Hostess' CEO on Balancing Innovation with Legacy Products

A steady stream of new products has helped lead skeptics back to old favorites.

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Hostess Brands President and CEO Andy Callahan knows that his company __ the maker of Twinkies, HoHos and other snack cakes __ is sometimes the butt of jokes.

"A lot of people think a Twinkie has a shelf life of a thousand years," Callahan said. "It doesn't. Once it gets to the store, it typically has to be sold within 35 days."

Callahan says a steady stream of new products, like candy bar-inspired Kazbars and miniature Baby Bundt cakes, have been key to winning over skeptics and leading them back to old favorites.

"When the consumer is reintroduced to a Twinkie, they're always delighted because of our investment in our product quality," Callahan said.

Hostess, which was founded in 1925, almost didn't make it into the new millennium. The company filed for bankruptcy twice before private equity investors formed Hostess Brands in 2013.

Callahan discussed the challenge of leading a brand with a history, as well as his service in the U.S. Navy, with The Associated Press. His comments have been edited for length and clarity.

Q. You place a lot of emphasis on product innovation. Why?

A. It's the way that brands become contemporary. It's a way that they stay relevant and it's the way they create a bridge to a new generation. When I took over Hostess five years ago, we had stopped that process. We'd stopped talking to consumers, we'd stopped innovating. We became more relevant in the business press than we became in the consumer press.

Q. How do you balance innovation with the need to keep making old favorites?

A. That's the trick of this journey. One of the great things about our Twinkies, Ding Dongs, HoHos __ they're interesting. They're relevant. Some of that has baggage, but a lot of it's really joyful. That approachability and unpretentiousness of our brand is one of our strengths. If you walk down the street and you have a Hershey Kiss shirt on, people kind of nod. When you put a Twinkie shirt on, I guarantee you within a one minute you'll get a reaction. So leveraging the good of that business, making it relevant to new consumers while not disenfranchising the old, is the art of what makes the consumer packaged goods market so challenging on one side but so exciting on the other. You can't leave one for the other.

Q. How is Hostess adapting to Americans' changing snacking habits?

A. The number of occasions that consumers are eating every day has marched up year after year for over 20 years now. And this balance sheet is real. Consumers really want their food to be fit for a purpose. If I'm going to sit down and have a meal, I want it to be nutritional. But if I'm going to have a "reward me" and "treat me" and "comfort me," I want it to be really good and I want it to be portion-controlled. Almost everything we do is in a small pack. And almost 10% of our business is our Voortman brand, which is a better-for-you option. So we're not staying exclusively indulgent and we're not saying that that when consumers move towards this trend of having more occasions, that they're going to eat more or eat unhealthy.

Q. You graduated from the U.S. Naval Academy and spent seven years as a naval flight officer, including service in the Persian Gulf War. How does your military service inform the way you lead?

A. Leadership in the Navy is actually pretty easy, because at least in the Navy, everybody volunteered and they all really believed. These are people who, when the national anthem is sung, they get a little shiver down their spine. Holy mackerel, if I could unlock that at Hostess Brands. That's what the military taught me more than anything, is when people are really bought into something, the sky's the limit in what they're capable of doing. The military breaks you down to your deepest level and it builds you back up in a more capable, positive and energizing way. Now, I don't break down my people, but I certainly want them to be bought into what we're trying to do for consumers, and I want them to care about each other as much as they care about the business. If we can do those two things, we're going to have a great team.

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