First they came for our Twinkies...

[Andrew D]

People past puberty, and not under the influence of one or more controlled substances, actually eat Hostess products?

Amazing.

[oldr_n_wsr]

I am not much of a sugar lover but I do like a twinkie now and then.

[oldr_n_wsr]

So what I am reading in this thread, Hostess could not break the sugar "opec" so went after the unions instead. Well, it seems the feds are in bed with both, so what should Hostess do?

[Sue U]

Who's to Blame for the Hostess Bankruptcy: Wall Street, Unions, or Carbs?

9 NOV 16 2012, 6:02 PM

Try all of the above.

Hostess Brands, the maker of Twinkie and Wonder Bread, is getting ready to bake its last corn-syrupy snack cake. After failing to win major contract concessions from one of its key labor unions, the beleaguered 82-year-old company has asked a federal bankruptcy court for permission to start liquidating its assets -- or, in real person speak, begin the process of selling off pieces of the company to the highest bidder while laying off most of its 18,500 workers.

There are two important things to realize about this rather sad situation. First: Twinkie, Wonder, and all the other high-calorie marvels of culinary science Hostess sells aren't going to disappear from shelves for good. One of its competitors will likely swoop in, buy them up, and restart production. So you can stop bidding on $100 boxes of Sno Balls on eBay.

Second: This is not a simple story that anybody should try to slot neatly into their political talking points. It's not just about Wall Street preying on Main Street, or big bad labor unions sucking a wholesome American company dry. It's about an entire galaxy of bad decisions that will cost many people their jobs and money.

As David Kaplan chronicled at length for Fortune earlier this year, the roots of this debacle go back to when Hostess entered its first bankruptcy in 2004. Not unlike the situation automakers would find themselves in a few years later, the company was collapsing under the weight of flagging sales, overly generous union contracts replete with ridiculous work rules, and gobs of debt. But unlike the automakers, the five years Hostess spent trying to fix itself in Chapter 11 didn't fix its fundamental problems.

Instead, they set the stage for its eventual demise. A private equity company, Ripplewood Holdings, paid about $130 million dollars to take Hostess private, and the company's two major unions, the Teamsters and the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union, sacrificed about $110 million in annual wages and benefits. But its labor contracts were still deeply flawed. Worse yet, the company left bankruptcy saddled with more debt than it went in with -- "an unusual circumstance that the company justified on expectations of 'growing' into its capital structure," as Kaplan put it.

Suffice to say, Hostess didn't do much growing. It continued to lose hundreds of millions of dollars making and selling starchy snacks that much of the public had lost its taste for, while failing to launch any great new products. The interest on its loans swelled the company's debt. By January 2012, it was back in Chapter 11, trying to wrestle a new contract with more concessions from its unions.

Hostess insisted that unless workers accepted further cuts, the company would have to shut its doors for good. That's the sort of threat that distressed companies often make in labor negotiations, and unions are inclined to consider it a bluff. But after getting a look inside Hostess' books, the Teamsters concluded that the threat was serious. Its members narrowly approved the contract in September.

The bakers' union, which represents about a third of the Hostess' workforce, did not. Instead they launched a strike last week that Hostess CEO Greg Rayburn says forced the company to take the final, dramatic step of liquidating everything and firing workers. Per the AP:

Although many workers decided to cross picket lines this week, Hostess said it wasn't enough to keep operations at normal levels; three plants were closed earlier this week. Rayburn said Hostess was already operating on thin margins and that the strike was a final blow.
"The strike impacted us in terms of cash flow. The plants were operating well below 50 percent capacity and customers were not getting products," Rayburn said.

It's not clear what, other than perhaps a misplaced faith that belief that they really did have the upper hand, might have convinced the bakers to strike. Certainly, the Teamsters all but begged them to accept the new contract. Some, interviewed by CNNMoney, said that their jobs simply weren't worth saving at the pay levels Hostess was offering. If that was really the prevailing opinion, it's a pity, because a lot of people at that company did seem to believe their jobs were valuable enough to hold onto, even if at a lesser pay grade.

Already, a few parties have tried to politicize this affair. The AFL-CIO today called it "a microcosm of what's wrong with America, as Bain-style Wall Street vultures make themselves rich by making Americans poor." GOProud sent a winking blast email headlined "Unions Kill Twinkies" (literally, they wrote in a wink).

Both takes are exceptionally reductive. Let's look at Wall street first. The private equity guys will likely lose most of their investment, since their stake in the company will be worthless. It's also not clear that the hedge funds and other lenders that supplied Hostess with its mountain of loans will fare much better. When it entered Chapter 11 this year, the company owed around $935 million, if you include the additional loan it took out to keep the lights on and creme flowing. Meanwhile, Reuters reports that the company listed $981.6 million worth of assets in its bankruptcy filing. There's virtually no chance they'll sell for that much in a liquidation. One of the failed bids to buy the whole company out of its last bankruptcy valued it at just $580 million. And that was when it was a going operation. If you factor in the interest payments Hostess has been making on its loans, some of the creditors might end up making out ok. But it doesn't seem likely anybody will make a killing.

In short: the smart money guys larded Hostess with too much debt and never figured out a real plan for fixing its business. They're coming out with a loss as a result.

As far as the unions go: You can blame them for not making enough concessions. You can blame the bakers for administering the final death blow. But you can't blame them for management's strategic incompetence, or the decision to try to run a flailing company on debt, hope, and empty calories.

There's more than enough blame in this story for everyone involved to have a taste.

http://www.theatlantic.com/business/arc ... bs/265357/

[Guinevere]

Never liked Twinkies or the cupcakes or the snoballs -- don't recall even eating them. I did like the occasional Hostess pie when I was a kid -- but only if the Tastykake pies weren't available. Oh but I did love my Tastykake Butterscotch Krimpets!

http://articles.philly.com/2012-11-17/n ... -tastykake

[Lord Jim]

Hostess could not break the sugar "opec"

Don't get me started on the sugar tariffs....

On this one I'll start to sound like Huey Long....

The sugar price tariffs are the reason that we're making ethanol out of corn, rather than out of sugar, (as they are doing in Brazil; the manufacture of ethanol using sugar is five times more efficient a process than the one using corn, and is also far more "environmentally friendly"...)

But we're not doing that here, (which would be a boon to the sugar industry) in order to protect the corn industry....

It's the ultimate in cynicism...

Archer Daniels runs a huge PR campaign designed to make the public believe that they're engaged in an "eco-friendly" program to expand US energy resources, when all they're doing is inefficiently using their surplus product (and beyond the economics, there's a moral component as well; people can eat corn...) at the expense of American consumers who on a level, non-protectionist playing field could get much better value from ethanol made from sugar...

[Sue U]

Never liked Twinkies or the cupcakes or the snoballs -- don't recall even eating them. I did like the occasional Hostess pie when I was a kid -- but only if the Tastykake pies weren't available. Oh but I did love my Tastykake Butterscotch Krimpets!

http://articles.philly.com/2012-11-17/n ... -tastykake

Yeah, no one around here ever ate Hostess anything, either; this is strictly a Tastykake market: we love our Krimpets (I prefer the jelly ones), Kandykakes and Koffeekakes. That article in your link pegs it exactly:

Hostess had a power lineup of Twinkies, Ding Dongs and Ho-hos. We knew about them. But they never had the same hold on our hearts as Krimpets, Cupcakes and Juniors.

For those growing up in the region, Hostess products were something you might see on the shelves of a 7-Eleven. (And you'd only go to a 7-Eleven if - and that's a big if - there wasn't a nearby Wawa - or a Turkey Hill for those from a little farther west].

None of the Flyers ever won a case of Ding Dongs for scoring a goal. And no one playing Marie Antoinette at Eastern State Penitentiary ever tossed snack cakes at a crowd while announcing "Let them eat Twinkies."

[Sue U]

Deleted duplicate post; computer is wacky today.

[oldr_n_wsr]

Deleted duplicate post; computer is wacky today.

So am I.
Played cards with some AA associates on Saturday night and won $110. Still the wife gave me hell for not geting home until 1am. Of course she didn't complain much on Sunday when she had an extra $110 to spend shopping.

[Lord Jim]

You played poker with your friends and came home stone cold sober with an extra $110 in your pocket, which you promptly turned over to her?

She shouldn't have given you "hell"....

She should have greeted you with wild sex....

[Guinevere]

For $110 bucks and sane behavior? Try again . . . .

[dales]

KEEP HOPE ALIVE!

WHITE PLAINS, N.Y. (AP) — Twinkies won't die that easily after all.

Hostess Brands Inc. and its second largest union will go into mediation to try and resolve their differences, meaning the company won't go out of business just yet. The news came Monday after Hostess moved to liquidate and sell off its assets in bankruptcy court citing a crippling strike last week.

The bankruptcy judge hearing the case said Monday that the parties haven't gone through the critical step of mediation and asked the lawyer for the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which has been on strike since Nov. 9, to ask his client, who wasn't present, if the union would agree to participate. The judge noted that the bakery union, which represents about 30 percent of Hostess workers, went on strike after rejecting the company's latest contract offer, even though it never filed an objection to it.

"Many people, myself included, have serious questions as to the logic behind this strike," said Judge Robert Drain, who heard the case in the U.S. Bankruptcy Court in the Southern District of New York in White Plains, N.Y. "Not to have gone through that step leaves a huge question mark in this case."

Hostess and the union agreed to mediation talks, which are expected to begin the process on Tuesday.

In an interview after the hearing on Monday, CEO Gregory Rayburn said that the two parties will have to agree to contract terms within 24 hours of the Tuesday since it is costing $1 million a day in overhead costs to wind down operations. But even if a contract agreement is reached, it is not clear if all 33 Hostess plants will go back to being operational.

"We didn't think we had a runway, but the judge just created a 24-hour runway," for the two parties to come to an agreement, Rayburn said.

Hostess, weighed down by debt, management turmoil, rising labor costs and the changing tastes of America, decided on Friday that it no longer could make it through a conventional Chapter 11 bankruptcy restructuring. Instead, the company, which is based in Irving, Texas, asked the court for permission to sell assets and go out of business.

It's not the sequence of events that the maker of Twinkies, Ding Dongs and Ho Ho's envisioned when it filed for bankruptcy in January, its second Chapter 11 filing in less than a decade. The company, who said that it was saddled with costs related to its unionized workforce, had hoped to emerge with stronger financials. It brought on Rayburn as a restructuring expert and was working to renegotiate its contract with labor unions.

But Rayburn wasn't able to reach a deal with the bakery union. The company, which had been contributing $100 million a year in pension costs for workers, offered workers a new contract that would've slashed that to $25 million a year, in addition to wage cuts and a 17 percent reduction in health benefits. But the bakery union decided to strike.

By that time, the company had reached a contract agreement with its largest union, the International Brotherhood of Teamsters, which 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.

Rayburn said that Hostess was already operating on razor thin margins and that the strike was the final blow. The company's announcement on Friday that it would move to liquidate prompted people across the country to rush to stores and stock up on their favorite Hostess treats. Many businesses reported selling out of Twinkies within hours and the spongy yellow cakes turned up for sale online for hundreds of dollars.

Even if Hostess goes out of business, its popular brands will likely find a second life after being snapped up by buyers. The company says several potential buyers have expressed interest in the brands. Although Hostess' sales have been declining in recent years, the company still does about $2.5 billion in business each year. Twinkies along brought in $68 million so far this year.


Read more: http://www.sfgate.com/news/texas/articl ... z2ChvPDSpu

[Jarlaxle]

Never liked Twinkies or the cupcakes or the snoballs -- don't recall even eating them. I did like the occasional Hostess pie when I was a kid -- but only if the Tastykake pies weren't available. Oh but I did love my Tastykake Butterscotch Krimpets!

http://articles.philly.com/2012-11-17/n ... -tastykake

I liked the Sno-Balls for a while...they they started making me sick. Fuckin' coconut allergy.

I always found Hostess pies way too sweet (they actually made me retch).

[dales]

Commie

[Lord Jim]

Wen I was a kid, I loved the fruit pies, (especially a variety they have since discontinued; French Apple...apple with rasins..) and well into my bachelor days I would pick up either a cherry or apple fruit pie, zap it in the microwave and then top it with a scoop of french vanilla ice cream...I'd be in the mood for a piece of pie, but didn't want to have a whole apple or cherry pie sitting around, needing to be eaten...(Sometimes I'd do that with a Hostess cupcake too, but I was never a big Twinkie fan)

[Andrew D]

Hostess products are to real food what SpaghettiOs are to real Italian cuisine.

[dales]

Yeah, so?

[oldr_n_wsr]

How come Hostess didn't get a gov baleout?

[Crackpot]

Because there is a twine shortage

[Sue U]