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

OMG.LOL.WT_

Capitalism is not about free competitive choices among people who are reasonably equal in their buying and selling of economic power, it is about concentrating capital, concentrating economic power in very few hands using that power to trash everyone who gets in their way.
David Korten

verdict

David Korten is confusing Capitalism with Corporatism. And neither party is innocent in regards to the Corporatism that may be trying to prevail in the world.

I am not a hard core Capitalist, by the way. I merely see it as a bridge allowing the safest possible passage from here to the ideal future (which, at this point, may also require that the people pay attention, investigate, and engage in strategic boycotts when necessary..and elect a President who will issue the crackdown while maintaining liberty).

Rand Paul (fiscal conservative, social liberal) 2016
..or installed as President sooner, by the military, in the event of collapse.

The Big Dog's back

What a crazy thing to say.

The New World Czar

Hey, Romney's not doing much after the election. Poetic justice would be served if Bain Capital bought Hostess and made it profitable without the unions. Now that is a win-win.

grandpa4life

Maybe with enough pressure The president will bail out hostess like he helped with GM and Now GM posts that they are back on the stock exchange

Save the HOHO

Randy_Marsh

Twinkies and HoHo's are evil and make people Obese so it will be a cold day when they get bailed out, They have been deemed EVIL by the obama's.

The Big Dog's back

You "dittoheads" (rushbots) may have to find a different way to listen to him since all his departed advertisers have put a hurtin' on local radio stations.

wiredmama222

I cannot believe you people are making a political mess out of ding dongs and twinkies. Didn't you guys get enough of this during the elections? OMG...just goes to prove that politics never dies but apparently twinkies do. How sad. I hate to see my ho ho's go, but not the constant "I approve this message" on TV. One more of those and we would be watching only movies on blu ray for the next six months. LOL.

Give it a rest people. The elections are OVER in case you haven't heard. Perhaps you can get together and tell the GOP to buy Hostess, they need a new brand to stand behind. Heaven knows their old one went no where. lol

Just a Girl

In the meantime, try Mrs. Freshley's products. Moister with more sugary filling, like Hostess used to be in the 1970s. But no one can duplicate vanilla Zingers!

Contango

Mediation failed, next stop - liquidation.

"The Teamsters, which represents 7,900 Hostess workers, said the company's plan would improperly cut the ability of remaining workers to use sick days and vacation."

IMO, "someone" missed the much bigger picture.

http://www.zerohedge.com/news/20...

bye bye Bellevue

Unions are a thing of the past, only used to protect lazy workers! The initial idea back in the day when they were legit for employee rights was fine, but they have taken advantage of employers over the years, and are no longer relevant! Hopefully whoever buys Hostess keeps unions out of their workforce and the company will do well!

OMG.LOL.WT_

Union workers are not all lazy. Without them giant corporations have no reason to pay living wages. The working class is being beaten down and the CEOs continue to benefit. Talk about taking advantage!

goofus

Have worked in a union shop, unions protect the guilty and take your money

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