The Twinkie Maker, Hostess, Seeks Bankruptcy Protection
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Hostess_the Twinkie maker

Hostess_the Twinkie maker

Guess who's back in Chapter 11! The Twinkie maker, Hostess is preparing to cut down its high costs as it reverts back into bankruptcy protection for the second time in almost less than a decade. It has been just three years that the Twinkie maker emerged from an earlier restructuring.

The Twinkie maker, Hostess, has enough cash to keep stores stocked with its Ho Ho’s, Ding Dongs, Sno Balls and Wonder Bread for now. But with health-conscious Americans favoring yogurt and energy bars over the dessert cakes and white bread, industry leaders fear that the 87-year-old Hostess may be in a bigger trouble.

The Twinkie maker has been for decades a staple of American kids’ diets. The failure of the brand is a tale, widespread with the problems that have inundated some of the country’s oldest and most renowned brands. The failure has been a combination of crippling debt from financial engineers, pension burdens, labor rules and management’s failure to revive a stale product line and keep up with the rapid changing tastes of consumers.

The Blame Game

There was plenty of finger-pointing reported in food and beverage magazines thisWednesday. Brian J. Driscoll, chief executive of Hostess Brands, blamed the Twinkie makers’ failure on ‘restrictive’ labor rules and legacy pension burdens, in the bankruptcy protection filing. Brain Driscoll grieved that the Twinkie maker had 372 collective bargaining agreements with a dozen unions, and that Hostess paid $103 million a year to employees’ pension funds. He also commented that the Teamsters’ agreement rules required different workers for making bread and cake deliveries and limited flexibility to serve small outlets.

Hostess employs about 19,000 employees with its operations spread in 49 states. The Twinkie maker produces numerous products, like Wonder, Nature's Pride and Merita breads, cookies and cakes with annual sales reaching about $2 billion.

Frank Hurt, president of the Bakery, Confectionery, Tobacco Workers & Grain Millers International Union, blamed management. Frank Hurt said, “Executives launched deli-style bread that was just a loser from day one. The union had been compliant, freezing wages for four or five years as the number of workers fell. As for the pension plan, which is owed $944 million, Hostess had not made a payment to the fund since July.”  Hostess also fell short of budgets it has kept aside for the promoting the brand and advertising in magazine, newspaper as well as on television.

The Twinkie Maker’s Bankruptcy Filing

Hostess declared Wednesday that its previous efforts to change, together with the prior Chapter 11, were inadequate. The Twinkie maker also commented that it was seeking to restructure Hostess into a strong, competitive company, under the current bankruptcy protection.

Hostess listed about $860 million in debt in its bankruptcy filing with the U.S. Bankruptcy Court for the Southern District of New York. Hostess’s biggest unsecured creditor is the Bakery & Confectionary Union & Industry International Pension Fund, which it owes about $944.2 million. The Twinkie maker, in the bankruptcy filing, also listed its approximate assets between $500 million and $1 billion and its estimated liabilities at more than $1 billion.

Author
Christy Gren is an Industry Specialist Reporter at Industry Leaders Magazine; she enjoys writing about Unicorns, Silicon Valley, Startups, and Business leaders and innovators. Her articles provide an insight about the Power Players in the field of Technology, Auto, Manufacturing, and F&B. Follow Christy Gren on Twitter, Facebook & Google.

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