Twinkie maker Hostess reaches the end of the line

Twinkies may not last forever after all.
Associated Press
Nov 16, 2012

Hostess Brands Inc., the maker of the spongy snack with a mysterious cream filling, said Friday it would shutter after years of struggling with management turmoil, rising labor costs and the ever-changing tastes of Americans even as its pantry of sugary cakes seemed suspended in time.

Some of Hostess beloved brands such as Ding Dongs and Ho Ho's likely will be snapped up by buyers and find a second life, but for now the company says its snack cakes should be on shelves for another week or so. The news stoked an outpouring of nostalgia around kitchen tables, water coolers and online as people relived childhood memories of their favorite Hostess goodies.

Customer streamed into the Wonder Hostess Bakery Outlet in a strip mall in Indianapolis Friday afternoon after they heard about the company's demise. Charles Selke, 42, pulled a pack of Zingers raspberry-flavored dessert cakes out of a plastic bag stuffed with treats as he left the store.

"How do these just disappear from your life?" he asked. "That's just not right, man. I'm loyal. I love these things, and I'm diabetic."

After hearing the news on the radio Friday morning, Samantha Caldwell of Chicago took a detour on her way to work to stop at a CVS store for a package of Twinkies to have with her morning tea and got one for her 4-year-old son as well.

"This way he can say, 'I had one of those,'" Caldwell, 41, said.

It's a sober end for a storied name. Hostess, whose roster of brands dates as far back as 1888, hadn't invested heavily in marketing or innovation in recent years as it struggled with debt and management changes.

As larger competitors inundated supermarket shelves with an array of new snacks and variations on popular brands, Hostess cakes seemed caught in a bygone time. The company took small stabs at keeping up with Americans' movement toward healthier foods, such as the introduction of its 100-calorie packs of cupcakes.

But the efforts did little to change its image as a purveyor of empty calories with a seemingly unlimited shelf life: Twinkies, for instance, have 150 calories and 4.5 grams of fat. A Ding Dong chocolate cake with filling has 368 calories and 19.4 grams of fat.

CEO Gregory Rayburn, who was hired as a restructuring expert, said Friday that sales volume was flat to slightly down in recent years. He said the company booked about $2.5 billion in revenue a year, with Twinkies alone generating $68 million so far this year.

Hostess' problems ran far deeper than changing tastes, however. In January, the company filed for Chapter 11 bankruptcy protection for the second time in less than a decade. Its predecessor company, Interstate Bakeries, filed for bankruptcy protection in 2004 and changed its name to Hostess after emerging in 2009.

Hostess, based in Irving, Texas, said it was saddled with costs related to its unionized workforce. The company had been contributing $100 million a year in pension costs for workers; the new contract offer would've slashed that to $25 million a year, in addition to wage cuts and a 17 percent reduction in health benefits.

Management missteps were another problem. Hostess came under fire this spring after it was revealed that nearly a dozen executives received pay hikes of up to 80 percent last year even as the company was struggling. Although some of those executives later agree to reduced salaries, others — including former CEO Brian Driscoll — had left the company by the time the pay hikes came to light.

Then, last week, thousands of members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike after rejecting the company's latest contract offer. The bakers union represents about 30 percent of the company's workforce.

By that time, the company had reached a contract agreement with its largest union, the International Brotherhood of Teamsters, which this week urged the bakery union to hold a secret ballot on whether to continue striking. Although many bakery workers decided to cross picket lines this week, Hostess said it wasn't enough to keep operations at normal levels.

The company filed a motion to liquidate Friday with U.S. Bankruptcy Court. The shuttering means the loss of about 18,500 jobs. Hostess said employees at its 33 factories were sent home and operations suspended. Its roughly 500 bakery outlet stores will stay open for several days to sell remaining products.

In a statement, the bakery union said Hostess failed because the six management teams over the past eight years weren't able to make it profitable — not because workers didn't make concessions.

"Despite a commitment from the company after the first bankruptcy that the resources derived from the workers' concessions would be plowed back into the company, this never materialized," the union said.

Ken Hall, general secretary-treasurer for the Teamsters, said his union members decided to make concessions after hiring consultants who found the company's financials were in a dire situation. But he said that he believed the company could've survived.

"Frankly it's tragic, particularly at this this time of year with the holidays around the corner," Hall said, noting that his 6,700 members at Hostess were now out of a job.

Kenneth McGregor, a shipper for Hostess in East Windsor, Conn., arrived at the plant Friday morning and said he was told he was laid off immediately.

In a statement on the company website, CEO Rayburn said there would be "severe limits" on the assistance the company could offer workers because of the bankruptcy. The liquidation hearing will go before a bankruptcy judge Monday afternoon; Rayburn said he's confident the judge will approve the motion.

"The strike impacted us in terms of cash flow. The plants were operating well below 50 percent capacity and customers were not getting products," he said. "There's no other alternative."

 

Comments

rottnrog

The US is going under because people like you think the rich should get richer while the rest of us get poorer. You are all for management getting raises by lowering current workers wages ! What a dumb belief !!!

Randy_Marsh

I am for people having jobs, I am also into making sound decisions and not biting the hand that feeds me. Did you by chance work at union chain?
"the company disclosed that its biggest unsecured creditor is the Bakery & Confectionary Union & Industry International Pension Fund, which it owes approximately $944.2 million" So the union was owed 944.2 million by Hostess but wanted more from a company going through bankruptcy? Not very bright if you ask well...anyone.
"Lets take a company on the edge and give them a shove by going on strike, Their lost revenues are sure to make them give in!"

rottnrog

Hey, Rmoney got rich pushing companys over the edge and ruining workers lives !! But what would you know about common people !!

grandmasgirl

When are you people going to give Bush and Romney a break. Do you still blame your parents for everything that has ever gone wrong in your life. Obama probably did just as much to get ahead as B & R. It's just that he keeps it hidden. The election is over. You won. Now, can we get on with remarks about the story?

Second Opinion

hey rottenhog, all you had to do is study harder in school and you wouldn't be whining now.

Taxed Enough Already

yes it's call capitalism. If you want to be a "rich" person, go out and take the same risks they did. That beats socialism any day of the week. In Socialism you eventually run out of the "other guy's" money. Who is going to keep beating their brains out and working like a mule so that some "sit on their behind kind" gets the same money and benefits they have worked so hard for?

mikel

randy - as i have said before you will NEVER hurt the rich, right, wrong or indifferent. prezo needs to come up with another plan such as HUGE incentives to hire.

BW1's picture
BW1

They had a product that was selling well. They just couldn't afford to pay what the union demanded.

A union is a pact of all the workers in a given industry not to compete. When companies agree not to compete, it's an antitrust violation. Under such circumstances, it's not worth it for investors to go into business and create jobs. So, in this case, the investors went John Galt. Expect to see more of this in the coming years.

rottnrog

Apperently there sales were way down but they could still give management 80% wage increases on the backs of workers !!

Second Opinion

Why do you refuse to tell the ENTIRE story rottenhog?

They also voted to take $1 a year until they pulled out of bankruptcy,

deertracker

Agreed!

Contango

@ jas:

Reads like you know how to operate a "profitable" biz.

Get some capital, hire some employees, pay 'em a "living wage" with great bennies and show all those evil right wingers how it's done.

What are you manufacturing?

totallyamazed

;-0
;-0
Sounds to me that Hostess (being in bankruptcy and all) was giving the employees one last chance to make a deal that would allow them to keep their jobs and the plants open. Workers said no and they closed up. End of story on my fruit filled pies., damn I like the GMO apple filled pies. My lips be smacken right now. Think I'll go over to eBAY and bid $110 on that last box of pies.....wish me luck
;-0
;-0

rottnrog

I have a box of TWINKIES autographed by Mitt Rmoney I'll sell ya!! :o)

Randy_Marsh

I wonder, Will the Teamsters union who settled with Hostess blame the bakers union for costing them 15,000 jobs?

rottnrog

I wonder will Randy ever admit he is management?

Second Opinion

I wonder if you will ever admit that greed, laziness, defense of those who should be fired, those who don't study enough in school should not make that which education provides, etc.

Are you so ignorant to believe that those who wash dishes, carry out rubbish, bake and deliver food should make what those who dedicated years of their lives getting an education? PLEASE ANSWER THIS AND SHOW FURTHER how your reasoning skills are that of Stalin and not the views of our Founding Fathers who believed that a person advances not because of strikes but because they use their brains.

Contango

@ Second Opinion:

The owner of the Jacksonville Jags, Shad Khan, came to this country broke and thought that washing dishes was a 'great' job.

Happened to catch an interview on "60 Mins":

http://jacksonville.com/opinion/...

I've often enjoyed talking to immigrants that came from crummy countries that "git it."

Most don't understand our fascination with socialism and political cronyism.

Darkhorse

What a shame. Companies are not bluffing the unions when they state they will close up the business. The union is so stubborn that they rather go without a job then take a concession. Anybody who strikes in this environment is simple crazy. Companies rather take their operations overseas or fold up rather then deal with the unions. The unions have become their own worst enemies.

SamAdams

I'm not going to argue whether or not company administrators (up to and including the CEO) made mistakes. It's clear that things went wrong or the company wouldn't have been in the hole as far as it was. It's just as clear, however, that one of those mistakes was kowtowing to union demands and offering up pension plans, salaries, etc. that were unsustainable. And certainly I put it ALL on the union leadership that an attempt to correct those errors and keep the company alive was summarily rejected.

Isn't it interesting that the union leadership — you know, those people who claim to represent workers' best interests? — would rather NOBODY have a job than that ANYbody get any kind of a cut?

I wish all the best to those rank-and-file union members who must now find new jobs, especially in this economy. (As an aside, any bets as to how many will find positions that will pay the same or more than they would have made had they taken the Hostess offer?) But the union leadership? Bah! They've proved their "worth" to their membership yet again.

Phil Packer

Maybe the truth is that because people are starting to realize that this kind of "food" is unhealthy, their sales went WAY down...

Second Opinion

Romneys fault, LOL! This is what the AFL=CIO said and Bid Dog accepts it as fact, Talk about distortion.

Amazing how Democrats just follow and never think, they don't even need rings in their noses to be lead around, they just follow without question.
Loons

eriemom

Wait. This what I read. The hourly employees took pay reductions, insurance cost increases, and decreased pensions. Then management pay increased by 80%. Soon after the CEO fled with his booty.

Did I miss something here?

SamAdams

Yes, you missed something. While SOME employees accepted the offers made by Hostess, the bakers' union refused. Although a few bakers did cross the picket lines, there weren't enough.

Hostess was already bankrupt. In an attempt to come out of bankruptcy, cuts needed to be made. The bakers' union apparently determined that they wanted what they wanted, and if they couldn't have it, then nobody would get anything. Nice "win," bakers' union!

mikel

kind of reminds me of the idiots at tsubaki. the workers were given an option and their union slave drivers drove them over the "fiscal cliff" because they thought they could dictate what the companies did. same result! just wondering how many of the union management team lost their jobs? imo union management are just as big of thieves as corporate ceo's.

Westender

The unions are missing a great chance to prove a point to the whole country. Let the unions buy the company, get rid of the managers, and show how to make it a profitable business with a great contract for the employees. $$$$

Contango

Employees owning and operating a co. is called an ESOP. They would need to come up with capital to buy it out. Private equity for the funding?

No bail out and restructuring from Mr. Obama and friends? Mrs. Obama more than likely hates Twinkies anyway.

Guess that it's after the election, he got those union votes and doesn't need 'em any more huh?

http://en.wikipedia.org/wiki/Emp...

Westender

Employee stock ownership plan (ESOP). What I'm saying is. Let the union buy the company, and employ union members. If the union members don't like the contract, then the union can strike the union and every one is happy.

Contango

@ Westender:

Understood. Just saying that an ESOP is generally the way to go.

You do know that union pension trusts own a percentage of Chrysler and GM? I don't expect it to end well.

my oh my

Because of 5,000 union employees that went on strike 18,000 will lose their jobs.......

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