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Monday, November 19, 2012

What Really Killed Hostess Brands?

By now you’ve surely heard that the American icon, Hostess Brands, has gone out of business. The company will start selling off its assets on Monday.

Apparently there were a lot of us who just weren’t buying as many Twinkies and Ding Dongs as we once did. But the story of Hostess is about more than just kids’ treats.

Besides the 19,000 workers who will lose their jobs with the company, a large private equity group and some New York hedge funds also stand to lose hundreds of millions of dollars.

Twinkies may live on, if another company buys the name and recipe.

We take a look at what brought down this 82-year-old company.

Guest:


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  • janeconsumer

    what about the fact that no one wants to buy their products anymore?  people are moving away from that kind of processed food and hostess never tried to adapt to the changing market. and to blame the union is just ridiculous.

  • Kathy

    I’m with Jane Consumer. Once a year I might get a nostalgic desire to taste a Drake’s Yodel, but I don’t think I’ve bought any of the other products from any of their brands for decades. Why didn’t they diversify and update? Or even market it as a kitschy nostalgia brand?

  • Martha Anne Jewell

     Read this this AM. What do you think, regarding it’s relevance to the commentator’s interview remarks?  , Martha Anne

    Twinkies and Wonder bread forever!And that, economists say, may come down to one sweet little word: sugar.
    Since 1934, Congress has supported tariffs that benefit primarily a few handful of powerful Florida families while forcing US confectioners to pay nearly twice the global market price for sugar.
    One telling event: When Hostess had to cut costs to stay in business, it picked unions, not the sugar lobby, to fight.
    “These large sugar growers … are a notoriously powerful lobbying interest in Washington,” writes Chris Edwards of the Cato Institute
    in a 2007 report. “Federal supply restrictions have given them monopoly
    power, and they protect that power by becoming important supporters of
    presidents, governors, and many members of Congress.”
    Such power
    has been good for business in the important swing state of Florida, but
    it has punished manufacturers who rely on sugar in other parts of the United States, the Commerce Department said in a 2006 report on the impact of sugar prices.
    Sugar
    trade tariffs are “a classic case of protectionism, pure and simple,
    and that has ripple effects through other sectors of the economy, and,
    for all I know, the Hostess decision is one of them,” says William
    Galston, a senior fellow at the Brookings Institution in Washington.
    Trade
    restrictions on sugar have a long, complex history, and sugar is
    certainly not the only major industry to have Congress play nose tackle
    against global prices by restricting imports. Yet as those policies have
    come under fire in the past decade, both Republicans and Democrats have so far refused significant reforms.
    That
    refusal to address tariffs that neither support infant industries nor
    provide national security has come despite damning reports from the
    Commerce Department about the impact on US jobs, including the fact that
    for every sugar job saved by tariffs, three confectionery manufacturing
    jobs are lost.
    Some of those job losses came when candy companies like Fannie May and Brach’s moved the bulk of their manufacturing to Mexico and Kraft relocated a 600-worker Life Savers factory from Michigan to Canada, in order to pay global market prices for sugar.
    The
    impending mass layoffs from 33 Hostess plants scattered around the US,
    economists say, might force Washington to take a more serious look at
    how public policy affects the ability of corporations to make money –
    especially in an economy where even iconic brands like Twinkies and
    Wonder bread aren’t safe.
    “I think there are policy implications
    here,” says Mr. Edwards, an economist at the conservative Cato
    Institute. “The Department of Commerce, the Obama administration,
    and [Congress] need to look at Hostess as a case study: Why did this
    company have to go bankrupt? Why were its costs higher than it could
    afford? Are there regulatory issues with import barriers on sugar or
    unionization rules that we need to look at and change? We’ve got to
    understand why manufacturing in a lot of cases doesn’t seem to be
    profitable anymore.”
    I

  • http://pulse.yahoo.com/_Y6CO5C2HE4WM2OYGCDVWGPRXXM oldman

    A big killer is kids don’t bring lunch to school anymore. The other killer is the choice of products now available – why eat twinkies from the 7/11 when you can get bakery products next door at Starbuck’s?

    Hostess just went the way of spam, macaroni and cheese in box, canned peas and salisbury steak TV dinner’s. They are all still around, but they are nowhere near the staples they used to be.

  • Mifaroo

    my favorite palindrome: God lived as a devil dog

    (I so wish I could take credit for inventing that but sadly, I did not and do not know who did)

  • Elizabeth

    My mother bought a 2-pack of Hostess cupcakes after we finished food shopping.  50+ years ago.  After she died last year we have them on her birthday.

  • http://www.facebook.com/profile.php?id=100003000884786 Navin R Johnson

    What will the people who deep fry twinkies at the state fair do now?

    • JMYA2

      Little Debbie has a similar product. Maybe they could fry up LD.

  • Maggie

    Yuck!!

  • it

    I had to laugh at your guest. He put on the pompous air that he didn’t like Twinkies, but when he was asked if he had to do a taste test he had to swallow very hard a few seconds later because his Pavlovian response kicked in. He thinks himself and intellectual and lies to himself, but his respondent conditioning to that stimulus gave him away.

    • Megs

      You sound like my ex boyfriend. You can’t comprehend complexities. And if it’s beyond your comprehension, you are nasty to the person who was more complex than you could understand. Just because somebody has a physical (innate) reaction to something doesn’t mean they like it. Some people do have an intellectual distaste that transcends a “Pavlovian response.” We’re not all controlled by animal instincts; that doesn’t make us liars. As a child, of course I wanted the Twinkie (actually, Ding Dongs were my thing). As an adult, there’s no way I would eat that disgusting thing, even if it does taste like sugary goodness.

  • Diana Lindvall

    I was disappointed that the conversation about Hostess didn’t mention the raises given to executives while the company was filing for bankruptcy, as I learned from a Nation of Change article:

    http://www.nationofchange.org/hostess-blames-union-bankruptcy-after-tripling-ceo-s-pay-1353255416

    Thanks for your informative programs,

    Diana Lindvall
    Washington State

  • JMYA2

    I bought a few products this weekend. The stores are running out but minimarts/gas stations still have a few of the individually wrapped items.  Twinkies-not the sweet, vanilla sponge cake with sweet filling I remember. Bland and greasy with greasy filling. Crullers-all grease. Fruit cakes-sugar on the outside, bland fillings on the inside with the exception being the cherry pie which left a cherry taste in the mouth. Donettes-fine but still so full of grease.  They all have zero trans fat. How is that possible with high sodium, high sugar, and high calories? Did the zero trans fat mean more lard and less taste?

  • JMYA2

    If no one else bakes Butternut bread, I’ll miss that for sure. Grew up with it and love it! It’s not at all Wonderbread.  Can only get it on the west side of Michigan in MI. Not sure if sold elsewhere.  I grew up with Dolly Madison which had similar products that were better than Hostess (but then Hostess bought them out.) DM used to be affiliated with the Peanuts Gang.

    • Joejoe343232

      Butternut bought hostess!!!! You don’t know what you are talking about!!!

  • OccWallSt

    David Kaplan’s twitter page identifies his background as being in “securitized financial products.” Great choice, y’all (not). Kaplan speaks to the merits of one supposedly well-intentioned short-term Hostess CEO while ignoring a whole history of the brand’s marketing problematics, bankruptcy threats, vulture capitalist buy-outs, serial over-paid CEOs, and cuts to labor salaries and benefits. This was a truly terrible analysis. Try reading this http://www.salon.com/2012/11/20/vulture_capitalism_not_unions_killed_twinkies/ or this http://www.dailykos.com/story/2012/11/18/1162786/-Inside-the-Hostess-Bankery# or this http://prospect.org/article/twinkie-defense . I’m frustrated by the inconsistency of quality on Here and Now. Sometimes the show is terrific. Sometimes (like this time) it’s just inexcusably bad.  

  • Former RSR

    Not all  the information Mr. Kaplan extolled was accurate. There are a great number of Depots that ran “hybrid” routes – Carrying Wonder Bread and Twinkies on the same truck. the area where this did not occur were influenced by the sales volume and capacity of the company to service the stores in a proper manner.

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