Hostess Brands, Inc. (TWNK) Q4 2021 Earnings Call Transcript

Hostess Brands, Inc. (TWNK)
Q4 2021 Earnings Call
Mar 01, 2022, 12:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Amit Sharma

Good morning, and welcome to Hostess Brands' 2022 Investor Day. I'm Amit Sharma, vice president of investor relations. While we would certainly prefer to be with you in person today, we thank you for joining us virtually on this busy morning and look forward to spending the next few hours together. Before I provide an overview of the agenda for today, a reminder that today's presentation is subject to our disclosure on forward-looking statements.

Please take a minute to review this slide. By now, everyone should have access to our earnings release and investor presentations, which are also available on our website at www.hostessbrands.com. This presentation is being webcast, and a replay will be available on our website. During the course of this presentation, management will make a number of forward-looking statements, including expectations and assumptions regarding the company's future performance.

Actual results may differ materially from these forward-looking statements, and we undertake no obligation to update or revise these forward-looking statements. A detailed list of these risks and uncertainties can be found in today's earnings release and in our SEC filings. We will be making a number of references to non-GAAP financial measures that we believe provide useful information to investors. A full reconciliation of these non-GAAP measures to the most comparable GAAP measures is included in the earnings release and presentation.

We have an exciting agenda for you today. We are not only proud to share outstanding performance in 2021 and the strong 2022 guidance, but more importantly, we are excited to share our vision for the next phase of growth for Hostess Brands. Andy Callahan, our CEO, will kick it off, followed by Mike Gernigin, our interim CFO and chief accounting officer, with a discussion of our fourth quarter and full-year performance. We'll then dive into the heart of today's presentation with a deep dive into the next phase of Hostess Brands growth, where Andy, along with Dan O'Leary, our chief growth officer, and Tina Lambert, VP of growth and innovation, will discuss how we are poised to unlock the exciting growth opportunities that lie ahead for Hostess Brands.

Mike Gernigin will then come back and show us how that growth translates into an attractive long-term growth algorithm before Andy wraps it up with a few closing comments. A quick call out on logistics today. We'll have a short break after prepared comments, before we begin a live question-and-answer session with today's presenters. [Operator instructions] You're in for a treat today.

And with that, let me hand it over to our CEO and president, Andy Callahan.

Andy Callahan -- President and Chief Executive Officer

Good morning, everyone. I'm Andy Callahan, CEO of Hostess Brands. I'm thrilled to have the chance to introduce to you the new Hostess Brands and a few of the talented leaders building our future. At the end of today's Investor Day, I believe you will walk away with an elevated understanding of why we are so confident in our future.

And you will be able to see that we are a differentiated snacking company with an advantaged business model that will drive sustained profitable growth. We are proud of our progress. Since going public five years ago, we've built a world-class team and a strong growing snacking business, including our addition of Voortman in 2020. We have the strong foundation of our iconic 100-year-old brands and have successfully emerged from the SPAC with a simplified equity structure, advanced talent and capabilities, and an expanded brand portfolio to launch us into the next phase of growth.

Today, we are a transformationally different company than we were five years ago. We are revealing our new corporate look and logo, reflecting a more modern, agile growth company that will continue to scale. We will also tell you today about the differentiated results the new Hostess Brands now has a proven track record of delivering. And finally, you are going to hear about our path forward and why you should believe like I do, that Hostess Brands is differentiated as one of the strongest North American pure-play snacking companies in the market.

Now to summarize what you're going to learn today about the new Hostess brands. First, we have built a fantastic foundation. We are proud of our strong performance during an unprecedented period of volatility and challenges. But we are even more excited about the future as we catapult into our next phase of growth.

Second, we are building a snacking powerhouse with unique access to broad, fast-growing snacking occasions, and a best-in-class business model that fits perfectly for our impulse-driven categories. And we are accelerating innovation, marketing, and consumer-facing capabilities to fully unlock the power of our iconic brands. Finally, we are confident in our ability to deliver top-tier financial performance over the long term. And today, we'll introduce our new long-term growth algorithm.

In addition to everything you will learn about our organic growth model today, our strong cash flows and flexible balance sheet enable us to pursue strategic opportunities within the wider snacking universe that will unlock additional shareholder value. We've just wrapped up a fantastic 2021. And as you will see, we have strong momentum as we look ahead. Before I hand it over to Mike for a detailed review of our fourth quarter and full-year earnings, let me highlight some takeaways from our strong fourth quarter, which caps off another outstanding year for Hostess Brands, and what a terrific year we had.

Our sales, EBITDA, and EPS increased by strong double digits in the fourth quarter. And meaningfully accelerated relative to year-to-date trends, demonstrating the strength of our business and our continued momentum even as we continue to face industrywide inflation and supply chain headwinds. With 16.1% net sales growth in the quarter, the fourth quarter was our 17th consecutive quarter of positive revenue growth. And the 8th consecutive quarter of at least 9% sales growth, reflecting strong innovation and retail execution.

Let me say that again. We just completed our eighth consecutive quarter of at least 9% sales growth. At the same time, fourth-quarter gross margins of 37.2% and EBITDA margins of 24.6% were largely flat versus year-ago levels, even as we faced double-digit inflation in the quarter. We grew over 16%, maintained margins relatively flat despite double-digit inflation, and invested in growth.

Wow. The Hostess team showcased its strength, resilience, and agility, delivering record results despite facing one of the toughest operating environments in decades. While our sales and profits reached record-high levels in 2021, with both net revenues and EBITDA growing by double digits, we were also lapping strong double-digit growth in 2020. In fact, on a two-year basis, our net revenue was up nearly 25%, with EBITDA growing even faster as we continue to deliver on our promise made at our 2019 Investor Day, of sustainable, profitable growth.

Our strong top line reflects outstanding performance in the measured channels. Our sweet baked goods point of sale was up over 14% for the last 52 weeks with our share of the category increasing by 187 basis points to 21.3%, with record-high market share in several channels, including our high-growth, high-margin convenience store channel. Our retail success is built on our outstanding execution, greater marketing investments, and strong new product innovation, which you will hear much more about through the rest of the presentations today. 2021 was our highest innovation year yet, and it is likely not a surprise that we led the category in the innovation growth as our new baby bunts continue to delight consumers with growing penetration and repeat.

Our success at retail has come during a period in which we implemented multiple pricing actions. We have continued to upgrade our data, analytics, and shopper insight capabilities. And that's clearly visible in the agility, nimbleness, and timeliness with which our sales team proactively and successfully engaged with our retail customers for multiple pricing actions in a fast-paced inflationary environment. We are proud of our top-line growth, and we are equally proud of our strong margins during a period of unprecedented inflationary headwinds, labor challenges, and supply shortages.

We are one of the very few food companies to post relatively flat gross margins and EBITDA margins in 2021. And we accomplished this while making incremental investments behind growth. This is a clear testament to the strong equity of our premium branded portfolio, advantaged business model, and relentless focus on execution and efficiency. You will hear more about this from Mike, and that has positioned us to deliver an increase in total shareholder value of nearly 80% over the last three years, well ahead of our food peers.

What a strong year we had. And I'm even more excited about our future. We delivered these amazing results due largely to the hard work and dedication of our great people. I want to sincerely thank all of the Hostess heroes out there working relentlessly to make Hostess the great company it is today.

They are the backbone that allows us to continue to bring joy to our consumers and customers while delivering great results as we move into our next phase of growth. Now Mike is going to take you through our strong 2021 results and outlook for 2022 before we get into the heart of today's discussion on our long-term strategic agenda, and why we feel confident in our ability to continue to deliver industry-leading shareholder returns.

Mike Gernigin -- Interim Chief Financial Officer and Chief Accounting Officer

Thanks, Andy, and good morning, everyone. I'm very excited for this opportunity to discuss the great performance Hostess has delivered in 2021 and to share what we expect for 2022. Turning to the financial performance for the fourth quarter. Through the outstanding execution by our team, we continue to meet the strong demand for our products and deliver double-digit growth across the board.

The fourth quarter was our third consecutive quarter of double-digit revenue growth increasing 16.1% to $297.2 million and up 37% on a two-year basis. Our strong performance resulted in adjusted EBITDA for the fourth quarter of $73.2 million, up 14.9% from the prior year. The increase in EBITDA was achieved even as we made discretionary investments to support our frontline workers. Adjusted net income of $34 million for the quarter increased 18.5% from the prior year, while adjusted EPS of $0.25 per share increased 19% as the fourth-quarter adjusted diluted EPS reflects higher average fully diluted shares outstanding due primarily to the net impact of warrants, which have now been fully exercised.

The strength of our revenue growth is a testament to the power of our brands and our team's ability to execute at retail with excellence, continue to service our customers, and deliver top-performing innovation in the category. Net revenue was driven primarily by higher volumes as consumer demand remains high and we had higher distribution and velocities. The higher volume was complemented by the benefit of pricing actions and favorable mix, helping us to have broad-based growth across retail channels for both Hostess and Voortman branded products. Adjusted EBITDA for the quarter was $73.2 million, up 14.9% from a year ago.

This increase was achieved as we maintained relatively flat gross margins in the quarter despite continued inflationary pressure of over 10%. In the quarter, we benefited from pricing actions, which continue to take hold, and the disciplined execution across our supply chain in a volatile and challenging operating environment. With tightening labor pulls across the industry, we continued to invest in our bakery and distribution workforce with discretionary investments to reward the team's relentless efforts and ability to deliver in this dynamic environment. Even with these investments, we were able to sustain double-digit EBITDA growth and hold EBITDA margins relatively flat.

We are confident these investments are good for the long-term health of the business as we prioritize the men and women that are the driving force behind our continued success. Turning to point-of-sale trends. In the fourth quarter, our sweet baked goods POS trends accelerated sequentially, with 24.1% growth in the fourth quarter, led by Hostess-branded growth of 24.2%. Our outstanding market share growth of 218 basis points in the fourth quarter is evidence of our advantaged brand portfolio, insight-driven consumer-based innovation, and outstanding execution.

As you can see, our retail takeaway growth outpaced our net revenue this quarter by over 680 basis points. About half of this is attributable to our nontrack channels with the other half due to the timing of inventory fluctuations, which is typical in our business, and we expect to normalize over time. This quarter's performance continues the positive trends we have achieved over the last five years. In 2021, we achieved over 180 basis points of market share expansion within the sweet baked goods category through broad-based growth across retail channels and across our portfolio of products as our point-of-sale growth of 14.4% was well ahead of the 4.4% category growth for the year.

Our focus on the fast-growing breakfast snacking occasions is showing great momentum with our breakfast portfolio achieving over 24% growth this year, while still achieving above category growth of 5% for our all-day snacking products. We have continued this growth into 2022 with our January POS up over 21%, demonstrating the continued strength and the sustainability of our growth. This consistent strong growth is a testament to our impactful innovation, outstanding retail execution, and resilient supply chain, all of which provides us the confidence that we will continue to deliver growth ahead of our category peers for years to come. The strong performance in the fourth quarter solidified the momentum we had been gaining throughout 2021, leading to double-digit growth in revenue, EBITDA, and EPS for the full year.

Adjusted EBITDA increased by 12% to $268.8 million for the full year 2021. This increase was driven by higher gross profit as higher volume, favorable product mix, pricing actions, and productivity more than offset transportation and input cost inflation and higher marketing spend. For the full year, adjusted gross margin was essentially flat at 36%, which is a huge testament to the skill and expertise of our team to manage through these extraordinary times of inflation and labor challenges, coupled with strong consumer demand. Turning to our guidance for 2022.

We are encouraged by our strong performance in 2021 and expect this momentum to continue in 2022. For 2022, we expect net revenue growth of 5% to 8%, adjusted EBITDA to be between $280 million and $290 million, and adjusted EPS of $0.93 to $0.98 per share. We expect our revenue growth to be driven primarily by price mix, along with flat to positive volume for the full year. We expect relatively stronger growth in the first half of the year given the wraparound benefit of pricing actions taken in the second half of 2021 and continued favorable consumer trends.

We continue to be in a very dynamic environment as consumer behavior adjusts to various factors impacting near-term demand. However, our strong momentum and a proven track record of excellent execution through volatile periods gives me high confidence in our ability to achieve the 5% to 8% expected net revenue growth in 2022. In addition to the strong consumer demand, we are also navigating the continued inflationary environment. We have a strong pipeline of productivity initiatives, coupled with the pricing actions already in the market today, which we believe will allow us to maintain relatively flat gross margins for the year while continuing to make investments in our long-term growth.

Our EPS guidance for 2022 of $0.93 to $0.98 per share is driven by the strong expected EBITDA growth and reflects impacts of our growth investments and the dilution impact of warrants exercised in 2021. The financials only tell part of the story of our amazing year. 2021 was a record-breaking year for Hostess Brands in so many ways. Take a look at this video highlighting some of our biggest accomplishments.[Commercial break]

Andy Callahan -- President and Chief Executive Officer

Mike, that was awesome. You've seen our 2021 year-end results. Now we are going to discuss the next phase of growth for Hostess Brands. The Hostess Brands company, as we know it today, was formed less than 10 years ago.

It started with a few bakeries and the rights to the iconic Hostess Brands that already had high awareness and were beloved by many. With bold and decisive action, Hostess reimagined the way baked goods could get to market, and established an efficient and centralized distribution model enabled by innovative product formulas and a focus on customer partnerships. This bold approach was unproven at scale in our categories, but enabled us to deliver a broader reach to all stores, large and small, with a dramatically better margin structure to invest in growth and capabilities. In these early years, the focus was primarily on reestablishing and growing distribution of existing products, leveraging the strong brand awareness and loyal consumer base and building the balance sheet.

We did this very well. In 2018, when I started, we all shared enthusiasm for the unlimited potential of this reimagined business model and the beloved brands. But also recognize we needed to invest in capabilities, talent, and data to fully unlock this potential. We also recognized if we were going to invest in these capabilities, we have the opportunity to transform the portfolio through M&A that would align our capabilities and investments to one business model and one high-growth, high-margin portfolio.

We discussed this at our Investor Day in 2019 as our five pillars of growth: growing our core by building the consumer brand and strong customer relationships was one; two, growing through innovation based on consumer insights and industry-leading capabilities; three, improving through agility and efficiency, leveraging our profitable business model; four, investing in talent, insights, and information to create industry-leading capabilities; and five, leveraging our strong cash flow, allowing us to execute strategic acquisitions to accelerate growth. Standing here today, I'm proud to say our focused and disciplined investments are truly unlocking the potential of our portfolio. We have transformed our portfolio, and have solidified our foundation and are already for the next phase of profitable growth. We are a relatively young company with iconic snacking brands.

Hostess has strong awareness, and a portfolio of large brands. Our flagship Donettes brand is a $0.5 billion brand and along with Twinkies and CupCakes, which are each at or near 100 years old, make up some of the core assets that we continue to invest in. Our high-margin branded business is at the center of our strong foundation that comprises over 90% of our sales. A critical component to this core is our continued focus on product quality, resulting in improving consumer satisfaction rates and strong consumer demand despite rising retail prices, demonstrating our brand strength and pricing power.

We have also invested in our talent, data analytics, and consumer insights, which have paid off with a more robust innovation pipeline and sharper consumer and customer merchandising and activation. Investment in processes and capabilities support a continuous improvement mindset leading to a platform of executional excellence. Investments in supply chain resulted in a highly resilient operating model positioned to excel even in periods of heightened volatility. The transition to our new larger primary distribution center in Edgerton, Kansas in 2020 was critical to the successful Voortman integration, and has provided needed additional growth capacity for our supply chain.

During this time, we also realigned our manufacturing to maximize the output of our portfolio while simultaneously investing in new production lines in our existing bakeries to build capacity and support our growth. We successfully executed the divestiture of the in-store bakery business in 2019 and the acquisition and integration of Voortman in 2020, which has expanded our branded consumer reach, leveraged our capabilities in consumer, data, and supply chain, and transformed the portfolio to higher growth and margin with opportunities to grow. We have done all of this while also simplifying our capital structure by eliminating the dual-class share structure and reducing our net leverage to efficient, diligent use of our cash. The investments we have made over the last few years have been thoughtful, executed with excellence, and set us up to take advantage of future market opportunities.

Taking a step back, the strength and resilience of these choices were put to the test with the disruption COVID delivered in March of 2020. Our portfolio, our business model and team responded with agility and decisiveness, grounded in data and supported by a resilient business model. And a shout out to our Voortman bakery in Canada. We closed the acquisition in January of 2020 and soon after the border was shut due to COVID.

They did not miss a beat. Not surprisingly then, that we have built a strong foundation of growth that provides business momentum for us with our customers and consumers. Since 2018, we have demonstrated over 10% sales growth, over 11% EBITDA growth and an outstanding 15% increase in EPS. In fact, for the past four years, our growth has been consistently above our peer set.

Looking back to 2018, our net revenue growth is now significantly higher, and we believe we will continue to drive sustainable, profitable growth in the future. And now we are ready to catapult our growth to the next level. The reason we feel so confident we can use a word like catapult is because we have such a strong foundation to build upon. We are a best-in-class snacking organization today, and we are just getting started.

Hostess Brands has a proven track record of learning and building. We built a competitively advantaged warehouse model, strong distribution and innovation capabilities. We invested in analytics and brand building, and then expanded our portfolio to include cookies. And now we are entering our next phase of strong and consistent growth, where we intend to propel ourselves further ahead of our competitors.

We will do that by expanding our brands and our business in the fastest-growing snacking subsegments. We will do that by activating a growth flywheel to enable investments in consumers with innovation and marketing. We will do that by unlocking our balance sheet to allow investments in other strategic initiatives, and we expect to achieve top-tier long-term growth as a result. You are going to hear from our management team today about just how much organic potential we have.

But with our strong cash flows and flexible balance sheet, we also have the ability to pursue strategic M&A opportunities. Expanding our footprint in the snacking universe is a key way to unlock additional shareholder value. And Voortman has been a good testament to how expandable our winning business model is. So with such a strong foundation what will catapult us to the next level of growth? Our business sits in growing spaces.

Our business model is best in class. And our innovation and marketing capabilities are gaining momentum. These three factors set us apart as a best-in-class pure snacking company. Snacking trends have positive momentum.

The data supports that people are eating differently. They have fewer sit-down meals and instead snack multiple times per day. And while we all make efforts to lead a healthy lifestyle, research shows that one of the key reasons people snack is to treat themselves. This is supported by the growth we have experienced as we provide consumers a small and responsible moment of joy in their day.

Most of our products are individually cautioned and addressed many of the key needs a variety of consumers are looking for in that sweet treat. We have seen these increasing snacking trends before COVID, and they've only accelerated as people have continued to seek out indulgent snacks during the pandemic. And we do not expect this positive momentum to let up anytime soon as there has been a fundamental shift in how people eat throughout the day. We believe consumers will continue to seek out snacks that they enjoy.

And the occasions for this need has structurally changed as consumers spend more time at home and in their cars. At Hostess, we are uniquely positioned to take advantage of these positive snacking trends. Of the top 15 snacking companies, we are one of the few whose portfolio of products are almost entirely focused on the fast-growing snacking occasions. We aren't burdened by legacy product portfolios and brands that may be declining due to this shift in consumer behaviors.

This allows us to focus our attention on our growing portfolio of iconic treats. You see this in the data with our total company retail sales growth of 13.6% in 2021, better than almost all other top players in the snacking universe. Mapping Hostess portfolio to consumer occasions shows we have significant consumer-driven tailwinds. We compete and are focused on the fast-growing snacking occasions with meaningful opportunity to grow.

Our proprietary research shows consumers are open to many different types of sweet treats within these occasions to satisfy their snacking needs, providing us a broad addressable market. Targeting these consumer-specific usage occasions provides us a focused, disciplined approach to innovate and market. We believe we have a right to win in these occasions, given our strong brands, high awareness, and high availability to consumers through our broad distribution. Although you historically may have thought of Hostess as a sweet baked goods company, consumers view us as a viable snacking alternative.

We will show you today that our portfolio plays across a much wider occasion map than sweet goods alone. And that expands our addressable market beyond this traditional category view. We have prioritized five of the fastest-growing consumer snacking occasions. These five segments are worth more than $50 billion in sales and are growing at 5.6% over the past three years.

These occasions provide meaningful and sustainable upside potential for our future growth. And as I mentioned previously, we have created a best-in-class business model that allows us to leverage our strong brand positioning, broad-based availability, and unique go-to-market approach to reach consumers and drive growth. These enablers of differentiated growth wouldn't be possible without the strong backbone of excellent execution we have consistently demonstrated. We have an efficient, agile, resilient, and scalable model that we will continue to leverage as we grow.

With this growth momentum, we have made key investments to efficiently expand our operating capacity. We will continue to make high ROI investments to ensure we can deliver on our growth expectations and service our customers and consumers. And we have additional levers to pull to continue to accelerate growth with incremental innovation and high ROI marketing communication, which we are confident will bring new consumers into our brands. And drive incremental purchases of our great products.

While many companies out there talk about growth flywheels, most are just maintaining their ongoing and existing model. As a young company, we have significant upside from managing our growth flywheel. Our strong top-line acceleration will enable us to achieve operating leverage. From there, a key focus of our investment in people and capital is around driving incremental productivity.

Using that cash to invest in growth levers and new capabilities like innovation and marketing communication. You are going to hear about each element of this flywheel from Dan, Tina, and Mike today. This leads us to our new and exciting long-term growth algorithm that we are unveiling today. As you have seen over the past three years, we have a track record of delivering on our commitments with structural advantage, disciplined and strategic investments in data, and strong execution.

Over the next few years, we expect to deliver mid-single-digit organic revenue growth, 5% to 7% EBITDA growth and 7% to 9% EPS growth that we believe will deliver top-tier shareholder return over time. We believe this sustained long-term growth will continue to establish us as a best-in-class snacking company that generates top-tier total shareholder returns. As I mentioned, our strong free cash flow gives us flexibility to continue to invest in our business while also providing ample dry powder to execute strategic M&A to drive growth and additional value creation. Also, given our current net debt leverage of around three times, we expect to continue to be able to opportunistically return capital to shareholders as we continue to build our version of a modern snacking company that delivers top-tier financial results.

We also believe and are committed to accomplishing this in a responsible way for all stakeholders. Last spring, we took a meaningful but important step in this journey by publishing our first corporate responsibility report. We recognize that success is not just about goals, but sustained and measured progress year after year. We are working hard to integrate this ESG mindset into our daily work and culture to make a positive impact.

We shared some of our strategic initiatives, goals, and achievements in our first corporate responsibility report published last year, and we'll have even more to share in our second report, which will be issued in the spring. As part of our ESG journey, we identified four key priority areas of focus. The first is our impact on the environment. We have a number of key initiatives that we are advancing with specific objectives of lowering our water and energy usage as well as reducing our waste and packaging impacts.

All new capital and productivity projects require an ESG impact report to ensure we are making strategic decisions with a comprehensive understanding of impacts and opportunities. Additionally, we are in the process of developing a climate action plan to broaden our understanding of the impact we will have on the environment and sharpen our understanding and resulting plans moving forward. These advancements are being led by our ESG executive committee with oversight by our board of directors. Importantly, all initiatives must permeate to the warehouse and bakery floor as that is where meaningful change can really happen.

We are also focused on improving our diversity, equity, and inclusion with programs established at all levels of our company. Unlocking the potential of our people and brands includes having and growing a diverse team. We know this is a key tenet to the success of our organization, and are committed to ensuring our people feel comfortable bringing their whole cells to work. We recognize our people are our greatest asset, and I am extremely proud that we have improved upon our already industry-leading safety record.

Our number one priority is to keep our people safe and healthy. Our team's focus and dedication to ensure proper training and oversight have enabled these results while delivering strong growth and navigating one of the most challenging labor markets I have experienced. Although we have much more to accomplish in our people journey, I know we are heading in the right direction. Recently, we were named as one of Forbes Top Places To Work for a midsized company, and one of the Top 100 Places to Work for Veterans.

As part of our focus on governance, we took many meaningful steps to enhance our board structure and oversight. Specifically, we increased the diversity of our board of directors. We eliminated the staggered board, and we created a formal structure for the board to provide oversight of our ESG program and ESG steering committee. And most recently, we added achievement of ESG goals to the strategic objectives of our executive team.

In fact, I couldn't be more proud of both what the Hostess Brands team continues to deliver for our shareholders, and how we are working together to deliver it. We are building a strong, sustainable corporate culture that values nimbleness, integrity, tenacity, inclusivity, and a commitment to quality. The Hostess Brands team has clear values and a clear mission, guiding us on our journey. Our products bring moments of joy to our consumers, customers, and investors.

We have a passionate team. And as I mentioned earlier, we put our hearts into everything we do. Leading the charge our leadership team, on average, has nearly 30 years of consumer packaged goods experience, and many of them have been trained at traditional consumer packaged goods companies like Procter & Gamble, Kellogg's, Tyson, and Pepsi. The combination of that strong knowledge base from a wide range of previous experiences with our agile approach has created a best-in-class snacking organization.

Our organizational excellence has allowed us to attract amazing talent, including most recently, the addition of Arist Mastorides as our chief customer officer. We are very excited to have Arist join our team, and he is already providing great value with his deep expertise and experience gained at Kimberly Clark, where he served in a variety of roles. But most recently, as president of the North America family care division. We also have a great bench and talent pipeline that provides us a strong foundation.

And I'm excited to introduce to you today, a few of them, as you will be hearing from Dan O'Leary and Tina Lambert on our growth strategy and have already heard a bit from Mike Gernigin on our financial performance and targets. Our size enables us to attract the most talented people and get them closer to the consumer and customer in a unique way that is more difficult for larger companies to replicate. We've made it back to our key takeaways for today. Before I turn it over to the rest of the team, I want to put this slide up for you again because it is so important.

We have a strong foundation for growth and are now going to catapult the company forward into the future. We are a snacking pure-play sitting in growing spaces with an advantaged business model, and upside potential from innovation and marketing. Finally, we have an attractive long-term growth algorithm of mid-single-digit sales, 5% to 7% EBITDA, and 7% to 9% EPS growth. And this does not include M&A as a value accelerator, which is enabled by our strong free cash flow.

And now I'm very excited to introduce our chief growth officer, Dan O'Leary, to tell you more about our business strengths and our focus for future profitable growth.

Dan OLeary -- Executive Vice President, Chief Growth Officer

Thanks, Andy. It's great to be here today to share with you how our fantastic team at Hostess Brands will continue to drive sustained profitable growth. As Andy mentioned, there are three main factors that make us so confident in our ability to continue to grow Hostess Brands ahead of competition. First, our business sits in growing spaces, which means we are operating in categories and consumer occasions with natural advantages.

Second, while it's great to be in these growing spaces, it's obviously not what makes us different in the market. What gives us a true competitive advantage is the best-in-class business model and set of assets we have built, all of which create opportunities for us to grow beyond our category and occasions. Third, our consumer capabilities are gaining momentum, which means we are just getting started in our ability to drive additional growth. These three factors set us apart as a best-in-class snacking company.

Let's start with what may seem like the most basic, but is actually one of our most important growth levers, playing in the right spaces. Our business sits squarely in snacking. In fact, we are a snacking pure-play company. Indulgent snacks are one of the largest and fastest-growing segments within snacking, and we are confident we can continue to grow our business by expanding our consumption occasions and have a plan to make it happen.

Today, we have broad penetration across consumer cohorts and broad availability across almost all key channels where snacks are sold. In addition, our business has relatively low private label exposure, which sets us apart from our big snacking peers. The explosive and consistent growth in snacking provides tailwinds to our business. Sweet snacks are a $91 billion market offering significant expansion opportunities.

Sweet snacking has been up 4.8% over the past three years, but our focus occasions are growing significantly more than that at 5.6% per year, and our breakfast snacking business is growing even faster. It is up 14% per year over the last three years. Snacking growth has a long runway because evergreen consumer trend spaces are driving it. To sharpen our growth strategy, we have invested in data and analytics to best understand the consumer market and opportunities available.

Through that work, we identified four trend areas that will drive growth for Hostess in the snacking space. And what's important here is that these are trends that existed pre-COVID, accelerated during the pandemic and are projected to continue to impact snacking post-COVID, which means we can have confidence in how we have made our growth assumptions. So let me walk you through these. The first is the snackification of eating.

Consumers are converting more and more of their eating occasions to snacks. In fact, the number of consumers eating five or more snacks a day is up double digits from 2018 among 25- to 44-year-olds. What we're seeing in our research is a steady decline in the desire to cook or prepare foods and a move away from the traditional three square meals a day with the pandemic, frankly, accelerating this trend. The younger generations are especially flexible about their eating habits, indicating this trend will continue to grow.

The combination of consumers preparing less food and eating more flexibly throughout the day is benefiting packaged snacks. In addition, we are seeing especially strong snacking growth in the morning, when time pressure is the most acute. One in four consumers now eat snacks in the morning, which is up 8% versus 2019. The second trend helping drive our growth is a renewed focus on family.

This is a great example of an evergreen trend that began before COVID with how millennials are approaching parenting but has accelerated through the pandemic. 73% Of parents are spending more time with their kids, and the increase in flexible work will keep this trend growing. We also know that when parents spend more time with their families, they're seeking out little ways to bring moments of joy into their kids' lives. In a challenged moment in time and in a challenged economic environment, small joys become more of a focus.

And 63% of consumers consider sweets to be an affordable, small indulgence. And we see these behavior changes as durable for years to come. Another trend that started as pre-COVID and has accelerated due to COVID is the focus on trusted brands. 88% of consumers say trust is critical for them in purchasing brands.

And likewise, 88% say they would buy more from a brand they trust. Past recessions have taught us that times of worry and uncertainty accelerate the push toward brands consumers know and trust. Hostess has high awareness and is a brand consumers love, and we will benefit from this trend. Finally, a trend that is driving growth in our Voortman cookie business is aging without compromise.

We know that as consumers age, they become more concerned with blood sugar and diabetes. But they also don't want to give up their favorite sweet treats. In fact, 49% of baby boomers are interested in foods that are associated with healthy aging as they look to beat the health challenges of the generation before them. And half of U.S.

boomers are limiting sugar consumption or buying reduced sugar products. We are seeing this trend start younger and younger, and it's helping drive strong Voortman sales growth on our sugar-free business, which is up a whopping 23% versus a year ago. Snackification, renewed family focus, the era of trusted brands and aging without compromise. These four evergreen trend spaces give us confidence in our ability to deliver sustained profitable growth.

So what spaces will we look to for that growth? Traditionally, when companies talk about snacking, they show you a pie chart like this with all the relevant snacking categories and talk about their size and growth rate. Here, we see the $91 billion sweet snacking universe, and sweet baked goods is one of the top sweet categories growing at 4%. While this view provides a great underpinning to our business, the challenge with it is that it mistakenly implies winning share in your segment is the only way to grow. But consumers think about snacking occasions in broader terms than categories alone.

They think about their needs in that occasion and consider a number of different snack options. Our investment in database consumer research shows a consumer snacking occasion is a combination of three things. Number one, the role they want the snack to play. Are they looking for a treat or a healthy snack or a mini meal? Are they hungry or just have a craving? Number two, the time of day they are snacking.

And number three, where they are? Are they at home or are they on the go? When we combine these factors, we identify unique consumer occasions. And in each one, a wide array of sweet and salty snacks is used. Our proprietary research identified 18 unique consumer occasions, and we have prioritized five of the fastest-growing consumer snacking occasions where Hostess and Voortman have unique ways to win. These five segments are worth more than $50 billion in retail sales and growing at 5.6% over the past three years.

There are also great occasions for the types of snacks Hostess and Voortman make that truly delight consumers. Let's talk about each of these times that consumers snack. Morning sweet start is a modern way to look at breakfast. Taking into account that consumers snack their way through the morning.

As the day has gotten longer, we see consumers increasingly adding a mid-morning snack, or if they're like me, two snacks to give them the energy to start their day. Lunchbox includes both adult and kid lunch and captures the midday snacks at both a company lunch on the go and sometimes replace it completely. Afternoon reward is the occasion when consumers are looking for something sweet and tasty to either keep them focused through the afternoon or give themselves a rewarding break. Immediate consumption takes place all day when consumers are on the go.

These snacks are purchased at convenience stores, vending machines, and other outlets when consumers are in a hurry and looking for a great tasting snack. What we love about this occasion is there are more and more places to buy snacks, and we're shooting to be in all of them. Afternoon sharing is unique because it's an occasion that involves other snackers, whether they're family, friends, or coworkers. This occasion is one of the largest we identified and is an incremental opportunity for Hostess Brands.

Taken together, we believe these five occasions provide huge upside potential for our future growth. And over $50 billion market for Hostess Brands to compete in. As a $1.7 billion retail sales snacking company playing in an over $50 billion set of snacking occasions, we are confident in our ability to deliver growth. If we think within our categories, we only have a 21% share in SBG, and a 2% share in cookies.

So we already have a huge upside potential to grow looking at snacking in a traditional way. But this is a really big important point. By smartly focusing on the occasions where our brands have the right to win, and by defining snacking the way the consumer does, we have clear opportunities for expansion through innovation, marketing communication, and M&A that can grow not just our brands, but can also grow the categories in which we compete. Here's an example of one of the top occasions we identified.

We call it morning sweet start. Morning sweet start takes place in the morning and at home. The role is a sweet treat to jump-start the day. This is a huge occasion, almost $6 billion.

That's because morning is about a lot more than just traditional breakfast. It's about snacking that happens the whole first half of the day all the way up to lunch. Only $1.1 billion or less than 20% of it is made up by the sweet baked goods segment, meaning we have a lot of upside. And to dig a bit deeper, the top snacks in this occasion today include refrigerated pastries, breakfast cookies and prepackaged donuts and muffins, but there are many other forms as well.

Morning snacking is an ever-evolving and fast-growing space. Meeting our consumers' needs in this occasion will unlock a larger source of volume for our morning snacking growth. Now let me share an example of how we use this occasion learning to generate innovation growth for Hostess. Afternoon sharing is one of the largest snacking occasions for consumers at $19.3 billion in sales, and is also one of the fastest growing at 5.9% CAGR over the past three years.

Hostess Brands under indexes in this occasion today because consumers are looking for something they can share with family and friends. It includes situations like kids grabbing a quick snack together when they first get home from school or roommates grabbing a snack together while they're watching a game. In those occasions, we found consumers were looking for more crispy, crunchy snacks with smaller pieces so everyone could have some. It is also an occasion that requires a package that's shareable, enter Hostess Crispy Minis.

We designed this innovation specifically to meet this occasion's needs. And we found that it was as much as 40% incremental to the Hostess business and up to 20% incremental to the category as a result, meaning not only has this innovation brought incremental growth to Hostess through a consumer insight, it also brought growth to our category and retailers. These are great examples of how our investment in database consumer learning is making a huge difference. I love this next slide as it really shows the sharpness of our insights and the upside we have.

We have prioritized five of the fastest-growing consumer occasions. But if you go one click deeper, our areas of focus are growing even faster than the total occasion. Within morning sweet start, the handheld breakfast items that we sell are up 8.5%, while the rest of morning sweet start is growing at 3.4%. Within the big growing afternoon reward occasion, sugar-free cookies are growing 190 basis points faster than the rest of the items consumers might choose for that occasion.

So in summary, we are focused on big, fast-growing consumer occasions with lots of upside, and we are winning with our products in these occasions. Our position in strong growing spaces has enabled steady growth. Hostess Brands has consistently grown over the past four years despite a dynamic macroeconomic environment, and we are confident in our ability to continue to do so. Our three-year CAGR is 9% at a total company level.

In fact, in each of the past three years, we have outperformed best-in-class food companies like Hershey, Mondelez, Mars, and Kellogg's. Our business sits in really fast-growing spaces, but we are growing even faster than other snacks. The total sweet snacking universe is up 4.8% per year over the past three years. Our five targeted snacking occasions are up 5.6%, and we are growing 9% over the same time frame.

That's because our growth is driven by evergreen consumer trends and our focus on incremental expansion in our five targeted consumer occasions. This strategy is guiding our innovation, marketing communication, and go-to-market efforts. A business grounded in growing spaces is the first reason you should believe we will deliver sustained profitable growth. Like I said before, being in growing spaces is great, an incredibly important part of our growth story.

However, just as important is our best-in-class business model. Our business model is predicated on four key pillars. One, wide availability. We seek to be everywhere our consumers are shopping for snacks.

Two, we have beloved consumer brands. Three, our unique go-to-market approach, which blends the best of a warehouse distribution model with a superior customer service from strategic broker partners. And fourth, and arguably most importantly, we have operational excellence that allows us to deliver on our consumers and customers' needs. Almost half of our sweet baked goods and more than one-third of our cookie sales come from impulse shopping, which our purchase as consumers did not come to a physical store or e-commerce site with an intention to buy.

Our business model is the recipe for success in high impulse categories. Being nearly everywhere consumers buy snacks, having brands they know and love, having a go-to-market approach that maximizes display, and having the operational excellence to deliver on all of those elements makes our business model best-in-class for impulse snacking. So let's talk a little more about each aspect of our business model, starting with wide availability. We are nearly everywhere consumers shop for snacks.

We have amazing breadth of distribution in line with our top competitors in snacking like Mondelez and ahead of our SBG competitors like McKee. We perform like a leading snacking company with our distribution in mass, dollar, and club. We have penetrated the strong impulse channels of C-store and drug, and this breadth of distribution ultimately gives us a critical leverage as we consider snacking acquisitions. For example, we have expanded Voortman distribution quickly, leveraging our supply chain network and retailer relationships.

We are also expanding both of our brands into channels more difficult to measure today but a strategic importance in snacking. These focused channels include vending, mini markets and e-commerce pure-play retailers like goPuff. Simply put, we want to be anywhere a consumer wants to buy a snack. Our availability isn't just broad across channels.

We also show up in multiple locations within our large format stores, having multiple placements within a store, multiplies our chances to drive an impulse purchase. Our recent wins in placing our high-margin single-serve products that checkout with key customers have been especially beneficial to our growth. Our sales teams and broker teams are always on the hunt for new permanent or seasonal distribution opportunities within our footprint, and do an awesome job getting us more points of availability within their stores. Our business model is also best-in-class because we have strong brands.

Awareness on Hostess is statistically at parity to Oreo, Reese's, Hershey, and KitKat. We are a household name in snacking. In addition, we index above our category on new and innovative. In fact, we hear from our customers that we are currently leading our category on innovation bringing bigger ideas that are more successful.

We also lead the category in perceived taste with our biggest brands consistently scoring higher than all competitors in our product testing. As an example, this chart shows Donettes, our No. 1 brand at $0.5 billion in point of sale. You can see we significantly outperformed the other bag donut competitors.

Our product quality is simply unparalleled. And our investment in database consumer learning will ensure it stays that way. After tasting Twinkies, our most iconic and peerless brand, an incredible 85% of consumers say it meets or beats their expectations. And this is a testament to our high quality and our very successful 2021 innovation, Baby Bundts, scores an 8.1 out of 9.0 on overall consumer liking.

For reference, the industry benchmark is 7.0. So this is truly an incredible score and reflects the strong R&D and innovation capabilities our company is building. Voortman also has strategic advantages as a brand. While we play in niche markets with Voortman, we are incredibly successful.

With a 78% share of the fast-growing sugar-free cookie segment and share leadership in cream wafer cookies and sales up 22% since acquisition behind the support of our strong distribution model, there is so much for our team to be proud of and to build upon. The third pillar of our best-in-class business model is our unique go-to-market approach. Our combination of a low-cost, highly efficient warehouse model with the superior service we deliver through our third-party broker and distributor support is an incredible competitive advantage. We are able to deliver our shareholders the best of both worlds.

This means best-in-class margins, broad distribution, reliable store visits that create great shelf presence and customer service, advantaged store-level data fed back to our headquarter teams from our brokers and distributors. And strong in-store presence both at shelf and on display. And as discussed earlier, our strong in-store presence drives impulse purchases. The warehouse model allows us to sell in all channels creating greater total store reach versus DSD.

Our R&D and operations teams have optimized our formulas and production methods to achieve longer shelf life versus our competitors. This allows us to manage inventory effectively across a broad range of channels, even with a Sweet Baked Good. Our long shelf life paired with our warehouse model allows us to reach more than 75,000 independent convenience stores. We even reached small and local grocery chains by adding frozen food distributors into our supply chain, and our vending and micro-market business allows us to provide broad availability in spots where consumers are looking for snacks.

Our warehouse model enables us to create customized display programs in an efficient way. That's because all of our prebuilt displays ship from a single consolidated warehouse. This allows us to affordably drive display 52 weeks of the year, driving more impulse incremental sales. Display is also the driving force behind our seasonal program, which is best-in-class.

We sell more than $50 million in retail sales annually and seasonal offerings, representing about 3% of our total retail sales, that level of program is in line with the seasonal programs of leading snacking companies. Our complementary broker retail support model drives in-store performance. We have people in store weekly across the grocery, mass, and convenience store channels, executing more than 0.5 million calls every quarter. These broker representatives work to ensure our shelf presence is strong and help execute our display events.

Our investment in data enables information to stream back to headquarters allowing us to anticipate and adjust our production and initiatives as needed in a highly efficient way. The Hostess Partner Program or HPP, drives strong in-store presence in the ultimate impulse channel, convenience. We have partnership agreements in place with more than 700 chains and more than 50,000 individual stores that represent one-third of the total C-store market. These agreements give us a strong competitive advantage because the C-store market is highly fragmented with almost half of all C-stores owned by small independents.

Our partnerships lead to more items in the right assortment, delivering the highest availability in our category. Convenience impulse purchases help bring new incremental consumers into our franchise, and it is a profitable channel for us. In the convenience channel, where it can be hard to have access to data, our unique combination of brokers, HPP partnerships, and distributors provide data back to headquarters on a timely basis. This smart investment in data allows us to track both the shipments into convenience stores and the store-level performance within them.

In addition, our brokers track all out-of-stock items in our stores and help us improve our customer service, ensuring our product is always available for our consumers. The final pillar of our winning business model is our operational excellence. At Hostess, we are lucky to have our growth agenda supported by world-class operations that deliver for our employees, consumers, customers, and shareholders. We have a strong foundation anchored by facilities and processes that are efficient, agile, and scalable.

We have a demonstrated track record of success that allows us to confidently deploy high ROI capital to grow our business. We have systematic programs in place to deliver the savings required to fund our growth initiatives while growing capacity to meet consumer demand. And I just have to say we could not be more proud of the 2,400 team members within our bakery and DC network who have done heroic work over the last two years to turn our operations into a competitive advantage second to none in the industry. Our warehouse snacking model is efficient, agile, and resilient, providing the perfect foundation for sustained growth.

Over the past three years, we have focused first on safety, quality, and efficiency within our bakeries. Our focus on these three fundamentals has prepared Hostess for our next phase of consumer-driven growth. Our bakeries are some of the safest in the country with recordable injury rate 75% below industry averages. Due to a culture of continuous improvement, our product quality is strong and continues to improve, which benefits both the consumer who gets the best tasting product, and our bottom line as we run even more efficiently.

And continuous improvements and targeted automation projects have increased our output per labor hour across our entire network by more than 10% in the last year. This increase in output has enabled us to meet record-high consumer demand and deliver customer service levels above our peers. Our strong foundation allows continued investment in our operations. One of those investments has been our scaled national distribution center in Edgerton, Kansas.

We completed our move into this facility in January 2020, and it has provided a 75% increase in our distribution capacity versus our prior distribution model. Removed more than 2 million road miles from our network and supports our future growth projections. It was the key that enabled us to transition Voortman from its legacy direct store distribution model to warehouse distribution without a hitch. We are confident our scaled warehouse distribution network is capable of supporting both our organic growth plans as well as further accretive M&A opportunities similar to Voortman.

Our efficient distribution network has also allowed us to maintain best-in-class service to our customers over the past year despite industrywide challenges. According to Transplace, who maintain supply chain performance benchmarks across more than 40 different CPG companies at a major retailer, Hostess has achieved top quartile on-time and in-full performance in 2021. This is truly an impressive feat and speaks to the strength of our model and our teams. Our highly experienced engineering and manufacturing teams have a tremendous track record of delivering large transformational projects on time and on budget, making the decision to invest in high ROI capital in the business very easy.

In the past few years, they have installed a new cake line in our Indianapolis facility, a new Donette line in our Georgia facility and delivered approximately a 20% increase in capacity across our cake and Donettes platforms. As part of our acquisition of Voortman, we undertook a significant transformation of the bakery, including new warehousing flow to support the move away from DSD, a new wafer cookie line to support our growth, and new capabilities to deliver the breakthrough innovation of Crispy Minis for the Hostess brand. Our Burlington facility has been efficiently absorbed into our network and has met all of the standards for what a Hostess bakery needs to deliver. We have demonstrated strong growth, are excited for our prospects, and see now is the time to take the next step in our investment and our network.

Today, we are excited to announce that we are investing in our future, with the acquisition of a new facility in Arkadelphia, Arkansas. We currently expect this new facility to cost between $120 million and $140 million. This 330,000 square foot facility will be transformed into a bakery of the future. It will unlock approximately 20% capacity across our cake and Donette platforms, and is expected to support our growth algorithm through 2028 based on current demand projections.

It will also enable continued innovation across our portfolio and provide the necessary space to support additional production lines in the future as we continue to grow beyond 2028. Unburdened by pre-existing constraints, this facility will leverage all of the best practices accumulated across our bakery network to become our most efficient and flexible operation. We have taken a sustainability first design approach to this project and are committed to making this the greenest hostess facility we have, which supports our ESG agenda. And as a conversion of an existing facility, Arkadelphia is not only our lowest cost option, but also the most sustainable.

Design and construction of the facility is ongoing, and we expect it to be operational in the second half of 2023. We could not be more excited about this investment and our growth. We are grateful to have made this investment in conjunction with the support of our state and local partners in Arkansas. We look forward to welcoming the new team members who will join our company when the bakery is operational in 2023.

Our business model is truly best-in-class and provides us an advantaged market position that will drive sustained growth. To wrap things up, we compete in growing spaces. We have a best-in-class business model. And those two things give us such a strong base on which to build and invest.

I'd like to now introduce you to Tina Lambert, our vice president of innovation and growth who will talk to you about how we are investing in innovation and marketing.

Tina Lambert -- Vice President, Growth and Innovation

Thanks, Dan. Our innovation and marketing are gaining momentum and will enable us to expand our business into our targeted usage occasions. The power for us lies in a combination of innovation designed to bring incremental households into the franchise, and efficient marketing communication that will deliver a high return for our investment. Let's talk first about how we will drive growth above the category average through innovation.

Over the past 24 months, we have built a systemic approach to new product innovation that is best-in-class. We have dedicated and experienced people working on innovation across marketing, R&D and project management. We have a disciplined process to manage innovation projects and are working three years out to give ourselves the lead time to create true disruption. And our ideas start with strong database consumer insights grounded in our targeted occasion insights that Dan spoke to you about.

We are pushing ourselves to ideate in new territories, exploring new product forms and new packaging forms. And our innovation approach is not one-size-fits-all. We customize innovation for each of our priority retail channels with a focus on our profitable and advantaged convenience store business. While this capability is strengthening for us as we make it more systematic, it is strong today.

We have a proven ability to grow through innovation. Our innovation revenue in 2021 exceeded our goal to have 15% of our annual revenue to come from new products launched in the past three years. We call this three-year rolling metric Innovation Vitality, and we prioritize it to ensure our teams are focused on launching innovation that will be sticky in market, creating sustainable growth. Our 2021 launches of Baby Bundts and Crispy Minis were two of the drivers of our strong Innovation Vitality this year.

Baby Bundts is on track to be $40 million in retail sales in year one, and is the No. 1 innovation in our category. Crispy Minis targeted a new younger consumer for the afternoon sharing snacking occasion, and has succeeded in bringing incremental growth to our business. Consumers love these innovations as much as our investors do.

Here's a few examples of what we heard this year on social media. On Baby Bundts, a consumer said, "these exceeded my expectations, one of the best Hostess things I've tried lately." And on Crispy Minis, we heard, "these are the greatest invention, light, airy, and great flavor." Andy and Dan showed you this bubble chart, highlighting how much upside potential we have in our focused snacking occasions to grow both our brand and the categories we directly compete in. In order to maximize our growth in these occasions, we are accelerating our innovation plans. We are doing that by layering more differentiated and more incremental innovation into our pipeline.

In the past, our focus was on innovation that supported the core business, new flavors, and seasonal offerings. Well, that work will continue. Starting in 2021, we also began expanding into new food forms and new packaging forms ideal for our focused snacking occasions. And on the horizon in 2023 and beyond, we will work on even more breakthrough innovation.

This innovation acceleration plan will drive greater incrementality, leveraging our targeted growing snacking occasions. To build on our momentum in 2021, we are very excited to announce today our next big innovation, Hostess Bouncers. Bouncers introduces poppable versions of our iconic brands, Twinkies, Ding Dongs and Donettes. Hostess Bouncers is designed to bring incremental growth to our brand by capturing millennial parents who are looking for a handheld sweet snack that is portable and easy for their kids to eat.

This innovation meets the needs of the fast-growing lunchbox occasion with portable packaging that is easy to take on the go. Bouncers is launching in the summer of 2022 in large format stores, and in the fall of 2022 in small format stores like Convenience. This video will tell you a little bit more about this exciting innovation.[Commercial break]

We have exciting innovation coming on Voortman this year as well. Voortman 2022 innovation will target incremental growth from younger, health-conscious consumers through the launch of sugar-free mini cookies. Sugar-free mini cookies target the 19.3 billion afternoon sharing occasions by launching two of our top flavors of cookies in a poppable size and stand-up resealable bag. In addition, we are bringing back our peanut butter cream wafers based on popular demand, Voortman peanut butter wafers are made with real peanut butter, making them a guilt-free choice for consumers looking for balanced snack options.

In order to expand our presence in the immediate consumption occasion, we are also targeting young males with custom innovation for our advantaged C-store channel. Our new Boost brand is launching jumbo donuts with the caffeine of one cup of coffee in each donut. Caffeine claims have been growing aggressively in the past few years. And we know that Energy Boost is one of the top needs young men are seeking in the convenience channel.

Boost is launching this year in two flavors: Caramel Macchiato and Chocolate Mocha. So those are the highlights of our 2022 innovation plan, Hostess Bouncers for lunchbox, Voortman mini cookies and peanut butter wafers for afternoon sharing. And Boost jumbo donuts for the immediate consumption occasion. Incremental innovation is one of our two consumer capabilities with momentum.

The other is high ROI marketing communication. Marketing drives growth. And here's the good news. We have learned that simply reminding consumers about Hostess will drive incremental sales.

We have 92% brand awareness on the Hostess brand, but only 36% top-of-mind awareness. That's because 61% of the consumers who don't buy us report the top reason is because they just don't think about it. We just aren't a brand they think of immediately when they think about a snacking occasion. This past year, we introduced the Live Your Mostess campaign.

Our investment in data-backed consumer insights and increased marketing communication will help build our top-of-mind awareness with consumers. By increasing our top-of-mind awareness, we will generate more impulse sales. Remember, we compete in highly impulsive categories that respond well to awareness driving marketing communication. And our category-leading margins mean that our sales lift will generate a higher ROI than our peers.

Our disciplined approach to investment, which you'll hear about shortly, allows us to increase our investment over time as we learn and course-correct each quarter to maximize our return. The combination of our category's high impulse nature, the strong margins we have and our disciplined test-and-learn approach to media will help drive business results. As we begin to advertise again, we are approaching investment in media differently without the baggage of a more traditional approach. Unlike many of our large snacking competitors, we are not weighed down by a long history of investment in linear television.

In fact, the average food company is only 65% digital and still spending a high percentage of their total advertising budget on traditional TV. By contrast, our spend is 100% digital, and our advertising is focused only on highly efficient digital video, e-commerce and social media. This allows us to maximize our reach at a higher return. E-commerce advertising is over one-third of our total advertising spending, and we are consistently outperforming the Nielsen benchmarks for retail search.

But e-commerce is about more than just advertising. We are investing in all three prongs of the e-commerce flywheel to maximize our return and efficiency. Step one is about availability. Our top 12 retail customers are all selling our products on their dot-com sites or through a delivery site today.

And we have almost 200 items for sale online. Step two is about the digital shelf consumers see when they shop at a retail dot-com. We have made significant investments to improve the images and content on a retailer's site. And we have prioritized adding even more new photography and content this year.

So once availability is high and the shelf content is strong, advertising will drive sales. We know that e-com advertising can drive sales both on and off-line. More and more consumers are using retail dot-com sites as a search engine to explore product offerings. As we increase our investment in e-com and other digital marketing communication, we are doing it in a disciplined way.

We have increased our investment in data to ensure we are maximizing our returns on marketing communication. We have identified measurement tools, including Nielsen and Kantar sales lifts as well as AI prediction tools. We have developed a media mix simulator that allows us to optimize our spending by tactic. We test all new advertising with consumers before airing it.

And each quarter, we read our results, and we leverage those learnings to optimize our spending and are creative for the following quarter. This disciplined approach helped us demonstrate an almost 150% increase in ROI in just two quarters in 2021. We will now roll a short video highlighting some of the great creative we aired last year.[Commercial break]

Our marketing communication works. Here is one case study of the lift we were able to drive on Baby Bundts at a top grocery store chain. We invested in digital couponing and e-com advertising, and both performed many times over their benchmarks. Overall, the campaign drove an 8% increase in unit velocity at the store, driving fantastic trial with consumers on the successful new item.

We intend to drive incremental growth above the category average through strong consumer activation. The combination of our innovation acceleration plan and our test-and-learn approach to marketing communication will drive strong consumer demand and allow us to grow with new consumers and in new consumer occasions. Here are the key takeaways on growth. Our business sits in growing spaces.

We compete in five key snacking occasions that are broad and fast growing. There are evergreen consumer trends driving our growth. Our business model is best-in-class and hard to replicate. We are nearly everywhere.

Consumers are looking for snacks. We have strong brands. Our go-to-market model combines the best of both worlds. The cost-effective warehouse model with the excellent service, data, and in-store presence provided by third-party brokers and distributors.

Our operational excellence enables our growth strategy to succeed. And finally, as I just explained, our innovation and marketing are gaining momentum. Incremental innovation and high ROI marketing communication are the final two levers of our sustained profitable, long-term growth strategy. I'm now going to pass the mic back to Mike Gernigin to talk to you through the financials we expect as a result of this strong growth strategy.

Mike Gernigin -- Interim Chief Financial Officer and Chief Accounting Officer

Hello again. Watching the Hostess team present, I hope that you're as excited as I am about our journey ahead with really attractive growth prospects and being well-positioned to realize these opportunities. Over the next few minutes, I will take you through how we expect to deliver financial performance, which we believe will put us in the top tier among our peers. Three key takeaways I would like you to walk away with.

First, we have a strong foundation to build upon for our top-tier growth and margin performance in one of the most challenging environments for our industry. More importantly, we are confident in our ability to continue this momentum to realize our attractive long-term revenue, EBITDA, and EPS growth targets. Second, to deliver this long-term growth, we are activating our growth flywheel, creating a continuous cycle in which our strong margins and capabilities to generate productivity will enable us to invest more behind our advantaged portfolio, driving the strong top-line growth and superior shareholder returns. And lastly, the flexibility of our balance sheet, the strength of our cash flows and with the leverage in targeted range, we are positioned to invest in our business for organic growth, execute on our M&A and maintain our ability to opportunistically return capital to shareholders.

Let me take you through the specifics of our value creation plan. Starting with a strong foundation of top-tier growth, we have posted double-digit sales, EBITDA, and EPS growth over the last three years. We have consistently outperformed our peers. You have heard a lot about our resilience, which has been tested and delivered strong growth during a period of extraordinary challenges during the pandemic.

We have not just faced unprecedented volatility in consumer buying patterns and our supply chain, but also a historically high inflationary environment, particularly in the last 12 months. Even with that, we were able to maintain our gross margins during this period, one of the very few food companies to achieve this. This is all a testament not just to the tremendous nimbleness and agility of our supply chain, as we talked about a few minutes ago, but also to our premium portfolio, proven pricing power, and our superior operating model, driving our ability to maintain industry-leading EBITDA margins. We are very proud of our strong and sustainable best-in-class margin structure and see it as a key enabler of the next phase of our growth.

Our strong performance during a challenging period hasn't gone unnoticed, and has resulted in leading shareholder returns. Over the last two years, Hostess Brands has generated cumulative shareholder return of nearly 80%, more than two times that of our peers. I am confident that executing on the agenda the team has outlined today will continue to deliver attractive returns for our shareholders. We are not just content with this strong performance in a challenging period.

We're even more excited about entering the next phase of Hostess growth. And as you heard from Dan and Tina earlier, we are better prepared than ever to deliver meaningful growth given our access to attractive, faster-growing snacking occasions, our best-in-class business model as well as our growing innovation and marketing capabilities. Andy introduced our long-term growth algorithm earlier today. Now I will go into more detail about how we expect to deliver it.

With our ability to identify the right opportunities, leveraging our strong foundation and continuously improving capabilities, we have a great confidence in our new long-term growth targets. Our long-term algorithm starts with mid-single-digit organic top-line growth. This top-line growth, combined with our attractive margin structure and sharp focus on productivity will drive 5% to 7% EBITDA growth. This all translates into 7% to 9% EPS growth over the long term as we lean into our strong cash flows and balance sheet strength.

Let's dive deeper at our top-line growth expectations. Generating a sustainable attractive top line is not only the topmost priority for Hostess Brands, but also where we consistently differentiate ourselves compared to our peer set. This track record, combined with what you have already heard today drives home the point that we have great confidence in our ability to realize this growth. As you have seen, our access to attractive, faster-growing snacking occasions such as the morning sweet start or lunchbox aligns with how consumers shop for and consume snacks.

Our focus on these targeted occasions that are well aligned with our iconic brands and innovation pipeline provide us confidence in our continued ability to access this large addressable market. We have also proven pricing power supported by the strength of our iconic brands and strong market position within our categories, meaningful innovation as well as continued investment in high ROI advertising and marketing which, combined with our ability to access these targeted consumer demand spaces, will allow us to continue our growth story. Most importantly, our 2022 sales growth guidance of 5% to 8% demonstrates expected top-line growth this year to be toward the higher end of our mid-single-digit long-term range as we continue to be very well-positioned to unlock the benefits and capitalize on the current positive trends in consumer behavior and continued strong retail and operational execution. Over the longer term, we expect to convert our mid-single-digit top-line growth in the 5% to 7% EBITDA and 7% to 9% EPS growth.

We have consistently delivered best-in-class EBITDA margins, and we are confident that activating our growth flywheel will enable us to maintain and expand these margins even as we increase our growth investments and manage the ongoing inflationary environment. We expect to generate EPS growth of 7% to 9%, driven by our efficient operating model and strong EBITDA growth. We also continue to have balance sheet flexibility, enabling us to pursue both inorganic growth opportunities as well as provide higher returns to shareholders while maintaining our long-term leverage within our three to four times target range. activating the growth flywheel is at the center of our long-term growth strategy and further unlocks our capabilities to deliver top-tier financial performance.

It's clear that we have tremendous opportunity to deliver an attractive top line. What is just as important is our commitment to invest more behind growth in a responsible way, while not taking a step back on our attractive margin structure. Let's dive further into the four stages of our growth flywheel. We have multiple levers to pull to create operating leverage.

Our volume-driven growth, iconic brands, proven pricing power, and efficient, scalable operating model support our leading margins, a source of lasting advantage against the competitive landscape. While we are pleased we maintained relatively flat margins during a period of heightened inflationary pressures this past year, over time, we expect to generate positive operating leverage and profits ahead of our top line, in part through continued productivity savings. We have always been a lean, efficient, low-cost operator with a supply chain that operates with an owner mindset, maniacally focused on unlocking productivity and cost-saving opportunities, and it has served us well. To realize our long-term financial commitments, we will drive continued productivity initiatives with our new, formalized, enterprisewide fuel our growth program.

This will build on our successes and existing capabilities. This new centralized structure will manage ownership of all of our productivity initiatives, develop scalable and repeatable processes for continuously refilling our pipeline of projects and facilitate cross-functional collaboration to unlock transformational ideas and best practices. Over the course of 2021, we have filled the productivity pipeline and begun executing on our first wave of initiatives. These initiatives span procurement, our bakeries, transportation, and distribution, but it doesn't stop there.

We are also identifying priority initiatives that drive efficiencies in our top line through trade spend management. Our approach to productivity savings starts with reducing complexity. We believe reducing complexity is vitally important to the program over the long term. Removing complexity from the system is what allows us to unlock and implement all of our other savings initiatives.

Our approach to procurement savings goes beyond what you might be imagining and includes our strategic and collaborative partnerships that will enable us to drive savings. Given today's supply constrained environment, we are focused on strategic sourcing partnerships that leverage their and our innovative thinking to find creative ways to drive savings and improve quality. As an example, rather than seek the lowest price on our existing corrugated cases, we partnered with our vendors on changing the way we pack our cases and alter their geometry to allow more cases to fit on a single pallet. This change will not only reduce our corrugate costs but also reduce the space needed in ours and our customers' warehouses and reduce the number of truck miles needed to get our products to market.

Next is manufacturing efficiency. We have two major focuses here. First, we believe that through the increased digitization of our bakeries, we can drive a step-change in our continuous improvement program, optimizing output and reducing waste. We are also continuing to allocate significant capital to automating our packing and palletizing functions on many of our lines.

Not only is this high-return capital, it will also reduce our demand for labor, mitigating our exposure to potential future labor disruptions in the marketplace. The final major savings bucket we're tackling in the first wave is our network and distribution structure. Our team is working on a series of initiatives that will increase our truckload utilization, reduce our cost per mile and improve our on-time services to customers. Driving productivity savings provides fuel for us to invest in additional growth levers and capabilities.

As Tina discussed earlier, since our business operates in high impulse snacking categories with a proven track record of sales lift from advertising and marketing spending, there's a huge opportunity to drive our sales growth by simply reminding these consumers about the Hostess Brands. Given our historically low advertising and marketing spend and high expected ROI, we plan to increase the spending over the next several years slightly ahead of our expected revenue growth as we establish our new base level of spend to drive growth. As Tina mentioned earlier, most, if not all, of our additional A&M investments will come through the digital media, giving us a higher ROI, and as with all of our spend, we have a maniacal test-and-learn approach to efficiently use our spend as effectively as possible to deliver growth. The payoff from these higher growth investments is a sustained, attractive mid-single digits top-line growth, completing our growth flywheel, creating a continuous cycle in which our strong margins and greater focus on productivity will enable us to invest more behind our advantaged portfolio, leading to even stronger top-line growth and superior shareholder returns.

And these growth investments are supported by our strong cash flows and flexible balance sheet. As you can see, with our net debt-to-EBITDA ratio falling to nearly three times at the end of 2021, we have delivered the leverage we committed to at the time of the Voortman acquisition and are now at the low end of our targeted range, allowing us to reprioritize our cash allocation strategies. As we have done consistently, we continue to view all of our cash allocation decisions through a rigorous ROI lens. That said, capital allocation for growth, both organic and inorganic, now has higher priority, followed by cash return to shareholders through buybacks while maintaining our targeted leverage.

Let's cover a few specifics. As mentioned earlier, our strong volume-led growth over the past 18 to 24 months and continued momentum has accelerated our need for additional capacity to support growth and maintain an efficient supply chain. We are now adding two new production lines in a recently acquired bakery in Arkansas, our sixth bakery in North America. It is expected to be online in the second half of 2023 with total costs of around $120 million to $140 million over the next two years.

At the same time, we will continue to deploy capital to drive operating efficiencies, including automation in our bakeries to unlock latent capacity and reduce labor intensity, which has become an imperative in the current operating environment. While we expect our capex to rise above 9% of revenue for the next two years, we expect it to moderate back to normalized levels of 4% to 5% by 2025 as we efficiently manage our capital needs with a higher revenue base and strong expandable infrastructure. Given our strong balance sheet, we are confident that we can continue to invest in the business to support our organic growth while actively seeking accretive acquisition opportunities. The Voortman transaction and our ability to successfully integrate it has proven that we can create significant shareholder value by leveraging our advantaged operating model over a larger, wider sales base.

And we have much bigger capacity to execute on our M&A agenda. Led by our strong growth outlook and 100%-plus cash conversion ratio, we expect to have significant firepower over the next three to four years even after accounting for our elevated capex spending and maintaining our leverage ratio within the targeted three times to four times range. Even with much more firepower, we will continue to be highly disciplined as we look for acquisition targets. We have a well-defined acquisition funnel to balance the size, complexity, and accretion of the potential deals with our strategic objectives.

As our Voortman success demonstrates, we are not constrained to our current categories and are willing to expand into the wider snacking universe that leverage our strengths and further complement and enhance our growth trajectory. At the same time, we are also open to targets that bring us new brands, new capabilities or entry into new desirable categories or segments. Along with investing more behind our growth, our capital allocation strategy includes returning capital to shareholders through opportunistic share buybacks. We are excited to announce a new $150 million share buyback authorization today, which supports our continued commitment to return capital to shareholders given our strong cash flow and leverage position.

We see this as a key component of our capital allocation policy, and we'll look to opportunistically return capital to shareholders. Let me wrap up with a reminder of the three key things I covered today. We have outlined an attractive growth agenda and long-term algorithm with mid-single-digit sales growth, leading to 5% to 7% EBITDA and 7% to 9% EPS growth. We are activating our growth flywheel to create a cycle of strong margins and productivity, enabling us to increase our advertising and marketing investments, leading to even stronger top-line growth.

We will lean in on the flexibility and strength of our balance sheet to execute on our growth agenda, both organic and through M&A, while returning capital to shareholders and maintaining our target leverage in order to enhance shareholder returns. I will now pass it back to Andy to wrap up our key messages we hope you will take away from today's presentation.

Andy Callahan -- President and Chief Executive Officer

We covered a lot today. And I hope you are as excited and confident as I am about our potential to continue to create industry-leading value. In 2019, I committed that Hostess make the right investments behind the right capabilities to deliver top-tier results. I believe we delivered against that commitment.

We cannot have accomplished this without the tremendous dedication of one of the most talented groups of employees in the industry. This gives me the confidence that we can do it again. I want you to take away three things from today. The foundation of Hostess Brands has never been stronger, and I've never been more excited of our capabilities of catapulting to our next phase of growth.

We are a unique company focused on snacking with a best-in-class business model that works in harmony with our impulse-driven categories within the consumer occasions where we will have meaningful upside to grow. Lastly, with the combination of those two, we expect to deliver the strong financial performance in our new algorithm with an opportunity to amplify value creation with M&A given our strong cash flow, which unlocks our ability to drive top-tier shareholder return. Thank you for joining us today, and we appreciate your interest in the new Hostess Brands. We will now take a short break before we begin our live Q&A.

Feel free to submit your questions in the chat section of your screen. OK. Welcome back, everyone, and thanks for joining us today. As you can tell, we're very excited about our results, our team's execution, but more importantly, we believe we're just getting started.

So we're very confident about where we're going, and now we turn the agenda over to you. And joining me for the Q&A is Mike Gernigin, who you heard from; Dan O'Leary and Tina Lambert, who lead the teams that make a lot of our growth and everything happen. So with that being said, we'll get to your agenda. And now I'm going to turn it to Amit for the first question.

Amit Sharma

Thanks, Andy. The first question comes from Ken Goldman at J.P. Morgan. You have done a great job of expanding your share of C-stores, partly via the HPP program.

To what extent does your long-term algo rely on continued expansion in this channel where you already have close to 90% ACV?

Andy Callahan -- President and Chief Executive Officer

Hey, Ken. Thanks for joining us. All right. I get this question a lot and I've actually received this for several years.

One of the beauties of our growth, as you heard from Dan, is we're not reliant on any one channel. We're not reliant on any one occasion. We have a broad-based distribution, that's one of the power of it. C-store specifically, we've been at above 90% ACV for years.

And we've been able to continue to grow because of our partnership; our focus on data, which has allowed us the quality of the shelf; and some of our innovation, which we're also coming up -- Mini Muff'n Stix were launched this year and doing extremely well. And I know you may have seen Boost, we're launching next year. So it's a combination of attracting consumers that are driving our growth, not just distribution alone. Dan, anything to add on to Boost?

Dan OLeary -- Executive Vice President, Chief Growth Officer

Yes. I'd say, I mean, Boost is a product that we are incredibly excited about. We did our launch announcement last week and we generated more than 1 billion consumer impressions through that launch. And what's really great about Boost, it actually gives us an incremental shelving location.

So that product is going to be shelved near coffee racks. It gives you the equivalent of a cup of coffee's worth of caffeine, a unique benefit. It speaks to the needs of our consumer. And it gives us that incremental distribution.

Andy Callahan -- President and Chief Executive Officer

Awesome. Amit, what else?

Amit Sharma

Great. The second question comes from Rob Moskow at Credit Suisse. You talked a little about younger consumers snacking more often. Can you provide more details on how your brands index with gender demos and how you intend to improve them over time?

Andy Callahan -- President and Chief Executive Officer

Yes. So I'll turn this over to Dan, again, who I think has outlined our insights and what we know about consumers and our focus on occasions very well, which Tina is bringing to life. So Dan, talk about our occasions a little bit more.

Dan OLeary -- Executive Vice President, Chief Growth Officer

Yes. So I'll actually start with the consumer trends. So the thing that we're seeing is a lot of the trends that are driving the market right now are really being created and driven by that younger consumer. So it's the snackification of eating.

We actually see this most predominantly being driven by that millennial and Gen Z consumer. Instead of three squares a day, they're snacking throughout the day. The other one is really the focus on the family. And we're seeing that millennial parents and Gen Z parents, they're just raising their kids differently than older generations did.

And those little moments of joy where they can give their families a sweet treat is something that they're really excited about. And then the third is really that trusted brands. And we're seeing a lot of the younger consumers gravitate toward trusted brands that have been around. So we take those trends and we put it then into our occasion model.

And we chose occasions that we feel do very strongly with this younger consumer. And one example that I would give is our Crispy Minis launch. We put it in our sharing -- consumer occasion. And the thing that we love about Crispy Minis is it really hits what the consumer is looking for.

They're looking for something that's poppable. They're looking for something in a packaging innovation that's easy for multiple people to grab out of the bag. And as a result, it's indexing quite well with our younger consumer.

Andy Callahan -- President and Chief Executive Officer

Yes. Just a quick build on that, Dan. Our occasions are focused on growth. We've been saying a while, we're maniacally focused on growth, and growth requires the attraction of incremental consumers.

And we have the model, as you've heard earlier, to be able to track that. So by definition, that's a younger consumer. Amit?

Amit Sharma

Staying on growth, the next question comes from David Palmer at Evercore. Hostess is guiding to flat volumes in 2022. Given the recent carryover momentum, what could be some offsets other than price elasticity that could keep volumes flat year-over-year? At some point in 2022, do we anticipate shipped sales outpacing consumption as retailers' inventory buildup?

Andy Callahan -- President and Chief Executive Officer

Yes. So why don't I take this, David? Great question. All right. So over time, I know we -- sometimes when we come through the year, but typically, the relationship of our point-of-sale and our shipments, they normalize over time.

And we've seen that if you look at a broader framework, so anything you see is maybe just noise around some quarters. We've seen that with Voortman. We're seeing it a little bit with Hostess. Related to our guide, a couple of things.

We talk a lot about the disruptions in the supply chain. We're also seeing the consumers experience a lot of disruption. And it's a large range of variability as we flow throughout the year. They're losing benefits.

They're moving to a normalized COVID environment. They haven't fully recognized they were absorbed pricing. Our guide, as a reminder, is at the high end of our long-term algo as we sit here this year, but we still haven't seen everything that consumers have absorbing. Now admittedly, we are off to a strong start to the year.

We're certainly seeing that. But we expect as time goes on and we normalize, we expect that to get closer to normal. If we're off, we'll adjust that in May when we talk to you more, which we've typically done.

Amit Sharma

Thanks, Andy. Next question comes from Bill Chappell at Truist. Over the next few years, will Voortman expansion or higher share in breakfast items be a greater driver of your top-line growth?

Andy Callahan -- President and Chief Executive Officer

So we're really -- I'm going to turn that over to Dan here in a second, but we're thrilled with Voortman. We bought a business that's growing at a greater rate than total Hostess, have margins at a greater rate than total Hostess. And we expect to continue to grow it. So, Dan, what about Voortman?

Dan OLeary -- Executive Vice President, Chief Growth Officer

Yes. I mean, to Andy's point, we do feel great about the Voortman acquisition. We were able to integrate it in a very difficult moment in time, right at the start of the COVID pandemic hit. We're thrilled with the point-of-sale performance that we've seen on Voortman.

And we actually see a lot of opportunity with innovation. And so we have two great items that are coming out in the next year. The first is our poppable mini cookies, which is in a stand-up pouch, and it fits that same kind of shareable poppable occasion that we talked about with Crispy Minis. And then the second thing with Voortman that we're really excited about is the launch -- or really the relaunch of our peanut butter items.

So we had two items that early on after the acquisition, primarily because of supply chain, we decided to take off the shelf as we really focused on core items. We've now brought those peanut butter SKUs back. We're gaining distribution, and we're thrilled with how we expect that those will turn. So we think Voortman has a lot of upside, both this year and as part of our long-term algorithm.

Amit Sharma

Excellent. Thanks, Dan. Next question comes from Rob Dickerson at Jefferies. Given your capex needs over the next two years, would you say that your acquisition appetite may be pushed out a bit? Or would you be willing to relever materially for the right asset?

Andy Callahan -- President and Chief Executive Officer

All right. So thanks for the question. One of the great strengths of our business, and Mike talked about this, is our ability to delever quickly. Now certainly, we have investment in our core.

We always said that was primary. And Mike talked about our firepower. How do you feel about M&A, Mike?

Mike Gernigin -- Interim Chief Financial Officer and Chief Accounting Officer

I feel really good about M&A, Andy. We do. We've demonstrated in the past that we have the ability to lever up, and we commit to strong cash flows and we have demonstrated our ability to come back down and lever with the right asset. We do have conviction around our growth.

We are making investments in capacity, and Arkadelphia is an example of that. But when it comes to M&A, we believe, over time, we've talked about earlier, that we'll have ample dry powder to deliver on our M&A agenda.

Andy Callahan -- President and Chief Executive Officer

And just to build on that, we delevered down to our target range now. We've talked about our priorities. Having our growth algorithm as strong as it is, that's a great position to be in to be able to invest in the core to continue to drive that growth at industry-leading EBITDA margins. And even with that, we're not going to delever anymore.

We'll maintain within targeted margins. So it still gives us the opportunity, with the right target at the right time, to be able to scale up our asset base which we believe is a great opportunity, which we've demonstrated with Voortman. Amit?

Amit Sharma

And the second part of Rob's question is, and when you say you would look beyond sweet baked goods, are you saying you will look into salty or more like cookies and cakes?

Andy Callahan -- President and Chief Executive Officer

So we haven't defined it that closely. What we have said is we're a snacking company and we're a darn good snacking company. We've demonstrated that in our results. We have a highest percentage -- all of our portfolio is basically snacking.

They're in high-growth areas. So we will look broadly, including salty, although really we have a snacking universe. What's really important is, is it a scalable niche? Can we grow it? Can we make money with it? And when we hit those and it fits within our asset base, then we'll look at it. And we'll be disciplined with the cash.

And if not, we can create a lot of value as we've demonstrated with our core.

Amit Sharma

Thanks, Andy. Next question comes from Ben Bienvenu at Stephens. Relative to the key snacking occasions that you have identified and intend to target, when you look at your product portfolio currently, are you over or under leveraged to any one of these occasions? And along those lines, how do you expect M&A and innovation to help broaden your product portfolio?

Andy Callahan -- President and Chief Executive Officer

All right, Ben, great question. We've done a lot of work on the occasion-based map, and the answer is both. So, Dan, why don't you fill in some more details on the occasion map?

Dan OLeary -- Executive Vice President, Chief Growth Officer

Yes. So as we think about the occasion map, we have picked five targeted occasions that we feel are going to be the strongest contributors to Hostess growth. They're going at a three-year CAGR of 5.6%, and it's a $50 billion addressable market. So we see a lot of upside targeting these occasions.

And when we look at where we are today, we feel like we have a really strong right to win in all of them. One that I would just highlight is that morning sweet start. We've seen great growth coming from breakfast over the last three years. We've targeted new innovation in the breakfast occasion, things like Boost that we talked about.

And then we also have great opportunities for in-store merchandising for our breakfast items or Donettes item. And our Donettes business actually became a $500 million point-of-sale business this year. So we feel great about how we're able to use the occasion model to create a real point of differentiation within our categories.

Amit Sharma

Excellent. Thanks, Dan. Next question is from Bill Chappell at Truist. With pricing, are you making similar moves, timing with single-serve versus multipack?

Andy Callahan -- President and Chief Executive Officer

Hey, Bill, thanks for joining us. I'm going to let Mike take the pricing, but just a real quick thing on pricing, at least the way we look at it. Pricing, by definition, is a change model. It's temporary.

Consumers get used to it. When all prices go up, it helps. So there's a relative pricing thing that I think every food business has experienced. It's also just one component, so price is short term.

The macro trends that we're seeing that are giving tailwinds to our occasion model, they last forever. So we're in a real good place. We're experiencing very good consumer volume-driven growth despite our pricing, but I'll let Mike talk about the way we think about it with single-serve and multipack.

Mike Gernigin -- Interim Chief Financial Officer and Chief Accounting Officer

Thanks, Andy. Yes. So as Andy said, pricing is just one of the tools we reach to in our entire business model. We've activated pricing across pack types, across channels.

We talked about earlier, we're going to get a wraparound benefit of pricing in 2022. We've also activate -- we've also put pricing actions that will go into the market after Q1 of this year. So broadly speaking, we're across channels and across pack types, our pricing strategy is in effect for 2022 and contemplated in our responsible guide.

Amit Sharma

Thanks, Mike. The next question is a follow-up from Ken Goldman. I love the Bouncers and Mini cookies innovation. I'm curious though, to what extent bag products such as these and Crispy Minis are detrimental to incremental margins?

Andy Callahan -- President and Chief Executive Officer

All right. Tina talked about this. When it comes to innovation, we have a disciplined approach, not just from a consumer side, not just from an execution side, but from a profitability side as well. So, Tina, why don't you give a little bit of detail the way this works?

Tina Lambert -- Vice President, Growth and Innovation

Yes, I'd love to build on that. We are really investing in innovation capabilities. And there's kind of three big ways we're investing. The first is people.

So we have invested in fantastic talent. We now have R&D, marketing, and project management leads on our innovation teams with more than 15 years of experience in innovation. The second one is process. And we are using a disciplined best-in-class stage gate process with the accompanying tools to make sure that we have rigor behind the way we're bringing innovation to market.

And we're working three years out in that process so that we can bring bigger ideas. And the third is the ideas themselves. We are investing in consumer insights, as you heard so much about during our presentation, to make sure that we're bringing bigger ideas and moving beyond just flavors and seasonal innovation to actually new forms and new packaging types that will bring more incremental growth. So as we do that, when we think about the process, part of that is a rigorous financial review and making sure that we're thinking about the margins that we need to hit in terms of our average company margin and that our innovation over time is not being a drag on the P&L.

We want it to be accretive. So we will leverage whatever tools we have, price pronounced premiums, that sort of thing. And you'll see, as we're moving forward with our innovation, as we're getting more creative, we have more opportunity to make sure that we can bring more margin to the business through innovation as well.

Andy Callahan -- President and Chief Executive Officer

Excellent. Thank you, Tina.

Amit Sharma

Thanks, Tina. And Ken, we'll make sure we send you samples of our Bouncers that's coming up soon. Next question is Wendy Nicholson from Citi Research. With your innovation, do you think you can continue to expand your shelf space? Is there an opportunity to have more end caps or other display spaces at retail?

Andy Callahan -- President and Chief Executive Officer

So great question. Here's the headline. When you're growing and you're bringing products that consumers want, you satisfy customers. Customers just don't want us to grow Hostess.

They want us to grow the category, and we have a great track record of doing that. So when that happens -- and part of our philosophy has been and it's always been, we do not only want sustainable growth over time that's profitable. We want sustainable, mutually beneficial relationships with all of our customers. And we invest in that over time, and that has paid dividends for us to this point and it will continue to over time.

So that includes shelf space. I expect that to -- as we continue to perform well, I expect our customers to continue to do that. And we're seeing that happen now with some of the front-end distribution we're seeing, the merchandising, and it's because we have the products that consumers are beginning to increasingly demand more at a better rate than the category is because we're focused on our broader occasion-based model with brands and assets that consumers love.

Amit Sharma

Thanks, Andy. Next question comes from Pam Kaufman at Morgan Stanley. How large are your non-measured channels today? And can you elaborate on how your growth strategy online and in channel such as vending, where do you see these going as a percent of sales over time?

Andy Callahan -- President and Chief Executive Officer

Yes. Hey, Pam, thanks for joining us as always. Vending is an important, but a smaller piece of our portfolio. And we have these for our -- that channel.

We see it coming back actually relatively well. It's overdeveloped in some of our value brands that we talked about, Big Tex and Cloverhill. So it's a good part of our business. It helps us fill some of our facilities at a very good way, and we do see it growing.

Now what's really exciting, as you mentioned as well, which I'm going to turn over to Dan and Tina, is our e-commerce sales, which we believe is a terrific and high growth opportunity for us.

Tina Lambert -- Vice President, Growth and Innovation

Yes. I'd love to build on that. So e-com is a really exciting growth opportunity for us. E-com only represents about 2% to 3% of our sales today.

So if you compare that to rest of food, we see a huge opportunity to continue to increase our penetration in that important channel. And so we're focused on it in three key ways, and I talked about them in my presentation as the e-com flywheel. We're focused on availability. So right now, we have almost 200 items available for sale online with our top 12 retailers on their dot-com sites or through their delivery services.

So we feel pretty good about that, but we certainly still have room to improve our availability as well. The second one is the digital shelf. So we are investing in data to make sure that we really understand how our digital shelf is performing and then we're investing in content to get that performance improved. And the third is advertising.

I mentioned in my presentation that over one-third of our digital marketing budget is dedicated to e-com. So we are absolutely committed through availability, improving the digital shelf, and then advertising online to improve our presence in e-com. And we believe it's a great growth opportunity for us through the span of our long-term algorithm.

Andy Callahan -- President and Chief Executive Officer

Excellent. Big opportunity for us and we're doing it very well, but we're just getting started. That's awesome. Amit, what else do we have?

Amit Sharma

Next question is from Rebecca Scheuneman at Morningstar. As you consider acquisition targets, how are you prioritizing profit margins? Are you willing to accept lower margins to add high-growth rents?

Andy Callahan -- President and Chief Executive Officer

So that's a terrific question. I think it's a little bit more holistic than that. We're focused on snacking. We're focused on products that we believe fit a scalable niche so that we can grow.

And we're focused on products that we believe can grow profitably. And profitably is relative to Hostess, which we're already very profitable. So certainly, we would look at things that maybe today aren't as high margin because we believe it fits within our business model, gives us the synergies to be able to drive the profitability up, and invest over time or innovate over time. So we certainly would, but it has to fit within our model.

And by definition, if we can grow it at a greater rate, at margins that are at or above, that's ideal. We've demonstrated our ability to execute it with Voortman. As I mentioned before, it's a scalable niche, number one in sugar-free and in wafers, higher margin than the Hostess average and is growing at a great rate, as Dan talked about earlier. So those are ideal, but it's more holistic than that.

And we will be very disciplined with our cash relative to return to shareholders.

Amit Sharma

Great. Thanks, Andy. Next question comes from Ann Gurkin. Would you please elaborate on your comments from your data that consumers prepare less food? It seems that during the pandemic, consumer prepared more food at home and that level of at-home consumption seems to remain elevated longer.

Andy Callahan -- President and Chief Executive Officer

So I'll let Dan talk about that just to clarify. What we are seeing is that consumers are snacking more and that there's a number of occasions that are increasing, and a lot of those occasions are snacking and the occasions that we're in are snacking more. So that's the focus. And we're not tied to a meal occasion.

Consumers can go to a restaurant more often and still be at home and snack. Dan, anything to build on that?

Dan OLeary -- Executive Vice President, Chief Growth Officer

Yes. No. I think that's the great point, Andy, is that snacking continues to grow. And what we've seen is total snacking was growing before the pandemic.

It's accelerated during the pandemic. And we think that that snacking consumption will definitely increase after the pandemic. And what we're seeing is the range of indulgent treats that the consumer might look for is growing as well. So we remain confident in the long term that we're going to be able to -- as folks are at home, but then as the mobility rises as well, they'll turn to our snack products.

Andy Callahan -- President and Chief Executive Officer

One build on that. I had a question earlier about baking, baking at home is more often. That's a different occasion. If you saw the -- baking occasions are more of an involvement with the family.

It's a different occasion. We're not a baking company. We are a snacking company that provides baked goods and we're an alternative to consumers through a broader consideration of what they're going to have to snack. And then they're increasingly noticing the improvement in our quality and choosing us more often.

We see that in the data. So it's more related to the snacking occasions. It's not tied to meals and it's really not even tied to in-home baking. If they're in home baking more and have a greater appeal and it's more relevant for them, we provide a very convenient, very good option when they are in that snacking occasion.

So that lifts all boats, the rise in tide lifts all boats. Amit?

Amit Sharma

Thanks, Andy. A couple of questions on our channels. The first one comes from Pam Kaufman. Just one second.

Given your exposure to the convenience store channel, do you anticipate any impact on sales from the rise in gas prices? In the past, have you observed any cross-elasticity between gas prices and the three baked goods category?

Andy Callahan -- President and Chief Executive Officer

Hey, Pam, great question. The short answer is yes, OK? So when gas goes up, I think the data does show trips are down, consumers are driving less. What we're uncertain about is how those other evergreen macro trends are impacting them. They're not in -- we've seen actually the mobility data would very clearly support the fact that consumers are more mobile now even than they were before the pandemic.

They're in planes less. They're in mass transit less. They're in their cars more. So we still believe that those macro trends even with the reality of increasing prices, but historically, we have seen that.

Now, that's the beauty of our model. We have broad-based distribution. We -- across multiple channels. We're in multipacks.

We're in C-store. We're available when consumers need it immediately. We're available for them to inventory. We're across all of the channels.

We're not relying on C-store alone, although it's a terrific part of our business and we continue to drive share. And we've gained ground based on our focus on these customers during this, and I expect us to continue to do that. So even if it impacts the channel, I expect us to continue to grow share and I expect us to have other -- the breadth of our availability and our portfolio will continue to grow.

Amit Sharma

Thanks, Andy. The second -- the other channel question is from Rob Moskow. You gained market share in every channel in 2021, except for one. Do you expect share gains to increase in a similar way in 2022? Or will it look different by channel?

Andy Callahan -- President and Chief Executive Officer

So we focus on the consumer and we focus on developing long-term strategic partnerships with all of our customers. We don't deal with short-term issues. We need to work on supply chain. We've talked about certain channels all the time.

And our focus was on making sure any solution we have was sustainable for both our consumer, our customer, and Hostess. We'll do that across all of the channels. I'll bring you an example. When COVID first came out, we didn't walk away from some of the channels that were out of favor.

We invested in our convenience customers. When we were down in certain channels, we continued to invest and service them, invest in different innovation and channels. We want sustainable long-term partnerships with all of our customers. It's in our philosophy.

It's in our DNA. And we believe, over time, that will sustain us. And we're seeing that in the data right now.

Amit Sharma

Thanks, Andy. Switching over to long-term growth occasion-based framework. This question is from Pam Kaufman. When you think about targeting more snacking occasions, how much of that opportunity comes from expanding your addressable market versus increasing consumption among your existing consumer base?

Andy Callahan -- President and Chief Executive Officer

Yes. That's a great question.

Mike Gernigin -- Interim Chief Financial Officer and Chief Accounting Officer

Just right down Broadway.

Andy Callahan -- President and Chief Executive Officer

There you go. Here we go. Yes, exactly. That is the heart of what we're trying to do here.

So like we talked about earlier, we play in a huge addressable market within the five occasions that we're targeting, north of $50 billion growing at 5.6% a year. And we see a lot of upside coming within those occasions. As we look at the occasion model, the thing that we're trying to really focus on is this is how the consumer views snacking. They don't necessarily view it through the lens of particularly categories.

They view it through what are they in the mood for in that moment? Are they looking for a sweet treat? Are they looking for something they can share with their family? Are they looking for something in the morning? And so as we've really looked at the occasion model, we understand what's happening in the market, but what's really cool is we've invested in data analytics and we have a top-notch consumer insight and analytics team who are now giving us the whys and they're giving us the hows and they're helping us understand how consumers are making those choices within the occasions. And what we're seeing within that is some really sharp consumer insights that are driving our marketing and making sure that we have a message that resonates to that incremental consumer. So as you talked about in your question, are we bringing new consumers in? The answer -- new consumers in, the answer is unequivocally yes. We're targeting new consumers through this occasion model.

And because of all the insights we've gained through the occasion model, we have sharper marketing. And then the other thing we have is a really sharp focus on innovation and making sure that we're launching the products that meet the particular needs of those consumers who we can source broader than the traditional lens of SBG. And so we feel really great about our ability to bring in incremental consumers through this large addressable market model and the tools that we've built.

Mike Gernigin -- Interim Chief Financial Officer and Chief Accounting Officer

So then can I build on this for a second? This gets to a macro question that I was really excited coming out of some of the CAG meetings because I heard a lot about, boy, I want to transform the portfolio to snacking. We are snacking. I heard a lot about investment in data and information. We have that.

I heard a lot about just innovation in total, the percentage of the portfolio, agility. We're not reinventing things, but we're applying proven tools with a very talented team and getting them uniquely close to the consumer and customer so we can do that in a differentiated way. We are proven that we can work that model and drive results, and we're just getting started. So your example that you're talking about as really doing these best-in-class and contemporary really tools, we know how to do it.

We have people that have done that before and learned at some of the best places. I'm really excited about the results we're really starting to see, and I really believe we're just getting started. Amit?

Amit Sharma

That was a great summary of our occasion-based framework, but I hope that you left some unsaid because the next question is on occasion-based as well. It's from Steve Powers of Deutsche Bank. As you think about opportunities to gain share across occasion, the expandability of the Hostess Brands seems fairly intuitive. What about the expandability of Voortman? How much opportunity is there with that brand across new, less traditional occasions for the brand?

Andy Callahan -- President and Chief Executive Officer

All right. So I'm going to turn this over again, and maybe we can bridge. One of the things we haven't talked about as much is our ability to be able to attract consumers with some of the marketing efforts, not just innovation and marketing efforts that we talked to, and Dan talked about some of the macro trends being dead on to our Voortman business. So it's a good time to really expand on Voortman, both on maybe you can expand on our activation both in Hostess and in Voortman, and then the Voortman trends because we have an exciting innovation slide in there as well.

Dan OLeary -- Executive Vice President, Chief Growth Officer

Yes. So I'll actually start with the Voortman trends. So we see a good opportunity here in Voortman to continue to grow. And like we talked about, we've had double-digit point-of-sale growth on Voortman in the last year and since acquisition.

So we feel like we're driving the business very well. As we think about Voortman, it plays a unique role in our portfolio. And like Andy talked about, our acquisition strategy was a niche at scale. And Voortman plays that role of, we call it, real food, real good food.

And what it really does is it goes after a very incremental consumer for us, a consumer who is more focused on health and nutrition, a consumer who is focused on our sugar-free items. And that incremental consumer has allowed us to really harness a new part of the sweet snacks target market. And so we feel good about our opportunity to grow. I talked about some of the newer innovation opportunities that we're looking at, but there are actually innovation opportunities further out as well.

And we're continuing to stretch Voortman. The other thing I would say, though, is we're also trying to be smart on the balance of base and innovation that comes to Voortman. There is some low-hanging fruit on Voortman in terms of channels, in terms of pack sizes that we're really trying to maximize the opportunity and then we'll continue to expand the innovation presence. So we feel really strongly about our ability to continue to grow Voortman.

To the second part of the question on marketing activation, we have a series of new tools that's really allowing us to grow how we think -- grow both businesses through advanced targeting and analytics. And Tina and her team have done a fantastic job of really improving, call it, the cycle time of our marketing. We are 100% digital. We're focused on gaining those -- household penetration of the new consumer.

And the way that we're doing that is we're gaining faster consumer insights through our AI-based solutions and then we're doing a test-and-learn approach so that as we're investing more in marketing, we make sure that we know it's working before we add that next dollar. So we think this model has worked very well for us in Hostess. We've expanded it for Voortman. And we feel it's going to generate long-term returns for both business.

Andy Callahan -- President and Chief Executive Officer

And Tina reminds me -- by the way, before we get to the next question, Tina and Dan remind me all the time, when we add that extra dollar, it's in digital. It's in with our ROI. And it's incremental to us. We're not coming out of legacy lower return ROI to higher.

We're adding it all at our best ROI. So we get the best growth out of it in higher-growth occasions and categories.

Amit Sharma

Thanks, Andy. Switching to the COGS inflation. The next question is from Ken Goldman. What is your estimate for COGS inflation for 2022?

Andy Callahan -- President and Chief Executive Officer

OK. So that's -- thanks, Ken. Obviously, moving target, but we talked about double-digit inflation for the year.

Mike Gernigin -- Interim Chief Financial Officer and Chief Accounting Officer

Yes. Thanks, Andy. Thanks, Ken. Yes.

So first, we're confident in our ability to manage inflation within what we believe is a responsible guide. We're convicted on our growth. We did exit Q4 '21 with double-digit inflation. We expect double-digit inflation again throughout 2022, although in this dynamic environment, it's very hard to predict timing of all of that, but we have contemplated that all in our guide.

With respect to that, we have -- you can look back to '21, we have the tools to be responsive to inflation. We landed the year with relatively flat margins. We think about our COGS basket and where we can get market-traded commodities covered. We're about half covered -- or we're about 75% covered for the full year and almost fully covered for the first half of the year.

Again, as we've talked about before, we're focused in a very disciplined and data-driven forward-purchasing strategy that leads us to those decisions. We continue to have a pipeline of productivity and savings. And we have our full toolkit, including the pricing actions we've already talked about.

Andy Callahan -- President and Chief Executive Officer

Great, Mike. So we feel good about our guide. Inflation is a moving target, but given the solid growth and our targets, we'll manage it. We've demonstrated our ability to do that and I think we'll do it again.

Amit Sharma

Thanks for that. I think you answered this question already, but I'll ask that. It's coming from John Braatz from KC Capital. Wheat prices are soaring.

How is your ability to pass those costs in a timely fashion?

Andy Callahan -- President and Chief Executive Officer

Thanks, John. Good to see you again, local Kansas City guy. We will -- we don't break out the percentage of our portfolio. As Mike just mentioned, we're 75% covered for the year and 90% -- over 90% almost fully covered actually for the first half.

And certainly, wheat is moving in a big -- it's in our -- it's contemplated within what we're talking about. We don't view it as a supply issue right now. It is a cost issue. It's included in our consideration even with the most recent news.

As you know, the season is mostly in July, which drives a lot of the ongoing -- the forward-looking prices, but it's included. I'm confident that we've contemplated it and I don't see it being an issue relative to our guide.

Amit Sharma

Got it. Mike touched on this one in his last response, but this is a follow-up from Ken Goldman. How much do you expect productivity savings to help 2022 EBITDA, either on an absolute basis versus '21?

Andy Callahan -- President and Chief Executive Officer

So I'll let Mike take that, but I'm really proud of our supply chain team. As we move into a lot of the things Mike talked about, we are building the ongoing sustainable initiatives that make our productivity actually more sticky and more efficiency-focused, which is really important now because as you scale that, you get more savings from that. So, Mike, how does it intersect '22's financial?

Mike Gernigin -- Interim Chief Financial Officer and Chief Accounting Officer

Yes. No. Thanks, Andy. As you had said, obviously, we have a strong history of driving productivity and savings initiatives.

As we think about our guide for 2022, we really see consistency compared to 2021. We don't guide at that level, but we expect to generate the same level of efficiencies and savings as a part of our broader tools kit to manage the inflation headwinds and our overall margin profile.

Andy Callahan -- President and Chief Executive Officer

Excellent.

Amit Sharma

Staying on the profitability, this is an interesting one from Steve Powers. Is there a way to frame the relative profitability of growing one occasion versus another? Are certain occasions inherently more profitable than other occasions?

Andy Callahan -- President and Chief Executive Officer

I think I'll take this one. The answer is no. As Tina mentioned and Dan mentioned, we have a disciplined approach across all innovation. We expect them to be margin at or better over time.

We expect them to be more incremental as we go over time. And Tina talked extensively about our vitality, which is the refresh rate that we expect to continue to keep 100-year-old brands fresh and contemporary with new consumers every day. The only -- the part that I would say is the on-the-go consumer, as you know, is our single-serve mostly. We've talked about that being a little bit higher than our fleet average.

But other than that, our occasion base are more driven by solving the consumer need for that occasion, attracting them to the portfolio, integrate it within our asset base and doing that in a margin that's at or better than our portfolio.

Amit Sharma

Got it. Switching to capex, another question from Steve Powers. Noting that the capex set up in fiscal 2022 given capacity expansion plans, but what level of normalized capex underpins the new LTO goal? What percent of that capex is for maintenance versus growth or productivity initiatives?

Andy Callahan -- President and Chief Executive Officer

Thanks, Steve. So we don't break it out, but Mike talked about that within earlier when he was given the prepared remarks. So, Mike, why don't you expand on that?

Mike Gernigin -- Interim Chief Financial Officer and Chief Accounting Officer

Yes. Thanks, Andy. Well, first, we're excited to invest in the next two years in growth capital. That's -- our step-up in capital for the next two years, 9% to 10% or 9% to 11% of revenue over the next couple of years.

We do expect to get back to 2021 levels starting -- as we exit 2023, it will actually step down as a relative percent of revenue over time as revenue continues to grow. With respect to automation, maintenance and protecting the core, we expect to spend at the relative same levels over time as we've done in the past. We don't disclose at that level, but we're committed to spending at those levels to maintain our automation, our efficiencies, our Protect the Core on a go-forward basis.

Andy Callahan -- President and Chief Executive Officer

Perfect. Thanks, Mike.

Amit Sharma

Got it. Next question is from Rob Dickerson. As you think about your long-term algorithm, as capex stays elevated, will that impact other capital allocation priorities?

Andy Callahan -- President and Chief Executive Officer

So, Rob, the answer is our capital allocation priorities that we talked to are remaining -- the only difference that -- from what we've talked about historically is that our leverage is now within our targeted range. So we now moved our ability to be able to take excess cash and give it back to shareholders. And Mike was very clear on our $150 million recommendation. And we're in a terrific position to be able to invest in industry-leading growth and a portfolio that still has a long runway to go.

So we're doing that and we still believe we can execute M&A, as we talked about.

Mike Gernigin -- Interim Chief Financial Officer and Chief Accounting Officer

Yes. Our capital allocation priorities, right? As we come off of a year where we've delevered almost a full turn, we have a great track record of generating very strong cash flows. Our primary objectives, Andy spoke to this, I spoke to this earlier, investing in organic growth, M&A, and returning capital to our shareholders. We've talked about the Arkadelphia, the capacity expansions Dan spoke to earlier today.

We've got an M&A agenda, Andy has talked about that. We believe over time in our algorithm. We'll have ample fire -- dry powder to deliver on that agenda. And we're excited.

We talked about it already, $150 million share buyback authorization today. We're committed to returning capital to our shareholders on an opportunistic basis. And we're excited about the next couple of years and where we're going to spend and allocate in a very disciplined way our capital allocations.

Andy Callahan -- President and Chief Executive Officer

I think that's the headline. We continue to be excited about our long-term growth and we'll be disciplined with use of our cash. Amit?

Amit Sharma

Just building on that, Pam Kaufman has a question about our M&A. Besides the capital allocation, what are the criterias are we using to -- for our future acquisitions?

Andy Callahan -- President and Chief Executive Officer

So, Pam, we're a snacking company and I think we've demonstrated we're a pretty good one. And we're an advantaged snacking company and I think we have demonstrated that. When it comes to M&A, we've invested in capabilities that we've outlined earlier that I believe will give us a really platform that's highly scalable. And so, therefore, when it comes to identifying a target and bringing in, it starts with, can we grow it? And we talked about our scalable niches because we're not going to just buy an asset, like we've demonstrated with Voortman, just to get a short-term synergy and get some leverage.

We're going to grow it. We're going to integrate it to grow it over time -- our best ability to be able to grow it over time if it fits within our business model that Dan articulated earlier. If it does those two things, it's a scalable niche that we believe we can grow at or better than Hostess and it fits within the capability scale, I'm pretty confident we'll be able to do it profitably and be able to integrate it and drive the synergies. So we look at it that way.

We look at it externally back. And we know when we see it. And we'll be disciplined about it.

Amit Sharma

Great. Next question comes from Ken Goldman. As we think about 2022, sales might come in at the higher end or the lower end of the guidance? Is the main x-factor price elasticity?

Andy Callahan -- President and Chief Executive Officer

So Ken, good question. Our guide is our guide. We gave you a guide, that's the range of the guide. So there's a lot -- we're sitting here -- certainly, we're off to a good start to the year.

But as I think I mentioned earlier, there's a lot of dynamics at play for the consumer. So there's a lot going on. They're still absorbing inflation. Some of the pricing is still going through the marketplace.

Some of these subsidies are still coming off the consumer. We got consumer tailwinds based on behavior. They are evergreen, but some other behaviors may come and go. We believe we have a guide that's above, by the way, our long-term algorithm in '22.

And as we sit here today, certainly, you see the point-of-sale trends that are above kind of what our guide, but it's still too early to tell. We'll stay close to that. As we come here in May, we'll update that and give you what we think is the most responsible and best representative update to that.

Amit Sharma

Got it. Another question from Ken Goldman. Which categories of products did you replace in getting new checkout placements? And how permanent are those placements that you have?

Andy Callahan -- President and Chief Executive Officer

OK. So one of the beauties of the checkout stores, it's not like the center of the store. And Dan, just listen to what I'm saying here and feel free to build or anybody can build on this one. But the front checkouts are going through a dynamic change.

There's less magazines there. There's less other things. So it's not a one-to-one relative to any one category. And given our performance in demonstrating with consumers, with impulse sales, we're one -- I think we're the number -- well, not I think, I know we're the No.

2 impulse category that consumers see. We've demonstrated our ability to be able to build a business model for media consumption. We've got that down and we can service our customers to do that. They're taking notice.

They're expanding out there. And it's a very expandable space not just for us, but for the category in total. So we don't look at it as a one-to-one category. A lot of those are being reimagined with a lot of our top customers.

And it's good to see that they're noticing that we're pretty high on the list based on our demonstrated success with consumers. Anything to build, Dan?

Dan OLeary -- Executive Vice President, Chief Growth Officer

Yes. My only build of this would be this is where the role of innovation is incredibly important. And we're seeing the innovation that we're launching really resonate in front of store. So things like Muff'n Stix, things like Boost that will be coming into all channels and our Baby Bundts single-serve items.

So we feel like the innovation is really paving the way for the growth that Andy just described.

Andy Callahan -- President and Chief Executive Officer

Boost has really caught social media, by the way.

Mike Gernigin -- Interim Chief Financial Officer and Chief Accounting Officer

Yes. It had tons of impressions, right?

Tina Lambert -- Vice President, Growth and Innovation

Yes. We had a really great response to our announcement of Boost last week. We got over 1 billion impressions, so very excited about that. And we absolutely just believe that Boost is a perfect example of us leveraging our occasion-based model to bring something for the immediate consumption occasion.

It meets the needs of those young men going into C-stores, looking for an energy boost because it's got the caffeine of one cup of coffee in it. And so we're very excited to see how it performs this year.

Andy Callahan -- President and Chief Executive Officer

Yes. And one of the things you've noticed that -- so Muff'n Stix was -- we have some items like Bundts we launched in multipack and we have some items that we've launched in on-the-go form like Muff'n Stix and Boost. And that's because of the occasion-based model that we're seeing activated. Tina gave you some examples before, but those as well relative to that consumer.

And then when they become more popular, whatever in that form, then we have the optionality to leverage our asset base, our broad distribution, and expand them. So it's working very well for us. Amit?

Amit Sharma

The next question touches on that theme. So would you please comment on balancing driving higher-margin impulse purchases by consumer versus an increasing trend for consumers shopping through e-commerce, click-and-collect channels?

Andy Callahan -- President and Chief Executive Officer

I will let Dan or Tina take that because they're different occasions.

Dan OLeary -- Executive Vice President, Chief Growth Officer

Yes. Tina, do you want to jump in on that?

Tina Lambert -- Vice President, Growth and Innovation

Yes. I mean, what I would say is I think they're both very important to us and we're going to prioritize both. We know that the immediate consumption occasion, especially C-store and front of store and large format, are going to be a priority for us for innovation and going to drive growth. We also know, as I mentioned earlier, that e-com is a big growth opportunity for us.

And we are working to drive impulse sales through e-com. Our category today, sweet baked goods is 45% impulse, and so we need to have that same kind of impulse behavior happening online, and that's definitely a priority. And we will make that happen.

Andy Callahan -- President and Chief Executive Officer

Some of these things -- I'll build on that. Some of these investments we talked about earlier, I'm really excited because we're seeing them come to life. You invested in the digital shelf, some of these things we invested in, HPP data. These were concepts, but now they're realities.

We've invested in consumer. We've mapped the occasion. Dan talked about how these occasions are growing at a greater pace. So we have a lot -- I love the spirit of these questions because you're right, we have a lot of opportunities to grow.

Amit Sharma

Great. The next question is -- I think it's for Tina. Can you talk about your innovation pipeline and how your innovation and R&D process is different now than it was many years ago?

Andy Callahan -- President and Chief Executive Officer

I will say Tina is an innovation zealot, a consumer zealot. So you're -- when you talk about this, that really works around Tina and we're just getting this further and further out and better and better.

Tina Lambert -- Vice President, Growth and Innovation

Yes. I talked a little bit earlier about how we're investing in our innovation capabilities, people, process, and ideas, but let me maybe talk a little bit about how we're proving that, that investment in capabilities is working for us. So we mentioned in 2021, we delivered 15% of our total net revenue from innovation that was launched in the last three years. We call that the innovation vitality.

And that's a metric that those of us who have been in innovation for a long time know is a critical one because you want to have sticky innovation in market. That's why we measure it on a three-year rolling basis and not just in one year. It rewards us for launching things that grow over time. So hitting 15%, and we actually exceeded that goal in 2021, it's huge for us.

And that really demonstrates that we're launching big innovations that are sticking in market. And here's an example, Baby Bundts. I mean, Baby Bundts is our big bet last year and it is on track to be $40 million in retail sales in year one, so a huge successful innovation. And we can't wait to see what Bouncers is going to do when we launch it this spring, just announced that for the first time today.

It's an exciting one. It goes after that lunchbox occasion, demonstrating again that we're leveraging that occasion-based model to really look for incremental growth to bring new consumers into our franchise. And we really believe that we have the right plan to do that.

Andy Callahan -- President and Chief Executive Officer

We are very excited about Bouncers. Our customers are very excited about Bouncers. Well, they had a little preview of it versus this audience. So we're very excited about it.

Amit?

Amit Sharma

I think the next question is on that. Given your commentary around new innovation distribution timing this year, it sounds as if you have good line of sight at this point regarding shelf resets again.

Andy Callahan -- President and Chief Executive Officer

Yes. I think the answer is yes. I'll turn that over to Dan, who works very closely with Aries and the team on -- with Tina on that.

Dan OLeary -- Executive Vice President, Chief Growth Officer

Yes. I mean we're feeling great about how our distribution has -- or by how our innovation has been received by customers this year. Like Tina said, Bouncers is our big bet, very positive response is what we're hearing from customers so far. So we're feeling good about how we'll achieve our distribution targets.

The other thing I would say in innovation is, over the last few years, we did not let up on the pace of innovation at all. And there was obviously a lot of things going on in the market, a lot of disruptions. And we really chose to focus on the innovation. And to Tina's point about vitality, we think that is a decision that's going to bear fruit in the years to come.

We launched items when you had a lot of consumers coming to the shelf, and we've gotten some great trial and some great penetration from those consumers that we're targeting. So we feel like that was a really right call. We're feeling great about the innovation, and we're excited to see what it does this next year.

Andy Callahan -- President and Chief Executive Officer

That's a very good point, Dan. When some -- maybe some people were putting a pause on innovation, whatever, our philosophy was we need to continue to innovate. Consumers want new news now more than ever, especially when they're eating more. We took the long view.

Our customers appreciate it and I think we're really seeing our consumers appreciate it, too. We were able to get new news in there. And I -- we're viewed more innovative than other brands. So that's the reason why it's because we give them more new news.

Amit?

Amit Sharma

Great. The next question is from Rob Dickerson. There is some delta between shipments and consumption, which is a POS data. Should we expect those to converge as we move through the first half?

Andy Callahan -- President and Chief Executive Officer

So, Rob, and maybe someone can fill up over here. We're seeing it in two places. It's just timing. If you look at it over time, the relationship between the POS and the shipment is fairly normal, and that's true on Voortman as well as Hostess.

And we're seeing a little bit of that on Hostess, too, as we come out of the year into Q4 and we're seeing kind of the opposite a little bit on Voortman just related to the POS versus shipment relationship. And Voortman is related to the timing of shipment versus an event last year, which has kind of smoothed out throughout the year, and Hostess is the opposite. It will normalize over time. Anything to add?

Dan OLeary -- Executive Vice President, Chief Growth Officer

No. Agree. Well said.

Andy Callahan -- President and Chief Executive Officer

Yes.

Amit Sharma

Next question is from Pam Kaufman. Can you elaborate on how you are leveraging data and the Hostess Partner Program to further enhance performance in the C-store channel?

Andy Callahan -- President and Chief Executive Officer

Yes. This is -- so the data we get back is most -- it's not as much consumer data at the HPP, just to be crystal clear. We do have a lot of consumer data and digital insights that we activate with consumer research, with advertising ROIs and others that Tina talked about. Our C-store channel data is mostly related to the shelf.

It's mostly related to the incrementality of the shelf, the relationship of the shipments versus what's going on sales. It allows us to direct our sales to collapse the amount of time of what's needed. The magic of this at a higher level is that some -- a lot of customers who service, especially in our categories, they're more reliant on what's on the truck to service our customers. We're reliant on what the shelf looks like.

We have -- therefore, we have a consumption-based reallocation of asset model because we can do that because we have salespeople out there, which you can't do if your service is tied to the shipments that you need to do with each customer. That has given us an advantage the way we activate it. And it's also, as we collapse that and become better at that, we're able to direct our sales force more nimbly and collapse the amount of time and visibility we have on that shelf. Also what it allows us to do, we're able to tie incentives with our customers so that we're all in together to grow, and that's a great win-win for our distributors, our customers, and Hostess.

So we leverage it in multiple ways, but it all starts with what does the shelf look like, how are things selling, how incremental are they, and all that. And when you have that information, you can activate it in multiple ways. And we're just -- the more information we get, the more ways we find use cases to be able to create value for Hostess on that. Scott Ward and that convenience team, I wouldn't trade them for anybody.

I don't care how big your company is. They do a great job. Amit?

Amit Sharma

Got it. Next question is from Pam Kaufman as well. How are you thinking about balance between gross margin expansion versus SG&A efficiency in driving EBITDA margin expansion? Will the new bakery be dilutive to gross margins initially?

Andy Callahan -- President and Chief Executive Officer

Yes. So let me take the gross margin first. Certainly, when we had -- when we invest in the bakery, it's not going to be filled up day one. And there's certainly a gross margin step back for that asset, but across the entire Hostess, it's contemplating our numbers and we will absorb it with other efficiencies and other things.

So I will turn over the second part with you, but we expect to grow gross margins over time. And our SG&A is mostly focused -- is all focused on the consumer and the people.

Mike Gernigin -- Interim Chief Financial Officer and Chief Accounting Officer

Yes. I agree with that. We do expect to step up, as we talked about earlier, in the A&M. We expect otherwise SG&A to grow in line with the sales in the short term.

Over time though, we do expect that margin expansion, Andy.

Andy Callahan -- President and Chief Executive Officer

Excellent. Thanks, Mike. So gross margins will grow modestly over time. Our efficiency and our growing will give us the dollars to invest back in advertising and in capabilities.

That growth flywheel is enabled by the fact that we're in categories that have a huge opportunity to grow. We're demonstrating it now. We're not like some companies that are talking about what's going to be different. We're talking about accelerating what's working, and that gives us a lot of confidence in our ability to access that growth.

Amit Sharma

Great. The next question is the sweet baked goods category has been growing faster than historical rates over the last several quarters. What do you expect SBG category growth post-pandemic? And why do you think you can continue to grow ahead of the category?

Andy Callahan -- President and Chief Executive Officer

Dan, why don't you take this? There's a structural shift here in the category, right?

Dan OLeary -- Executive Vice President, Chief Growth Officer

Yes. There is. So as we think about -- just to answer the top line question, like what do we think the category will grow at? We see the category growing two to three points throughout our long-term algorithm, but to Andy's point, we do see a structural shift in how the category will grow. And it's really two things.

One, we are the biggest driver of the growth today within the category. So in the last year, we've grown the category -- 60% of the growth in SBG is driven by Hostess. We've grown the category 40% in the last three years, the growth is driven by Hostess. And so we feel like we've got a track record of showing how we can grow the category.

To Andy's point, there are a lot of changes to just how the consumer operates that we think are durable. So you think about that more at-home occasions. We think about the higher levels of mobility. All of those play to our advantage within the occasion model that we talked about and really why we feel like we can leverage that huge addressable market.

The thing we haven't talked about as much though is why we think we can continue to grow above the category is that business model that we've built as well. So I talked about it earlier in the video, but when you think about our business model, there's really four components that give us a lot of strength. The first is our high brand awareness. And so this is a brand that's beloved by consumers and we have awareness on par with the leading snack brands.

The second one is our distribution. And we talked about it today. We show up anywhere the consumer is looking for snacks, but the cool thing is we show at multiple places within the store when they're there. So we're in the SBG aisle.

We have display. We're in front of store. The third area is our go-to-market, that really is a unique benefit to Hostess and a competitive advantage for us in the market. We have our warehouse model supplemented with brokers.

And like Andy talked about with the HPP program, that one-two punch really gives us great data to make us know where we need to grow, where we need to focus our efforts. And then the fourth piece within our operational model is the idea of operational excellence. And our teams at the bakeries have done phenomenal work the last few years. It is unbelievable how they have always met the call when the customer is called.

They've also done a great job not just in servicing the business, we've boosted our quality. And we think that that boost in quality will really help us retain the consumers that we brought in and it really just becomes part of the virtuous circle of our business model. And so when you put together the large addressable model, our large addressable market, and our business model, that's why we are so confident that we can continue to outgrow the category.

Andy Callahan -- President and Chief Executive Officer

That's a great stat, Dan. Like, digest this for a second. Over the last three years, we're 40% of the total growth, twice our index share of the category. And over the last year, we're over 60% of the growth.

And our innovation is by far the highest in the category. And the reason there's not an accident that the category, therefore, is coming because we're attracting new consumers into the category. It's a great place to be. That's over three years, not like in the back half, not like in a short period of time, over three years.

So really excited about that. Amit?

Amit Sharma

Great. The next question is on our new bakery. Can you talk about the return or hurdles rates on new projects like the Arkadelphia facility?

Andy Callahan -- President and Chief Executive Officer

Yes. So I want Mike -- but we're very disciplined about our ROI, and having an opportunity to grow your core is a great place to be.

Mike Gernigin -- Interim Chief Financial Officer and Chief Accounting Officer

Yes. Thanks, Andy. When we talked about our capital allocation priorities, we look at everything through a rigorous ROI lens. Again, we're convicted about our growth.

We're excited about the new bakery. We closed -- or the new facility. We closed on it last week. We've entered into the design and build phase, and we expect to invest $120 million to $140 million in this bakery and to put it online in the second half of 2023.

Yes. Go ahead, Dan or Andy.

Andy Callahan -- President and Chief Executive Officer

No. OK.

Mike Gernigin -- Interim Chief Financial Officer and Chief Accounting Officer

As Dan had mentioned, we expect it to unlock capacity. We expect it to be margin-accretive over time. There will be a buildup and a ramp-up period to get the bakery online and in full production. That unlock of capacity of 20%, we expect to get us through our planned growth into 2028.

Our rigorous ROI lens and our discipline around that always gets us well above our cost of capital.

Andy Callahan -- President and Chief Executive Officer

Perfect. That's what I was going to add. Amit?

Amit Sharma

I think we have time for one more. What -- why change your long-term growth algorithm now? What gives you the confidence that you can deliver it consistently over time?

Andy Callahan -- President and Chief Executive Officer

I'll take this one. What a great last question. We're changing it now because we believe in it and it's the right time for us to continue to grow. Over the last three years, as you saw previously, we're performing at a rate that is at or above all of our peers.

We have the opportunity to grow more with industry-leading margins and we're in occasions that are growing at a greater rate. We have, over the last year, invested with really smart people who understand how to do the consumer, who have been trained in some of the top places, to really refine and give us confidence of our ability to be able to grow. And our growth, we believe, over time, is in the mid-single digits. That enables us -- at our existing margins.

So we're committing that. And we believe that if we deliver that with the other economics we talked about, that we'll deliver top shareholder return like we have over the past three years. So now it's the best time to do it. So I just want to wrap up by saying I think we're kind of done with the time.

I really appreciate your interest in Hostess Brands. We have built a snacking company that is one of the finest that there is because we invested in the right capabilities, transformed the portfolio that put us in a position to grow and have amazing Hostess heroes to be able to unlock that talent in the marketplace. We are in a great position. For how successful we have been, I firmly believe we are just getting started.

Thanks for joining us and look forward to seeing you at our next call.

Duration: 161 minutes

Call participants:

Amit Sharma

Andy Callahan -- President and Chief Executive Officer

Mike Gernigin -- Interim Chief Financial Officer and Chief Accounting Officer

Dan OLeary -- Executive Vice President, Chief Growth Officer

Tina Lambert -- Vice President, Growth and Innovation

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