Take the survey!

brand r.i.p.

RIP Twinkies: Hostess Brands Calls It Quits

Posted by Dale Buss on November 16, 2012 11:25 AM

Jokes about Twinkies, Ho-Hos and Ding Dongs may never end. And it's possible that those names and even products, possibly even their parent brand, could live on.

But now, rather suddenly, Hostess Brands, the company that has made them all possible through the decades, has met its apparent end, with the CEO filing for bankruptcy Friday morning, a move he's been threatening while playing hardball with striking workers. The move means the end for the company that brought the world not only Twinkies, but also Wonder Bread, Dolly Madison, and a host(ess) of other branded baked goods.

After a troubled few years dealing with its union-represented employees, Hostess Brands has finally decided to go out of business and liquidate its assets after failing to win back striking workers. Changing American tastes to "better-for-you" snacks, and higher commodity costs, also conspired to sink Hostess.

"We deeply regret the necessity of today's decision, but we do not have the financial resources to weather an extended nationwide strike," Gregory F. Rayburn, Hostess CEO, said in a statement. "Hostess Brands will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to the highest bidders."

An #RIPtwinkies hashtag quickly rose on Twitter, while eBay has been flooded with memorabilia (and actual Twinkies and other products). One wag is even asking $10,000 for a box of 10 Twinkies.

About one-third of the company's workers were union members who bucked Hostess's cutbacks during a bankruptcy reorganization. But Rayburn insisted on The Today Show on Friday that his decision wasn't simply a tactic to bring striking unions crawling back to the negotiating table.

"It's over," said Rayburn, who joined Hostesss earlier this year as a restructuring expert. "The problem is we don't have enough [workers crossing picket] lines to maintain normal production." Output at about a dozen of the company's 33 plants had been seriously affected by the strike.

Hostess Brands owns not only the bakeries but also 565 distribution centers, about 5,500 delivery routes and 570 bakery outlet stores around the country. Delivery will continue for a while, the company said, and the retail stores will remain open for "several days."

The move sounds a death knell for about 30 brands unless they're acquired, as the bankruptcy statement notes:

In addition to dozens of baking and distribution facilities around the country, Hostess Brands will sell its popular brands, including Hostess®, Drakes® and Dolly Madison®, which make iconic cake products such as Twinkies®, CupCakes, Ding Dongs®, Ho Ho’s®, Sno Balls® and Donettes®. Bread brands to be sold include Wonder®, Nature’s Pride ®, Merita®, Home Pride®, Butternut®, and Beefsteak®, among others.

As for the brands, their fate remains uncertain, set to be decided by a bankruptcy-court auction run by Hostess's investment bankers, according to the Wall Street Journal, or maybe determined by a group of liquidators. Rayburn told the newspaper he is unsure which brands might sell or how much they might garner in purchases.

Rayburn told the Journal that the names have decades of brand equity and demand for Hostess products and brands remain "pretty significant" — the company has had revenues of $2 billion a year. But a competitor would have to ramp up its own output of the newly acquired brands and figure out how they jibe with their own existing shelf space.

But it's always hard to keep a good brand down forever. That's why we may not have eaten our last Twinkie just yet, even as it's ScaryCakes time for its employees, distributors, backers and fans of its brands. (Update: Mexico's Grupo Bimbo, which owns Sara Lee and its Entemann's and Thomas' English Muffins brands, is reportedly a contender to salvage at least some Hostess Brands.)

Below, WSJ.com's tribute to Hostess Brands:

Comments

Sharon Edgar United States says:

This guy obviously didn't give a damn about the brands, the company's history or the workers. My sympathies to the employees and families impacted by the closure of Hostess.

November 17, 2012 11:40 PM #

Bill United States says:

"Hardball." I don't think that word means what you think it means. Liquidating a company is not hardball, it's desperation.

Hostess was losing tons of money. The fact they went into liquidation means that no investor *anywhere* was willing to put more money into the company. The union didn't seem to realize that investors won't willingly choose to lose money forever. Capital isn't charity.

November 19, 2012 10:39 AM #

Glen Varnadoe United States says:

Company employees must either put their own money in the game or learn to uderstand that usually "investors", own public companies.  Many times the owners are retirement plans that have hired investement firms to invest the retirement money.  When investors are not getting a return on cash invested, they will take their money out and move on.  Unions should buy some companies and run them by themselves, then they'll get the "picture".
The union can keep all the profits or keep pumping in their own money to support the losses.
That's the way the free capital market system works.

November 20, 2012 12:57 PM #

T.D.F. United States says:

The above comments don't take into account the massive bonuses the executives gave themselves...

November 20, 2012 08:01 PM #

Bill United States says:

The "massive bonuses" is a red herring.

Managers don't give themselves bonuses, the board compensation committee recommends them, and the board of directors vote for them.  The board is dominated by the equity holders and debt holders of the company. In a private company, those bonuses only got paid because the owners -- not the managers -- allowed them to.

And while the bonuses are distasteful, they are not what sank the company -- they weren't close to being determinative for the overall economic condition of the company.

November 21, 2012 08:00 AM #

Comments are closed

elsewhere on brandchannel

1 2 3 4 5 6 7 8 9
brandcameo2014 Product Placement Awards
Apple loses its crown to a new #1
Coca-ColaIt's the Journey That Matters:
Coca-Cola Opens Up With Story-Based Web Refresh
debateJoin the Debate
Is product placement a waste of money?
Arthur Chinski and Joshua Mizrahi
Model Behavior? Brands Beware
U.S. Legal Changes Impact Use of Brand Ambassadors
paperCorporate Citizenship in Canada
Fresh thinking from Interbrand
Sheryl Connelly
Sheryl Connelly

Meet Ford's Resident Futurist
MetaluxuryMeta-Luxury
Brands and the pursuit of excellence

Advertisements