mean, you can see that a lot of companies in the first quarter had headwinds with regard to supply chain headwinds of weather and whatnot mid-quarter.

Could you maybe talk about whether you had those? And then thinking through the year on the gross margin line, we could see a tailwind from your mix with the on-the-go growing, but also perhaps some gathering headwinds in terms of input costs. So any thoughts about how we should think about gross margin cadence versus this quarter would be helpful. Thanks.

Brian Purcell -- Chief Financial Officer

Sure, David, I'll take that. So yeah, if you look at Q1, we expanded margins both in the base business and also with Voortman. Voortman was largely a function of the timing lap when we, you know, transitioned from the warehouse -- or the DSD model to the warehouse. So we expanded margins roughly 140 basis points.

And, you know, if you look at our mix is driving a chunk of that in our business. The volume that we're seeing, we're seeing absorption, and we're getting some productivity. So those items, we are seeing inflation. But those items are offsetting inflation to the point where we're actually expanding margins.

I would say as we look forward to the year, I would expect, you know, sort of neutral-ish to, you know, maybe a little bit of favorability from a margin standpoint based on the visibility we have with pricing and productivity to offset inflation. We are seeing inflation. We are seeing certain areas tick up a little bit more than we thought at the beginning of the year, but we're pretty confident that we can offset that with pricing productivity and mix. One call out, just to remind everybody, is we did have very elevated margins in Q2 of last year, driven by Voortman when we did the transition to the warehouse model in April.

We got a big pipeline filling a lot of production efficiencies. So I would actually expect Q2, driven by Voortman and the lap on margins there, to potentially be a headwind in Q2 and then the balance year, as I said, I think that we can offset inflation with pricing productivity and mix.

David Palmer -- Evercore ISI -- Analyst

Great. Thank you.

Operator

Our next question is from Ken Goldman with J.P. Morgan. Please proceed.

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

Hi. Thank you. Two for me, if I may. You know, obviously, your total share is doing great.

It's also good to see that your, you know, share losses in the mass channel are sequentially diminishing. Andy, you do have some fairly easy comps in those shares or the share story in the mass channel ahead. Is it fair to assume that as the year progresses, you'll start to regain share with these customers? Or how do we think about that? Is it just going to be share losses at a lower level? Just trying to get a sense of what we should be looking for in some of the, you know, the measured data that we get.

Andy Callahan -- President and Chief Executive Officer

Yeah. So just across the board, you know, maybe a comment, we've talked about this. One of our strengths is our broad-based distribution and our agile model. So we expect, overall, to continue to grow our business.

And one of the reasons why we grow share isn't just because of channels, because we continue to innovate across a broader snacking spectrum. We're committed to investing in category growth. We're doing it with innovation. We do it with the insights.

We do it by investing in capacity. We do it by investing in consumer. So we're continued to invest in growing capacity and we're continuing to invest in sustainable long-lasting partnerships with all of our customers. I expect that true in the mass channel, expected in convenience and food across the board.

So over time, I would expect us to grow share. Now, at any given one channel at any one time, we may. The headline is, yup, I expect to continue to see improvement. COVID impacted every channel and every model differently.

So we're investing and we're committed to investing in making sure that we continue to grow and solve our consumers' problems, and do that in great long-term partnership with all of our customers. And over time, yes, I would expect us with that model and our brands and our team to continue to grow share. And I would expect that to happen in every channel. And maybe not one quarter for one month.

But over time, absolutely, we would expect us to continue to see growth-share because we're committed to investing in the category growing, and that's what customers expect from us. And we're making really great progress across the board in this channel you brought up. Thanks, Ken.

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

Yeah. OK. OK. So thank you for that.

And then, Brian, I think last quarter, if I'm not incorrect, you mentioned that all in, your cost inflation will be somewhere in that 2.5%, 3.5% range. Either you talked about some inflation having picked up. What's the range you're looking for now? Is there an update on that number?

Brian Purcell -- Chief Financial Officer

Yeah, so I think, you know, in total, we're -- our guide, overall, remains in your guide. We do see certain areas of inflation a little higher than kind of what we saw at the beginning of the year. So, for instance, transports up a little bit. We're looking at a pretty dynamic labor situation, which a lot of companies, you know, in the space are looking at as well.

So we're monitoring that. But we also feel great about, you know -- so we do think inflation is ticking up a little bit versus what we saw originally at the beginning of the year. But again, I think we also get better visibility on pricing, the price increases we've been selling in. We've got a good visibility of our productivity pipeline, and our mix is working for us, as we talked about in the upfront comments.

So collectively, we feel good about our -- the ability to manage that in line with where we guided, you know, the implied EBITDA guide that we give.

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

OK. Thank you.

Operator

Our next question is from Rob Dickerson with Jefferies. Please proceed.

Rob Dickerson -- Jefferies -- Analyst

Great. Thanks so much. I guess just to follow up on the pricing question dealt with you do have this good visibility, maybe you are even already starting to sell in some. But just with respect to, you know, I guess any color around, you know, magnitude and timing.

We've heard a lot of companies kind of speak more to the Q3 time period. So why I just kind of want to get an idea of how you or how you think about the phasing of this pricing as we go through the year? And then, obviously, I understand for competitive reasons you're likely not going to tell us exactly what that pricing is. But just trying to gauge, when you talk about pricing, is this, you know, similar to what you have seen in the past, maybe a little bit more or a little bit less, anything you can provide would be really helpful. Thanks.

Brian Purcell -- Chief Financial Officer

Yes. So from a -- I'll take that. Yeah, from a timing standpoint, and then Andy can just add color on the selling process and the like. We're expecting to see the pricing take hold in the back half of the year, so really kind of starting in the Q3 timeframe, the beginning in Q3.

So we're, you know, we're still in the process in different channels of the sell-in, so can't give you kind of the exact number. But we're -- from a timing standpoint, we expect the beginning of Q3 to -- for the pricing to take hold.

Rob Dickerson -- Jefferies -- Analyst

Got it. OK. Fair enough. And I guess, Andy, just curious, you had a number of comments around driving shelf, right, especially in the smaller format stores.

And I think you mentioned maybe a couple of LTOs coming in Q2. Would you say there's, you know, anything mildly different kind of with the go-to-market strategy as you try to drive revenues, not only in mass but also in smaller format stores just given the shift in mobility, like you view this as, you know, this is a core opportunity for you to make sure you're taking share of stomach and share of market? Thanks.

Andy Callahan -- President and Chief Executive Officer

Yeah. Just a couple of things. Thanks. Appreciate that -- your comment, Rob.

As I mentioned earlier with David's question, I believe our insights and our understanding of consumers' occasions are sharper. They continue to build. And taking that, we're able to tailor innovation much more specifically to a need of an on-the-go consumer versus maybe a multipack purchase that brings home for a snacking occasion, either brought from home or in-home. All of those occasions are increasing.

And the occasions in which our business is more highly developed and where we have assets that consumers are looking for are also growing at a greater rate than total snacking, which is why when we execute our playbook very well. We grow the category and are able to grow share. So -- and going forward, one of the things that we've done that is different is we have more tailored innovation like the constant and other things that are -- the flavor's curated or the actual ideas more on-the-go consumer. And then we have, you know, Baby Bundts; obviously Crispy Minis, which are off to a great starts; mega wafers, which is expanding Voortman into that on-the-go occasions.

And they're all designed for this more or more tailored for the specific needs state. And then we're taking -- as Brian mentioned, we're taking early steps to finding that consumer who is looking for, talking to them in advertising, either through our customer channels or be at some other consumer methods. And we're testing that. So we're getting feedback on that.

So we're trying to put together and successfully put together an ecosystem that very efficiently be able to find the consumers we want in the occasion they want, and then be able to invest in that consumer to grow it. That's a flywheel of growth and that's what we're building.

Operator

Our next question is from Ryan Bell with Consumer Edge Research. Please proceed.

Ryan Bell -- Consumer Edge Research -- Analyst

Hi, morning everyone. Could you talk a little bit about your expectations for the future of indulgence practice? It's clear there's been a benefit to the at-home breakfast category given the pandemic. How do you think about it going forward? And then maybe as we start to get into a bit more of a normalized environment, what some incremental work from home could mean about that occasion going forward?

Andy Callahan -- President and Chief Executive Officer

Big fan of in-home breakfast. Consumers love Hostess during the breakfast occasion. We call it AM snacking. So there's different occasions in need state around breakfast.

If you remember about, you know, I guess it was about two and a half to three years ago, we made a commitment to the occasion and our research has continued to demonstrate that breakfast is going to grow at a greater pace. We were underdeveloped in that occasion. We're now fair shared and continued to grow our breakfast share. We were up in breakfast above 15% in the quarter, driven by a lot of those initiatives that we took.

As we come out of this COVID environment, we do expect obviously mobility to increase. We do not expect in-home occasions of snacking to go down to pre-pandemic levels. We expect them to maintain, continued to be elevated at some level. And as a result, the investments we've made in that breakfast occasion in-home we expect to -- our position to be very well.

We'll continue to innovate around there, and we expect to continue to have that occasion specifically that be a meaningful contributor of growth both because of our core items and because of the innovation that we'll bring to the occasion.

Operator

Our next question is from Bill Newby with the D.A. Davidson. Please proceed.

Bill Newby -- D.A. Davidson -- Analyst

Hey. Good morning, guys, and congrats on a great start to the year. I just -- maybe, Andy, you touched on a little bit at the end there, but I wanted to ask a little -- another follow-up on just the category growth. And I mean, if I look at multipack this quarter, I mean, still very strong growth there, especially after a difficult comp, and I guess a lot of talk about where the sweet baked good category is going to go post-COVID and whether it will kind of fall back into that low single-digit range or not.

I guess is this growth that we're seeing in multipack kind of an indicator that maybe we can sustain above that range a little bit longer? And I guess I appreciate any further thoughts there.

Andy Callahan -- President and Chief Executive Officer

Yeah, I believe that there is a good -- there's an emerging visibility. You know, I'm not going to say all the models that we look at are perfect because we're coming out of an unchartered territory here related to the COVID. But I think all of the consensus, and myself included, is that there's going to be behavioral changes that are going to stay. And I would expect specifically for Hostess and specifically for -- I'll talk more broadly into consumer occasions and mid-states, that in in-home breakfast occasion is going to stay meaningfully elevated versus where it was, and therefore, that's good for overall growth projections going forward for Hostess and likely for the category.

But for sure, for where we compete relative to morning snacking, sweet snacking occasions in the morning, I expect that to grow. I would expect that to grow at a better -- greater rate than overall food. I would expect it to grow at a greater rate than overall breakfast because historically it has. And I would expect Hostess to continue to grow share in it.

So all of that positions us well to continue to grow, which is why we've invested in our insights and our innovation and our marketing in that area, and it's paying off and I expect that to continue to happen going forward.

Bill Newby -- D.A. Davidson -- Analyst

Great. Super helpful. Then I guess just one quickly on what you're seeing promotional environment here as we start to lap COVID and I assume providers start to roll out whatever strategy they've developed to try and retain much of the trial that happened last year? I guess any thoughts on how that's developing and how -- maybe relative to what you guys would have expected three months ago.?

Andy Callahan -- President and Chief Executive Officer

Yeah. So what we're seeing is, as you know, well, we didn't -- you know, it's kind of funny, we -- there was a reduction in promotion spending a year ago. That is true. We had plans to drive more efficient growth prior to even COVID happened, which was really good timing.

We were taking out and adjusting our models to drive efficiency, leveraging promotion. Promotion is coming back at a level, but it's being put back where I can only speak for ourselves. Our intent is to continue to support our consumers and our customers and do it at the most efficient grow -- growth for the category and for the brand. So we are bringing -- we do have promotions coming back.

We believe that they're more efficient than they were before. You know, you need to manage the entire revenue management model with both promotion and base pricing and as we mentioned earlier, you know, we're bringing pricing into the marketplace that's going to come in the back half. So I do believe, you know, it's going to come back to the normal model but not at the level I would expect that it was pre-pandemic, and that's more efficient for everybody, it is more efficient for our customers and for Hostess.

Operator

Our next question is from Andrew Olsen with UBS. Please proceed.

Andrew Olsen -- UBS -- Analyst

Yeah, hi, good morning, guys. Andy, just to build on your comments just there. Just talking a little bit more on the pricing that you guys are slated to take in the back half. Just from a high level, how do you think about pricing levels -- levers that you can pull through the revenue growth management whether it's like with less price versus price pack architecture? And then how do you think about that based on channel, like how do those levers vary by channel as you think through pricing in the different channels? And I'll pass on.

Andy Callahan -- President and Chief Executive Officer

Yes. So, Andrew, sorry for the foundational work but I remember we talked about this a lot. We had -- we haven't done we try not to do pricing until it's a natural progression of input costs and inflation and other things, which is why in my three years, we've done like a base price on part of the portfolio three years ago. And there are some parts of our portfolio that haven't -- we haven't done pricing in six or seven years since we relaunch.

And the reason we've been able to do that is because of all of our productivity initiatives to offset the efficiencies of our supply chain and other things that you mentioned that we do -- price pack architecture, changing prices, getting efficiency on lanes, all of these multifaceted elements of our pricing managing the everyday price versus the trade efficiency. We've been able to manage that over time and that's our goal. Our goal that's good for our ability to be able to drive growth. So we are doing pricing now on price as part of the portfolio because it's the efficient thing and the right thing to do relative to the category, it is now healthy for the category major input prices.

So -- but your point is well taken, we look at all of those in a continuum -- every day. I mean, every day, we have a pipeline of what we call multifaceted efficiency programs. The revenue line down that looks at mix, looks at price pack architecture sizes, productivity out of packaging, and product formulations are running the way we run our plants. All of those things are efficiency initiatives that the team looks at and does very well every day.

When it comes to the data, we have the elasticities by channel, by form, and that all goes into our models so that we can be very predictive on what we think the impact of our pricing is going to be on the elasticity going forward. So that's all built into our forecast related to pricing. Assuming that what gets reflected in the marketplace is correct in our models, we believe we have a pretty -- we have a very good visibility to the impact going forward both on the growth side as well as the profitability side. Anything to build on that, Brian?

Brian Purcell -- Chief Financial Officer

No, other than, you know, I think you asked the standard, the by channel that it does play out differently. We look at that, you know, obviously, what pricing is across different channels in our ability to manage that across different channels and certain channels lend themselves to perhaps managing trade versus list price versus price pack market, you know, the price pack changes. So we do look at it kind of on a channel-by-channel basis and do what we think is appropriate in that particular channel, which also kind of, over time, I think, gives us a little bit of runway as well.

Andrew Olsen -- UBS -- Analyst

All right. Thank you very much.

Operator

Our next question is from Pamela Kaufman with Morgan Stanley. Please proceed.

Pam Kaufman -- Morgan Stanley -- Analyst

Hi, good morning. I would like --

Andy Callahan -- President and Chief Executive Officer

Hey there, Pam.

Pam Kaufman -- Morgan Stanley -- Analyst

Hey. Do you have any insight into how much the growth -- how much of the growth over the last year has been driven by an increase in household penetration during the pandemic versus increase consumption among existing households? And I guess how you're thinking about the retention of new households as things normalize?

Andy Callahan -- President and Chief Executive Officer

Yes, so the retention of our new households has actually been extremely well. You know, that household penetration is more of a broader long-term metric. We have been able to -- early in the pandemic, we're increasing our households, and based on some of the merchandising flows, it's kind of gone flat, and then it goes back up again just because of access to consumers. But early in the pandemic, we're increasing our households, we were then converting those households, yeah, into more frequent multi buyers at a greater rate than the overall category.

So we're increasing that penetration. We also find that our advertising when we look at our growth consumer, we're acquiring those consumers very well via our advertising. So our ability to be able to get the long -- lifetime value consumers very well. So we feel really good about the tools that we have to access consumers and continue to drive long-term growth both overall and with our -- it's not just the overall number, it's with our strategically important growth consumer that we've identified as well.

So we feel good about that.

Pam Kaufman -- Morgan Stanley -- Analyst

And also, can you talk about how you're thinking about Voortman performance over the course of the year, given the various growth initiatives that you're executing on? Just looking at the absolute level of Voortman sales, they have been somewhat stable over the last couple of quarters. So should we expect to start to see those sales ramp up? Or I guess maybe some color on the cadence as you execute on the growth strategy there.

Andy Callahan -- President and Chief Executive Officer

Can you -- what are you looking at when you're mentioning that Voortman sales are stable?

Pam Kaufman -- Morgan Stanley -- Analyst

I guess sequentially, looking at the absolute level of sales over the last couple of quarters, they've been relatively stable.

Brian Purcell -- Chief Financial Officer

Yeah. So there is a little seasonality in the business, you know, Q1, Q4. I do expect, you know, as we're looking to build a run rate with Voortman probably more as we move throughout the year for sales on an absolute basis to increase.

Pam Kaufman -- Morgan Stanley -- Analyst

All right.

Andy Callahan -- President and Chief Executive Officer

Yeah. Our plan is for Voortman to grow the headline and I guess sequentially on the seasonality it's different. So I agree with Brian.

Operator

Our next question is from Rebecca Scheuneman with Morningstar. Please proceed.

Rebecca Scheuneman -- Morningstar -- Analyst

Yes, good morning. So thanks for, you know, sharing some of the colors on your data-driven innovation. I'd love to also hear what are the systems that you're sourcing that data from? And also, you know, you talked about how you're doing a lot to study and really understand usage occasion, are there other, you know, types of data that you're digging into, such as traits that consumers are seeking?

Andy Callahan -- President and Chief Executive Officer

Yeah. We don't disclose -- we use a lot of the tools that are very common in our industry. And then we either internally or sometimes with partners, we then take it and we mine it through proprietary tools to really understand at deep as we can at the consumer level of how they are behaving, who they are behaving that way. We look at different segmentation to it.

So we'll take data from our partners, our Nielsen partners will take other sources of data and we'll take the third party, sometimes we buy them off, we'll take a media consumer with our partners who we work with. So what we're doing is not necessarily proprietary or reinventing an approach in the industry but we do it in a way that leverages our own insights and we tailor it specifically to our business to be able to work on the segmentation and then drive the consumer motivation to the why once we get that. So we do a lot of -- I'm not going to claim that we're doing it -- we're reinventing how they do the segmentation or the analysis but having spent a lot of time cutting my teeth, that craft, with Hillshire, with Tyson, and now with Hostess and having a great marketing team and partners we're trying to apply what we collectively learned with really talented people and apply it to a terrific brand. And we think we're doing it very well and that's probably as good that a lot of other much larger companies out there.

So I feel really good about that, but that's our approach.

Rebecca Scheuneman -- Morningstar -- Analyst

OK, great. Thanks for that color.

Andy Callahan -- President and Chief Executive Officer

Sure.

And secondly, I know you've talked a lot about, you know, the great opportunities, expanding Voortman some of their 61% ACV toward the Hostess brand's 91%. I'm just wondering how much can you close that gap? Does Voortman have the same ACV potential that the Hostess brand does, or should we expect it to lag that?

You would expect it to lag it over time but we're in the Voortman -- we're in the growth mode with both Hostess and Voortman. You know, Hostess has nearly ubiquitous awareness, Voortman does not. So both when we advertise with consumers and build the brand, we do it in different approaches. So Voortman is a lot about building awareness and then having the ACV follow.

So what you should think about only getting to 91%. We will eventually get there, we're not going to get there next year, we're not going to get there probably in two years but it's going to continue to grow year after year. And that gives us a long runway for growth as we simultaneously invest in the consumer and innovation and then that consumer's going to drive the awareness, it is going to continue to grow. And then also importantly, I talked about hostess being on snacking occasions and Voortman when we do the segmentation of Voortman, Voortman both with its sugar-free business, which is growing extremely well with the leading share within sugar-free and sugar-free is growing at greater than two times the overall cookie category, we're the number one lead.

And then also our real benefits -- those areas with Voortman competes are also growing faster in overall cookies. So as we build availability and build awareness, we expect that to be a long runway for growth.

Operator

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Andy for closing remarks.

Andy Callahan -- President and Chief Executive Officer

Great. Thanks, everyone, for your participation and interest in Hostess. As you can see from the results, and hopefully you've heard from our tone today, we are increasingly confident that we're emerging from the pandemic in a stronger position than when we went in. And we believe we have the talent, the proven playbook to continue to deliver profitable growth over the long term, both in the back half of this year and for many years to come.

So thanks again for dialing in, appreciate it, and we will see you next quarter. We'll continue to work hard for you.

Operator

[Operator signoff]

Duration: 58 minutes

Call participants:

Chris Mandeville -- ICR

Andy Callahan -- President and Chief Executive Officer

Brian Purcell -- Chief Financial Officer

David Palmer -- Evercore ISI -- Analyst

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

Rob Dickerson -- Jefferies -- Analyst

Ryan Bell -- Consumer Edge Research -- Analyst

Bill Newby -- D.A. Davidson -- Analyst

Andrew Olsen -- UBS -- Analyst

Pam Kaufman -- Morgan Stanley -- Analyst

Rebecca Scheuneman -- Morningstar -- Analyst

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