Editor’s note: The follow editorial appeared Wednesday in the Chicago Tribune:
The move last Friday follows a strike that began Nov. 9 by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union. It refused to swallow additional wage and benefit concessions to keep the bankrupt Hostess Brands afloat. Its 5,000 members were nearly unanimous in rejecting the company’s final contract offer.
As a result, the company said, most of the 18,500 Hostess employees will lose their jobs. That includes members of the largest union, the International Brotherhood of Teamsters, which did agree to the company’s concession demands. Hostess Brands Inc. was in a New York bankruptcy courtroom Monday to start the process of selling itself.
The bakery union’s self-defeating refusal to accept financial reality is only part of the story however. For Hostess, the strike was the final blow of many. High commodity costs hurt the company. Not only did it pay a fortune for food ingredients, but also for the energy to run its facilities and fuel its delivery trucks.
The recession hurt too. Hostess was unprepared to meet difficult business conditions that prevailed in 2009, when it emerged from a previous bankruptcy reorganization in which it obtained big concessions from its workforce. It had been, in fact, a poorly managed company for a long time. A string of short-sighted executives were quick to take money out of the business and slow to make the capital investments it needed to stay competitive.
Perhaps most damaging, the company failed to innovate in response to changing consumer tastes. Hostess didn’t have to make Ho Ho’s out of tofu to stay relevant. Food companies such as Kraft, Sara Lee and Nabisco have long understood their success depends on sophisticated market research, product development and creative marketing. It doesn’t come cheap.
They also must update their product lines constantly to keep their customers – many of them increasingly health-conscious – satisfied. Consider Kraft’s Jell-O brand. Consumers still can buy a box of powdered gelatin dessert that hasn’t changed much in 100 years. They also can buy pudding, no-bake desserts, ready-to-eat, fat-free and sugar-free versions of the product under the same Jell-O brand.
The 82-year-old Hostess was previously known as Interstate Bakeries Corp. and based in Kansas City, Mo., for many decades. Arguably, its best-known products peaked during the 1970s.
Other companies may yet do better with at least some of the Hostess brands. Flowers Foods Inc., Bimbo Bakeries USA, a division of Mexico-based Grupo Bimbo, and Pepperidge Farm, a division of Campbell Soup Co., are among prospective buyers as the company is liquidated, analysts say.
Even if those companies buy all the brands, however, many redundant factories and distribution networks will close. Most of the Hostess jobs still will be lost.
There also is no guarantee that any particular brand will survive. Yes, even golden, cream-filled Twinkies snack cakes could go extinct.
As one analyst told the Reuters news service of the Twinkies brand, “It’s iconic, but in the same way that the great Studebakers are iconic.”
Reports circulated Friday of Twinkies being auctioned for as much as $10 apiece online. Not bad for an obsolete hunk of popular culture. It is sobering to note that today’s Twinkies have a much longer shelf life than the company that made them.