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

gilamonster

Its Michelle Obama and Bloomburgs fault; well they want you to eat healthy, Get up and move!!

I never understood the union mentality, which is that your employer is supposed to take care of workers for life. Even if the cost of labor outstrips any profit.

Though I will say, giving the CEO and key staff members raises during a time when the company was struggling is a joke. On the opposite side, union presidents are nothing more than self- serving hypocrites and leaches. Don’t believe it, look at someone like Hoffas salary, how much he spent to retain his position, and whom he gave raises. If they want management to work for free or take cuts; union presidents should do the same?

Glad I never had the need to let some union Neanderthal look out for my best interest.

eriemom

Aren't union representative's salary based on hourly pay?

Randy_Marsh

@Erie
"Richard Trumka increased his yearly salary by nearly $74,000—from $165,000 to $238,975— in the last four years. That amounts to a 44 percent salary increase. In addition, Trumka will also get an AFL-CIO pension equal to 60 percent of his top pay."
I do not know ANYONE who works and pays into the AFL-CIO that makes anything close to that. So the answer in a word is "NO"

Contango

@ eriemom:

If you wanna focus on unfunded pensions, ya need to take a serious look at IL's public pensions and how the state's Dem leaders have been passin' the buck for yrs.

Their new higher income tax rates are bringin' in less revenue than before. Glad I got out when I did.

OMG.LOL.WT_

. I voted Republican because you can blame problems on poor people instead of the rich ones who actually run things.

starryeyes83

I just seen an ad on CL for a LOCAL box of Twinkies for sale for $ 500. oo smackers.

LOL! Are they crazy? What are ya suppose to do with them?

Bronze them?

Contango

@ starryeyes83:

I wish him/her the best.

I spoke with a mgr. of a grocery store yesterday that said that some guy bought 18 boxes.

We both agreed that the names and recipes will be sold and that all the products will be back in stores baked by a different co.

I had read that Hostess said that they would sell their current baked product inventory to a discount house.

DGMutley

The Teamsters agreed to concessions to keep the company afloat and to preserve their jobs.

The company lost 347 million last year and the Bakers' union is upset because they're asked to agree to concessions? What is the Bakers' union thinking? They are a prime example of why unions get a bad rap. They've lost their 5,000 jobs and 13,000 other jobs at the company. Who knows how many thousands of other jobs they've lost through the multiplier effect.

2cents

In my eyes this is classic greed from all sides. I have read about the Hostess problems for a few years now. In general the whole thing is just sad, the rest of the world keeps laughing at the US anymore!

Maboom2Paul

Always blame the people who actually work. They make the nasty food. obviously manage the place. 3 CEOs couldn't save it. I think if they had dumped king dons ands ho hos and zingers and stuck to their original plan, they might be doing alright. But those conservatives see Union and autotomaticaly they have their scape goat

buttermaker

Actually, the company was run by prominent democrats, including former democratic congressman Dick Gephart, whose own consulting group is an equitable partner in the Hostess group.

http://management.fortune.cnn.co...

buttermaker

http://newsbusters.org/blogs/tom...

Silly libs, paychecks are for workers...

Contango

@ buttermaker:

Good research!

Actually the Progressives like to ignore the fact that big union public employee pension trusts like Calpers and Calstrs invest billions of dollars in both hedge funds and private equity firms.

The wealthy political elites appreciate the ignorance of their useful idiots.

The Big Dog's back

Moderators have removed this comment because it contained Personal attacks (including: name calling, presumption of guilt or guilt by association, insensitivity, or picking fights).

verdict

I read the entire article.
Hostess = Union workers + Democrat management decisions + media somehow blames Republicans.

Maboom2Paul

Let's blame Obama! ou republicans are cutting off your noses to spite their faces. All these business are so worried about their wallets, they lost respect for themselves and their workers. Hostess has been going down hill for a long time. It"s free enterprise, better products, less expensive choices. Hostess needs to blame Hostess for not keeping up with the times and tastes. Too bad for the employees, that will be Obama's fault too. Scott Paper closed they tried to blame the Union too, but it was the city of Sandusky who wouldn't cooperate. STOP BLAMING UNIONS! There is a reason republicans are against unions because they want all the power, no other reason, but money and power. I'm sick of it. Conservatives keep your heads in the sand, this country is better off that way.

verdict

Maboom, read the article being discussed in the comments/replies above yours. When Democrat management decisions cannot satisfy the bakers' Union, I dunno who can.

EdO's

Junk. They're selling the name. Maybe Entenmmans or Tastycakes will make them better.

kURTje

That's okay, management's daughters can get a great job working for me @ my after 5shop.

The Big Dog's back

Vulture Capitalism (ponzi scheme) at it's best.

OMG.LOL.WT_

Hostess Twinkies CEO tripled salary to $2.5m while preparing to file bankruptcy

TakingCrap

Hostess emerged from Bankruptcy in 2009 only to have to file again in January 2012. The Teamsters were amendable to concessions as they had the common sense to see that the company was not healthy. The Bakers union didn't run this company under, but they were clearly and undeniably the final straw that broke the camel's back.

Those trying to blame Romney (and those trying to defend him) can just stop. The election is over, Romney isn't going to run again. You need to find something else to use your spin on.

Those trying to blame Obama can also just stop. The election is over and the last time I checked, he can't run for a 3rd term. Did this company fail (again) under Obama? Yes, but his policies didn't cause the management to fail.

mikel

yet he saved a trillion auto jobs?

wiredmama222

Ding dong, no more ho ho's? Twinkies are gone? No more raspberry coconut twinkies? I can't live without this stuff. There goes breakfast. SHOOT.

eriemom

The latest news is that a Mexican company is in the wings for this sale. Lower labor and sugar costs would make it more profitable. Imported sugar has a tariff to protect US industry growers.

Contango

@ eriemom:

So you're for the special interests continuing to protect the wealthy U.S. sugar growers with taxpayer money?

What's not to like about Bimbo's mascot?

http://worldnews.nbcnews.com/_ne...

Why didn't Mr. Obama help save the co.; not unionized enough?

Mr. "I won" doesn't care anyway, the election's over.

44846GWP

Oh Winnie. Obama saved the Auto industry because it effects the whole country, one in eight jobs in Ohio are tied to the Auto industry. The country will move on without a Hostess Cup cake.

Contango

Good to see Zippy that you agree that Mr. Obama only nationalized GM and Chrysler for votes.

starryeyes83

Haark! Is that the faint sound of Taps,, I hear, playing softly in the background?

[ well hey, they did for the leg lamp in Christmas Story ]

wiredmama222

LOL....I am going to buy a twinkie and bury it in the backyard in a shoe box. Next summer I am going to dig it up. Want to come to the funeral? Its on Saturday. I am serving coffee and Ho Ho's. Know where I can get a buggler?

If the Twinkie is good in the summer, I intend to eat it. LOL

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