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Greetings. Welcome to Hostess Brands First Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.
I would now turn the conference over to Chris Mandeville with ICR. Thank you. You may begin.
Good morning, and welcome to Hostess Brands' first quarter 2021 earnings conference call. Joining me on today's call are, Andy Callahan, Hostess Brands’ President and CEO; and Brian Purcell, Chief Financial Officer.
By now, everyone should have access to the earnings release for the period ended March 31st, 2021 that went out this morning at approximately 47:05 AM Eastern Time. The press release and an updated investor presentation are available on Hostess' website at www.hostessbrands.com. This call is being webcast and a replay will be available on the company's website.
Hostess would like to remind you that today's discussion will include a number of forward-looking statements. If you will refer to Hostess' earnings release as well as the company's most recent SEC filings, you will see a discussion of factors that could cause the company's actual results to materially differ from these forward-looking statements. Please remember that the company undertakes no obligation to update or revise these forward-looking statements.
The company will make a number of references to non-GAAP financial measures. The company believes these measures provide investors with useful perspectives on the underlying growth trends of the business and has included in its earnings release a full reconciliation of non-GAAP financial measures to most comparable GAAP measures.
And now, I will turn the call over to Mr. Andy Callahan.
Okay, thank you, Chris, and good morning. We appreciate you joining us today. I’d like to begin by offering a few highlights from our first quarter performance to emphasize and reinforce the strength of our business. I will then turn it over to Brian to discuss our financial results in greater detail and we’ll wrap it up with a discussion of our outlook before opening it up to you for questions.
In short, Hostess continues our strong profitable growth with our 13th consecutive quarter of revenue growth in the first quarter and very strong momentum leading into the second quarter. I am extremely proud of our entire team of Hostess heroes’ execution in a fluid environment.
Our results are a testament to the strength of Hostess and Voortman brands; our leading position in consumer snacking occasions; the impact of our insight and data investments; our latest marketing and merchandizing efforts; and the remarkable talent to execute against our proven playbook on a daily basis.
Underpinning these very strong results, and building momentum is the outstanding execution of the Hostess supply chain who are executing today to service our consumers and customers, while building the foundations for continued profitable growth tomorrow. We are consistently and profitably growing and our solid foundation is getting stronger.
A few takeaways to highlight our quality results before I provide greater color on the quarter. Net revenue grew 9% with our Sweet Baked Goods sales contributing 5 points and our Voortman sales contributing 4 points to total growth.
Sweet Baked Goods point-of-sale was very strong, up 8.7%, once again, led by our Hostess branded growth of 10.6%. The growth resulted in 153 basis points of market share gains across multiple channels demonstrating our strength in growing consumer occasions and the benefit of our broad based distribution model.
On a two year stat basis, we had point-of-sale growth of 13.7%, versus the category of 5.8% exemplifying our continued strong consumer demand and successful execution both before and during COVID. Consumer mobility is increasing and in-house snacking occasions remain elevated, providing a solid foundation for continued strong growth.
Voortman continues to deliver strong growth, as well, with net revenue up over 60% year-over-year as we lap transition from the direct store distribution model in the prior year and drive increased distribution and velocities.
Total Voortman point-of-sale achieved 18.3% two year stats growth, as compared to 7.8% growth for the cookie category, demonstrating again the strong performance in faster-growing snacking sub-segments. Insights in quality innovation are driving improved contribution of new products versus a year ago. LTOs are also contributing nicely to overall results.
Additionally, Q2 has two big launches with Baby Bundts and Crispy Minis, which are both off to a good starts to help continue their momentum. Our small format success in the quarter was simply remarkable. We touched new highs in market share for C-store, Dollar and Drug, with year-over-year share gains of 327, 786 and 570 basis points respectively.
The strategic decision to drive shelf and customer expansion, our consumer and focused innovation created for the needs of the channel and our advantaged warehouse distribution model help drive these impressive results. We are positioned for continued growth as mobility increases, consumers are vaccinated and communities lift the restrictions.
Now on to innovation. Our very strong three year innovation pipeline, which leverages key consumer insights and is tethered to fast-growing consumer use of occasions is performing very well to start 2021 and has been a strong contributor to our performance of the Sweet Baked Goods category, While Voortman’s innovation is realizing steady distribution gains.
These offerings are more incremental and more profitable than previous years and we expect them to drive us towards our 15% vitality target rates by year end.
Shifting to occasions, Hostess’ breakfast products continued to perform tremendously well with point-of-sale growth of 17.6% growing our share of breakfast in Sweet Baked Goods by 290 basis points to 20.5%. Strong growth of Hostess Coffee Cakes including our new cream cheese labor, updated packaging for our multi-pack Danish, as well as our early introduction to market of our Baby Bundts at select retailers, are all resonating with consumers.
These initiatives build up previous successful launches like Donut Snack Packs and base breakfast item core growth across Donettes, Honey Buns and Danishes.
Grounded in our consumer insights and strategic investments in the on-the-go consumer, innovation specifically curated for convenience has proven critical to our success. During the quarter, we launched the Pecan Spins and Muff'n Stix with positive early consumer reception.
C-store retail partners are showing good interest in our Voortman Mega Wafers and in recent weeks, we launched our Crispy Minis with a key national chain. Again, heading into the all important summer driving season, we are confident that our core business strength and new products position us well to capitalize on increased mobility as the economy continues to reopen.
Longer-term, we believe we have best-in-class innovation pipeline tailored to both on-the-go, and eat at home snacking occasions. We are focused on four key strategic growth priorities for innovation that will help deliver sustainable growth.
Reinvigorating our icons, growing household penetration with young families; continuing C-store consumer growth; and establishing Voortman’s distinct position to optimize growth potential. Underpinning the remarkable results this quarter is the success of our marketing and merchandizing efforts.
We continue to drive incremental growth through our strong Hostess partnership program in the convenience channel as we are able to leverage the data and the insights we have mined to maximize our sales and profit for our retailers.
These strong partnerships have been instrumental in managing through the evolving consumer demands over the last year and helps steadily increase our leading market share in the convenience channel. We are seeing the benefits of these partnerships pay-off and expect this to continue.
Our Dollar channel performance is impressive. Our Dollar channel point-of-sale grew 36.5% in the quarter as we grew share 786 basis points driven by revitalized shelf sets, expansion of our breakfast platform and continued strong partnerships and customer service.
We continue to work with our partners in the mass channel to develop programs that are mutually beneficial and have seen sequential improvements this quarter as we implement new changes to our product assortment and merchandizing programs.
We have iconic brands that consumers love. As we look forward, we are committed to building on our great foundation through targeted proven marketing investments that we are confident will deliver incremental growth. To that end, we executed a handful of e-commerce advertising trials during the quarter with very encouraging results.
We were pleased that each of our trial delivered return on advertising spend and response rates well above benchmarks providing us the confidence that future programs can drive growth and unlock another lever in our already formidable growth toolbox.
Our merchandizing efforts for Voortman are also beginning to pay-off as total Voortman point-of-sale grew 8.7% in the quarter fueled by accelerating growth of Sugar-Free, which grew 18% year-over-year. Contributing to the strong point-of-sale growth is the increase in our total Voortman ACV, which we have grown by 6 points since the acquisition with good improvement across all channels, particularly, within the grocery channel, which expanded by nine points.
We expect to continue to drive growth in Voortman as we introduce more innovation and drive awareness with targeted marketing programs. We also continue to make great strides on our ESG initiatives. We have embedded ESG goals into our operating model including the continued focus on retention and diversity.
We were also thrilled to add two new Board Members to our Board of Directors, Olu Beck and Hugh Dineen, who bring with them a wealth of experience and knowledge that will be very valuable to our organization as we move forward in our journey. We also continue to build our management team and last week announced the addition of Dan O'Leary as our Chief Growth Officer.
Dan brings valuable experience of having profitably grown iconic brands at Kraft, Mizkan and Tyson Foods where he was most recently the Senior Vice President and General Manager for Tyson Prepared Foods. We are excited to have Dan on board to help drive our important growth initiatives.
Hostess once again delivered industry-leading revenue growth at leading margins. We closed Q1 strong and are headed into Q2 with momentum. Although early in the year in this dynamic market, we are very well-positioned to deliver on our full year guidance.
We will continue to prioritize the safety of our dedicated and loyal employees, while we execute with agility and efficiency to continue catering to consumer needs in a highly profitable manner.
And with that, I’ll turn it over to Brian to go through the quarter’s financial results in greater detail.
Thanks Andy. It’s a privilege to speak to another quarter of strong results. As Andy mentioned, this represents another quarter of robust growth underscoring the power of our brands and strength of our business model.
Net revenue for the quarter was $265.4 million, an increase of 9%. This increase in net revenue was fairly balanced between continued strength in Sweet Baked Goods with 5 points in growth, and Voortman contributing the remaining 4 points of growth. The Voortman growth is primarily due to a favorable lap on timing of shipments as we transitioned from DSD to the warehouse model in 2020.
We saw POS growth in Sweet Baked Goods across both single serve and multi-pack sizes. Our single serve POS growth accelerated to 10%, driven by our strong performance in convenience, where we saw share gains of approximately 330 basis points. Our multi-pack and bag donut business grew 7.6% despite our lapping of last year’s COVID bump at the end of the quarter, driven by continued growth in the grocery and Dollar channels.
Importantly, point-of-sale growth is driven by share gains across the business. Gross profit was $95.5 million for the quarter, while gross margin came in at 36%, a 140 basis points higher than the prior year period. Approximately, half of the realized margin expansion was driven by favorable mix in our core Hostess business and the remainder was the result of the achievement of Voortman synergies and productivity efficiencies.
As we anticipated, operating cost were notably lower in the first quarter, down 24.5% to $48.5 million due to prior year expenses incurred for the integration and conversion of Voortman’s operations and the realization of synergies.
Our effective tax rate, excluding discrete items was 27.3%, compared to 23.6% in the prior year quarter. The effective tax rate for the prior year period was impacted by the write-off of deferred taxes related to Voortman and the allocation for the non-controlling interests which was eliminated in the fourth quarter of 2020.
Net income was $26.7 million, and diluted EPS was $0.19. Adjusted net income and EPS were $26.9 million and $0.20 per share, an increase of over 40% versus the prior year period as a result of higher volume and operating efficiencies including accretion for Voortman.
Adjusted EBITDA for the quarter was $62.5 million or 23.5% of net revenue, compared to $51 million or 20.9% of net revenue in the prior year. The increase was driven by strong Hostess branded volume and favorable mix, as well as $8 million higher Voortman, adjusted EBITDA as a result of higher revenue and operating efficiencies from the integration and transition to the warehouse model during 2020.
At the end of the quarter, we had cash equivalents of $197.8 million and net debt of $925.8 million with a leverage ratio of 3.6 times down from 3.9 times at Q4 2020, driven by our strong operating cash flow growth.
Turning to our outlook. Given the strength of how we started the year, we are increasingly confident in our ability to achieve our full year guidance. We continued to expect to drive net revenue growth to be at 4.5%, and expect adjusted EBITDA to be between $255 million and $265 million with adjusted EPS of $0.80 to $0.85 per share.
Looking forward, we feel confident in our ability to manage margins as we move through the remainder of the year. We have good visibility to balance cost with pricing and productivity. Additionally, we are seeing strong consumption across our portfolio, mainly in the convenience channel which is benefiting our single serve mix.
From a balance sheet perspective, given healthy cash on hand, strong fundamentals, and increased operating cash flow as we lap transition cost related to Voortman, we feel confident that our leverage will approach three times by year end absent M&A or any material buybacks. As we delever almost a full turn in 2021, we continue to make strategic investments in the business to help support future growth such as the investment in our new cake line which remains on track for a ramp in the back half of the year.
Longer term, we remain committed to investing for growth and generating shareholder value. We are excited by the opportunities ahead of us and confident in our team’s ability to deliver.
With that, I will turn the call back to Andy for closing comments.
Terrific. Thanks, Brian. Hostess is well-positioned to deliver sustained strong growth throughout 2021 and beyond. Hostess has leading positions in snack occasions and meat states that are growing ahead of overall snacking propelling growth and providing a solid foundation for sustained growth.
In 2021, we expect in-home snacking with indulgent and well-known brands will continue at elevated levels; as consumers simultaneously increase in their mobility, increase in the demand for Hostess on-the-go occasions. The strength of our brands, breadth of our availability across channels, and agile business model positions Hostess to realize this opportunity.
Our track record of consistent execution, clear ability to innovate and grow through successful acquisitions like Voortman, in addition to the strong consumer affinity for Hostess Brands is foundational to capturing this industry-leading growth.
We will continue to work to build on our consumer and customer foundations going forward. We are deeply committed to shareholder value creation and sustainable, profitable long-term growth.
As we move forward, our strong and growing cash flow positions us well to unlock shareholder value. We will continue to reduce our leverage, reinvest in the business to support industry-leading growth at industry-leading margins, while maintaining the flexibility to opportunistically pursue strategic acquisitions, as well as enhance shareholder returns. We remain stewards of capital and we’ll always strive to optimize shareholder value.
And with that, Brian and I are available for your questions.
[Operator Instructions] Our first question is from David Palmer with Evercore ISI. Please proceed.
Thanks. The first question would be on the reinvestment levels that you are making and the nature of those reinvestments, I think you mentioned, data and analytics. I don’t know about marketing and advertising part of that. But could you give us a sense of how much you reinvested in the quarter? And generally what your expectations in your guidance entails or includes in terms of reinvestment this year? And I have a follow-up.
Yes, David, I’ll take that. Thanks for the question. We’ve been investing and building that foundation for years and it starts with really understanding the way we build our businesses understanding the consumer. So we’ve invested in understanding occasions, drivers of occasions, quantifying those occasions. We started by just understanding our customer shelf set early. If you remember, one of my first calls, one of the first decisions I made was an investment in more data around convenience store shoppers and how they shop outflows through what are the incrementality of the convenience channel and that’s paid off well. We’ve done similar across the board in shopper then we moved up to the consumer and then, we have even greater insights over the last year around consumers. We’ve also taken that and then, invested a lot of their – Tina, our Head of Innovation and Growth, and now with Dan coming in and the great team that we build around that of understanding our consumer investments. This quarter, we’ve invested in e-commerce marketing, as well as both Voortman and Hostess, and we are taking a build as we go, where now, as we go forward, there are some modest investments. We’ll see them come through on the SG&A line as we move out. I’ll let Brian kind of talk, put up that, but we do it concurrent with our growth and we do it in a way that when we validate that it’s very successful, then when we look forward, when that happens, we will continue to build it. But the good news for us is, we don’t have – I’ve lived in large businesses that had deep heavy spending that was inefficient and it was a lot and you had to build off it. We have all that growth in front of us. So, we are really excited about validating and then investing in our customers and in consumers to continue to drive growth. So that’s mostly where it is. It’s around foundational on consumers and then testing in the market with some modest increase and when we get to them – we really believe that it’s got to continue to drive our growth. That’s another lever we have. Brian, anything to build on that?
Yes. Just a couple quick numbers and if you look at our advertising and marketing expense, we were up about $1.5 million, - $15 million versus prior year. Last year, we kind of ramped up A&M spend. So, it was largely in line with Q4, just kind of year-on-year. So there is some incremental investments we are making there. There is a little bit to SG&A as well, just to complement with any stocking levels.
Great. Thanks. And then, just some color on gross margins. I mean, you can see that a lot of companies in the first quarter had headwinds with regard to supply chain, headwinds of weather and what not mid quarter? Could you maybe talk about whether you had those? And then, thinking through the year on the gross margin line, we could see a tailwind from your mix with the on-the-go growing, but also, perhaps some gathering headwinds in terms of input costs. So any thoughts about how we should think about gross margin cadence versus this quarter would be helpful. Thanks.
Sure, David. I’ll take that. So, yes, if we look at Q1, we expanded margins both in the base business and also with Voortman. Voortman was largely a function of the timing lap when we transitioned from the warehouse or the DSD model to the warehouse. So, we expanded margins roughly 140 basis points. And if you look at our mix, it’s driving a chunk of that in our business of the volume that we are seeing, that we are seeing absorption and we are getting some productivity. So, those items, we are seeing inflation. But those items are offsetting inflation to the point where we are actually expanding margins.
I would say, as we look forward to the year, I would expect sort of neutralish to maybe a little bit of favorability from a margin standpoint, based on the visibility we have with pricing and productivity to offset inflation. We are seeing inflation. We are seeing certain areas tick up a little bit more than we saw at the beginning of the year, but we are pretty confident that we can offset that with pricing productivity and mix. One callout, just to remind everybody is, we did have very elevated margins in Q2 of last year, driven by Voortman, when we did the transition to the warehouse model in April, we get a big pipeline filling a lot of production efficiencies. So, I would actually expect Q2 driven by Voortman and the lap of margins there to potentially be a headwind in Q2 and then the balance of the year, as I said, I think that we can offset inflation with pricing, productivity and mix.
Great. Thank you.
Our next question is from Ken Goldman with JPMorgan. Please proceed.
Hi, thank you. Two from me, if I may? Obviously, your total share is doing great. It’s also good to see that your share losses in the mass channel are sequentially diminishing. Andy, you do have some fairly easy comps in those share or the share story in the mass channel ahead. Is it fair to assume that as the year progress, you’ll start to regain share with these customers? Or how do we think about that? Is it just going to be share losses at a lower level? Just trying to get a sense of what we should be looking for in some of the measured data that we get?
Yes. So, just across the board, maybe a comment, we’ve talked about this one of our strength is that broad based distribution in our agile model. So, we expect overall to continue to grow our business and one of the reasons why we grow share is, just because the channels, because we continue to innovate across a broader snacking spectrum. We are committed to investing in category growth. We are doing it with innovation. We do with insights. We do it by investing in capacity. We do it by investing in consumer. So we are continuing to invest in growing capacity and we are continuing to invest in sustainable long-lasting partnerships with all of our customers. I expect that’s true in the mass channel, expected in convenience and food across the board.
So, over time, I would expect us to grow share. Now in any given one channel at any one time, we may. The headline is, yes, I expect to continue to see improvement. COVID impacted every channel and every model differently. So we are investing and we are committed to investing in making sure that we continue to grow and solve our consumers’ problems and do that in great long-term partnerships with all of our customers. And over time, yes, I would expect us with that model and our brands and our team to continue to grow share. And now we expect that to happen in every channel. And it’s may be not one quarter, or one month, but over time, absolutely, we would expect us to continue to see grow share, because we are committed to investing in the category growing and that’s what customers expect from us and we are making really great progress across the board in this channel you brought up. Thanks, Ken. Yes.
Okay, okay. Yes. Well, thank you for that. And then, Brian, I think last quarter, if I am not incorrect, you mentioned that all in – your cost inflation will be similar in that 2.5%, 3.5% range. You talked about some inflation having picked up. What’s the range you are looking for now? Is there an update on that number?
Yes. So, I think, in total, our guide overall, we are maintaining our guidance. We do see certain areas of inflation a little higher than, kind of what we saw at the beginning of the year. So, for instance, transport is up a little bit. We are looking at a pretty dynamic labor situation, which a lot of companies in this space are looking at as well. So we are monitoring that.
But, we also feel great about – so we do think inflation is ticking up a little bit versus what we saw originally at the beginning of the year. But again, I think, we also get better visibility on pricing, the price increases we've been selling in. We've got a good visibility of our productivity pipeline. And our mix is working for us as we talked about it in the upfront comments.
So, collectively, we feel good about the ability to manage that in line with where we guided the implied EBITDA guide that we gave.
Okay. Thank you.
Our next question is from Rob Dickerson with Jefferies. Please proceed.
Hi. Great. Thanks, so much. I guess, just a follow-up on the pricing question tell like you do have this good visibility, maybe you are even already starting to sell in some, but just with respect to - I guess, any color around magnitude and timing? We've heard a lot of companies kind of speak more to the Q3 time period. So why just kind of want to get an idea of how you – or how you think about the phasing of this pricing as we go through the year?
And then, obviously, I understand for competitive reasons you are likely not going to tell us exactly what that pricing is, but just trying to gauge, when you are talking about pricing, is this similar to what we have seen in the past, maybe a little bit more or a little bit less, anything you can provide would be really helpful? Thanks.
Yes. So, from a – I'll take that. Yes. From a timing standpoint and then, Andy can just add color on the sell-in process and alike. We are expecting to see the pricing take hold in the back half of the year. So really kind of starting in the Q3 timeframe, at the beginning in Q3. So, we are – we are still in the process in different channels of the sell-in. So we can't give you, kind of the exact number. But we are – from a timing standpoint, we expect at the beginning of Q3 to – for the pricing to take hold.
Got it. Okay. Fair enough. And then, I guess, Andy, just curious, you had a number of comments around driving shelf, right? Especially, in the smaller format stores and I think you mentioned maybe a couple LTOs coming in Q2. Would you say there is anything mildly different kind of with the go-to-market strategy as you try to drive revenues, not only in mass but also in these smaller format stores, just given the shift in mobility, like you view this as the core opportunity for you to make sure you are taking share of stomach and share of market? Thanks.
Yes. Just a couple things. Thanks. Appreciate your comment, Rob. As I mentioned earlier with David's question, I believe our insights and our understanding of consumers' occasions are sharper. They continue to build and taking that, we are able to tailor innovation much more specifically to a need of an on-the-go consumer versus, maybe a multi-pack purchase that brings home for a snacking occasion either brought from home or in-home, all of those occasions are increasing.
And the occasions in which our business is more highly developed and where we have assets that consumers are looking for are also growing at a greater rate than total snacking, which is why when we execute our playbook very well, we grow the category and are able to grow share.
So, going forward, one of the things that we've done that is different is we have more tailored innovations like the constant and other things that are -- the flavors curated or the actual ideas more on-the-go consumer.
And then, we have, you know, Baby Bundts, obviously, Crispy Minis, which are off to great starts. Mega Wafers, which is expanding. Voortman into that on-the-go occasions and they are all designed for this more or more tailored for the specific needs state. And then we are taking, as Brian mentioned, we are taking early steps to finding that consumer who is looking for, talking to them and advertising either through our customer channels or be at some other consumer methods.
And we are testing that so we are getting feedback on that. So, we're trying to put together - successfully putting together an ecosystem that very efficiently be able to find the consumers we want in the occasion they want and then be able to invest in that consumer to grow it. That's the flywheel of growth and that's what we are building.
Our next question is from Ryan Bell with Consumer Edge Research. Please proceed.
Hi. Good morning everyone. Could you talk a little bit about your expectations for the future of indulgence practice? It's clear there has been a benefit to the at-home breakfast category given the pandemic. How do you think about it going forward? And then, maybe, as we start to get into a bit more of a normalized environment, what some incremental work from home could mean about that occasion going forward?
Big fan of in-home breakfast. Consumers love Hostess during the breakfast occasion. We call it AM snacking. So there is different occasions in need state around breakfast. So if you remember about, I guess, it was about two-and-a-half, three years ago, we made a commitment to the occasion and our research has continued to demonstrate that breakfast is going to grow at a greater pace.
We were underdeveloped in that occasion. We are now fair shared and continued to grow our breakfast share. We were up in breakfast above 15% in the quarter, driven by a lot of those initiatives that we took. As we come out of this COVID environment, we do expect obviously mobility to increase. We do not expect in-home occasions of snacking to go down to pre-pandemic levels.
We expect them to maintain, continue to be elevated at some level and as a result, the investments we've made in that breakfast occasion in-home we expect to – are positioned to be very well. We'll continue to innovate around there and we expect to continue to have that occasion specifically that be a meaningful contributor of growth, both because of our core items and because of the innovation that we will bring to the occasion.
Our next question is from Bill Newby with the D.A. Davidson. Please proceed.
Hey. Good morning guys, and congrats on a great start to the year.
Thanks, Bill.
I just – maybe, Andy, you touched on it a little bit at the end there, but wanted to ask a little – another follow-up on just the category growth. I mean, if I look at multi-pack this quarter, I mean, still very strong growth there, especially after difficult comp.
And I guess a lot of talk about where the Sweet Baked Goods category is going to go post-COVID and whether it will kind of fall back into that low single-digit range or not. I guess, is this growth that we're seeing in multi-pack kind of an indicator that maybe we can sustain above that range a little bit longer? And I guess, I appreciate any further thoughts there.
Yes, I believe that there is a good – there is an emerging visibility. I am not going to say all the models that we look at are perfect, because we are coming out of an unchartered territory here related to the COVID. But I think all of the consensus, myself included is that, there is going to be behavioral changes that are going to stay.
And I would expect specifically, for Hostess and specifically for – I'll talk more broadly into consumer occasions and meat states, that in in-home breakfast occasion is going to stay meaningfully elevated versus where it was. And therefore, that's good for overall growth projections going forward for Hostess and likely for the category, but for sure, for where we compete relative to morning snacking, sweet snacking occasions in the morning, I expect that to grow. I would expect that to grow at a better -- greater rate than overall food.
I would expect it to grow at a greater rate than overall breakfast, because historically it has and I would expect Hostess to continue to grow share in it. So, all of that positions us well to continue to grow, which is why we've invested in our insights and our innovation and our marketing in that area. And it's paying off and I expect that to continue to happen going forward.
Great. Super helpful. And then, I guess, just one quickly on what you are seeing promotional environment here as we start to lap COVID. And I assume providers start to rollout whatever strategy they've developed to try and retain much of the trial that happened last year? I guess, any thoughts on how that's developing and maybe relative to what you guys would have expected three months ago?
Yes. So, what we are seeing is, as you know, well, we didn't – it's kind of funny, there was a reduction in promotion spending a year ago. That is true. We had plans to drive more efficient growth prior to even COVID happened, which was really good timing. We were taking out and adjusting our models to drive efficiency, leveraging promotion.
Promotion is coming back at a level, but it's being put back, but I can only speak for ourselves. Our intent is to continue to support our consumers and our customers and do it at the most efficient grow – growth for the category and for the brand. So we are bringing – we do have promotions coming back. We believe that they are more efficient than they were before.
You need to manage the entire revenue management model with both promotion and base pricing and as we mentioned earlier, we are bringing pricing into the marketplace that's going to come in the back half. So I do believe – it's going to come back to the normal model, but not at the level than I would expect that it was pre-pandemic. And that's more efficient for everybody. It is more efficient for our customers and for Hostess.
Our next question is from Andrew Olsen with UBS. Please proceed.
Yes. Hi. Good morning, guys. Andy, just to build on your comments just there. Just talking a little bit more on the pricing that you guys are slated to take in the back half. Just, from a high level, how do you think about pricing levels – levers that you can pull through the revenue growth management whether it's like with less price versus price pack architecture?
And then, how do you think about that based on channel, like how do those levers vary by channel as you think through pricing in the different channels? And I'll pass it on.
Yes. So, Andrew, sorry for the foundational work, but I remember we talked about this a lot. But we haven't done - we try not to do pricing until it's a natural progression of input cost and inflation and other things, which is why in my three years, we've done like a base price on part of the portfolio three years ago.
And there is some parts of our portfolio haven't – we haven't done pricing in six or seven years since we relaunched. And the reason we've been able to do that is because of all of our productivity initiatives to offset the efficiencies of our supply chain, and other things that you mentioned that we do -- price pack architecture, changing prices, getting efficiency on lanes, all of these multi-faceted elements of our pricing managing the every day price versus the trade efficiency.
We've been able to manage that over time and that's our goal. Our goal that's good for our ability to be able to drive growth. So we are doing pricing now on prices as part of the portfolio because it's the efficient thing and the right thing to do relative to the category. It is now healthy for the category measure input prices.
So, but your point is, well taken. We look at all of those in a - every day. I mean, every day, we have a pipeline of what we call multi-faceted efficiency programs. The revenue line down that looks at mix, looks at price pack architecture sizes, productivity out of packaging and product formulations, running the way we run our plants. All of those things are efficiency initiatives that the team looks at and does very well every day.
When it comes to the data, we have elasticities by channel, by form. That all goes into our model. So that we can be very predictive on what we think the impact of our pricing is going to be on the elasticity going forward. So that's all built into our forecast related to pricing. Assuming that what gets reflected in the marketplace is correct in our models, we believe we have a pretty – we have a very good visibility to the impact going forward both on the growth side, as well as the profitability side. Anything to build on that, Brian?
No, other than, I think, and you asked us Andrew, the - by channel that it does play out differently. We look at that obviously, what pricing is across different channels and our ability to manage that across different channels and certain channels lend themselves to perhaps managing trade, versus list price versus price pack market, the price pack changes.
So we do look at it kind of on a channel-by-channel basis and do what we think is appropriate in that particular channel, which also kind of, over time, I think, gives us little bit of runway as well.
Alright. Thank you very much.
Our next question is from Pamela Kaufman with Morgan Stanley. Please proceed.
Hi, good morning. I would…
Hey there, Pam.
Hey. Do you have any insight into how much the growth – how much of the growth over the last year has been driven by an increase in household penetration during the pandemic versus increased consumption among existing households? And I guess, how you are thinking about the retention of new households as things normalize?
Yes, so, the retention of our new households has actually been extremely well. Household penetration is more of a broader long-term metric. We have been able to – early in the pandemic, we were increasing our households and based on some of the merchandizing flows, it's kind of gone flat. And then, it goes back up again, just because of access to consumers.
But early in the pandemic, we were increasing our households. We were then converting those households into more frequent multi-buyers at a greater rate than the overall category. So we are increasing that penetration. We also find that our advertising when we look at our growth consumer. We are acquiring those consumers very well via our advertising.
So, our ability to be able to get the long lifetime value consumers very well. So, we feel really good about the tools that we have to access consumers and to continue to drive long-term growth both overall and with our – it's not just the overall number, it's with our strategically important growth consumers that we've identified, as well. So we feel good about that.
Also, can you talk about how you are thinking about Voortman’s performance over the course of the year, given the various growth initiatives that you're executing on? Just looking at the absolute level of Voortman sales, they have been somewhat stable over the last couple of quarters. So, should we expect to start to see those sales ramp up? Or I guess, maybe some color on the cadence as you execute on the growth strategy there.
Can you – what are you looking at when you are mentioning that Voortman’s sales are stable?
I guess, sequentially, looking at the absolute level of sales over the last couple of quarters, they've been relatively stable.
Yes. So, there is a little seasonality in the business, Q1, Q4. I do expect the - as we are looking to build a runrate with Voortman, probably more as we move throughout the year for sales on an absolute basis to increase.
Yes. Our plans for Voortman to grow the headline. And I guess, sequentially on the seasonality it's different. So I agree with Brian.
Our next question is from Rebecca Scheuneman with Morningstar. Please proceed.
Yes. Good morning. So, thanks for sharing some of the colors on your data-driven innovation. I would love to also hear, like, what are the systems that you are sourcing that data from? And also, you talked about how you are doing a lot to study and really understand usage occasions? Are there other types of data that you are digging into, such as traits that consumers are seeking?
Yes. We don't disclose – we use a lot of the tools that are very common in our industry. And then, we either internally or sometimes with the partners, we then take it and we mine it through proprietary tools to really understand at deep as we can at the consumer level of how they are behaving, who they are behaving that way, we look at different segmentation to it.
So, we'll take data from our partners. Our Nielsen partners will take other sources of data. We'll take the third-party. Sometimes we buy them off. We'll take a media consumer with our partners who we work with. So what we are doing is not necessarily proprietary or reinventing an approach in the industry, but we do it in a way that leverages our own insights and we tailor it specifically to our business to be able to work on the segmentations and then drive the consumer motivation to the why once we get that.
So, we do a lot of – I am not going to claim that we are doing it – we are reinventing how they do the segmentations or the analysis, but having spent a lot of time cutting my teeth at Kraft and with Hillshire, with Tyson, and now with Hostess.
And having a great marketing team and partners we are trying to apply what we collectively learned with really talented people and apply it to a terrific brand and we think we are doing it very well. And it’s probably as good as a lot of other much larger companies out there. So I feel really good about that. But that's our approach.
Okay. Great. Thanks for the color.
Sure.
And secondly, I know you've talked a lot about the great opportunities expanding Voortman some of their 61% ACV towards the Hostess brand’s 91%. I am just wondering how much can you close that gap. Does Voortman have the same ACV potential that the Hostess brand does? Or should we expect it to lag that?
You would expect it to lag it over time. But we're in the Voortman – we are in the growth mode with both Hostess and Voortman. Hostess has nearly ubiquitous awareness, Voortman does not. So, both when we advertise with consumers and build the brands, we do it in different approaches. So, Voortman is a lot about building the awareness and then having the ACV follow.
So, what you should think about only getting to 91%, we will eventually get there. We are not going to get there next year. We are not going to get there probably in two years. But it's going to continue to grow year-after-year and that gives us a long runway for growth as we simultaneously invest in the consumer and innovation.
And then, that consumer is going to drive the awareness. It is going to continue to grow. And then, also importantly, I talked about Hostess being in snacking occasions. Voortman, when we do the segmentation of Voortman, Voortman both with its Sugar-Free business, which is growing extremely well with the leading share within Sugar-Free and Sugar-Free is growing at greater than two-times the overall cookie category, and we are the number one lead.
And then, also our real benefit those areas with Voortman competes are also growing faster in overall cookies. So, as we build availability and build awareness, we expect that to be a long runway for growth.
We have reached the end of our Question-and-Answer Session. I would like to turn the conference back over to Andy for closing remarks.
Great. Thanks, everyone for your participation and interest in Hostess. As you can see from the results, and hopefully you've heard from our tone today, we are increasingly confident that we are emerging from the pandemic in a stronger position than when we went in.
And we believe we have the talent, the proven playbook to continue to deliver profitable growth over the long-term, both in the back half of this year and for many years to come.
So, thanks again for dialing in. I appreciate it and we will see you next quarter. We'll continue to work hard for you.
Thank you. This does conclude today's conference. You may disconnect your lines at this time and thank you for your participation.