For a long time, Hostess has been raising its prices. The last time I looked, Little Debbie had equivalent products for half the cost. Consumers voted with their wallets and McKee Foods (Little Debbie) has gained more market share every year as a result.
Brand loyalty will only help to a certain degree. Hostess ran out of brand loyalty with many consumers a long time ago. When a brand raises prices to improve the profit per piece, the brand is going to lose the consumer's brand loyalty a little bit at a time.
The cost of doing business is, and always will be, similar for similar items. If it is drastically different, methods should be examined. When one manufacturer outsells another, on an equivalent product 5 to 1 by making half the profit on each snack cake, the company profit increases despite a reduction in the per-piece profit.
Now that McKee Foods has an even greater market share, I would look to see if they buy the Hostess factories and hire the workers. It will be cheaper and production will ramp up faster than it would for McKee to expand its present factories or build new ones.
