Twilight of the Twinkie

Hostess Brands announced Friday that it was closing down its operations and laying off its 18,500 workers.  The company hopes to find a buyer to adopt its snack cake and bread brands.

Fans of the Twinkie, the golden sponge cake, shaped like a loaf and filled with vanilla crème need not despair; at least one competitor, Little Debbie Cakes, sells a cheaper, knock-off brand of the ubiquitous treat.  Hostess may also find a buyer for the popular Twinkie, which often happens with brand names.

Twinkies debuted in 1930 as a cheap treat during the Depression. The original banana filling changed to vanilla during World War II, when the fruit was rationed.  They’ve since become an American icon.

According to the Associated Press, Hostess, based in Irving, Texas, said a nationwide strike crippled its ability to make and deliver its products, which also include Ding Dongs, Ho Ho’s and Home Pride bread. Hostess suspended bakery operations at all its factories and said its stores will remain open for several days to sell already-baked products.

The company had warned employees that it would file a motion in U.S. Bankruptcy Court to unwind its business and sell assets if plant operations didn’t return to normal levels by Thursday evening. The privately-held company filed for Chapter 11 protection in January, its second trip through bnkruptcy court in less than a decade.

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 Twinkie generating $68 million this year alone.  Sales plummeted in recent years to do the health consciousness of consumers.

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 said it was burdened 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 agreed to reduced salaries, others — including former CEO Brian Driscoll — had left the company by the time the pay hikes were revealed.

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. Bankrupticy 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.

The bakery union insisted that Hostess failed due to mismanagement and failure by executives over the past eight years to make the company profitable — not because workers didn’t make concessions.  Yet the union went on strike

“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.

What concessions?

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.  Well, isn’t that too bad?  What did Marie Antoinette say?   “Let them eat cake,” cake being the leavings of the kitchen fireplace.

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,” Rayburn stated. “The plants were operating well below 50 percent capacity and customers were not getting products.  There’s no other alternative.”

Twinkie sales for the year ended December 25, 2011 were 36 million packages, down almost 2 percent from a year earlier.

Twinkies were invented in Shiller Park, Ill., in 1930 by James Alexander Dewar, a baker for the Continental Baking company.  Realizing that several machines used to make cream-filled strawberry shortcake sat idle when strawberries were out of season, Dewar conceived a snack cake filled with banana cream, which he dubbed the Twinkie.  He said he came up with the name when he saw a billboard in St. Louis for “Twinkle Toe Shoes.”  During World War II, bananas were rationed and the company was forced to switch to vanilla cream. This change proved popular, and banana-cream Twinkies were not widely re-introduced. The original flavor was occasionally found in limited-time promotions, but the company used vanilla cream for most Twinkies.  

In 1988, Fruit and Cream Twinkies were introduced with a strawberry filling swirled into the cream. However, the product was soon dropped.  Vanilla’s dominance over banana flavoring would be challenged in 2005, following a month-long promotion of the movie King Kong. Hostess saw its Twinkie sales rise 20 percent during the promotion and in 2007 permanently restored the banana-cream Twinkie to its snack lineup.

Twinkies are still produced in Canada by Saputo, Inc.’s Vachon, Inc., which owns the Canadian rights for the product from Hostess and are not affected by the actions in the U.S.

Unions and management point the finger of greed at one another while an American snack food icon hangs in the balance and the government rubs its hands in glee at the prospect of more government dependents.  Those union members will gain more consideration from the government than the millions of non-union private sector workers standing on unemployment lines union members are exempted from.

Twinkies, a relatively cheap product during the Depression and World War II, had become an expensive commodity at $4 a box.  I went to the local supermarket yesterday to pick up a couple of boxes at $4 apiece.  The cakes were on sale; I’d just forgotten my supermarket card and went back and got the sale price of 2 for $5.  Still an expensive purchase, having to pay for millionaire’s mansions and union members who can retire earlier with more comprehensive and full-funded health care plans than I can.

American has begun to wake up that in reaching for the “equal pay” ring, we short-change innovation, creativity, and productivity.   If the bakers had concentrated on making Twinkies instead of making cozy deals, they would still be employed this Christmas.

Twinkies are fattening and I gave them up long ago, somewhere between high school and college.  In our culture of arrested development we’ve failed to realize that Twinkies, like so many childhood remnants, must end and we must relinquish them to a new generation.  Only we haven’t produced a new generation to introduce to the joys of Twinkies.  We’ve selfishly clung to our childhoods, continuing to eat a product that’s certainly not healthy for someone in the Forties but perfectly acceptable for your average 9 year-old, as long as they eat the one package and not the entire box.

There aren’t enough children anymore to make the production of Twinkies profitable at the price it costs to support aging union members.  With any luck, Hostess will find a buyer in a right-to-work state who can make the Twinkie more efficiently, our adolescent culture will grow up and start having children (as opposed to “careers”) earlier, and a new generation will grow up worshipping the Twinkie (rather than the Government).  

Twinkie, Twinkie little bar

The unions simply went too far

Striking for a pay-scale high

And a greater share of pie

Twinkie, Twinkie little bar

Please stay in our cookie jar.

 

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Published in: on November 17, 2012 at 11:56 am  Leave a Comment  

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