From Obesity to Unions, Hostess Brands is Everything That's Wrong With America
Hostess Brands is filing for bankruptcy for the second time in a decade. With nearly $1 billion in debt, 19,000 employees whose jobs are at risk, and suffering from rapidly rising costs of sugar, flour, and hydrogenated vegetable/animal shortening required to make what Time called "plastic-sheathed snack cakes," Hostess seems to define everything that's unhealthy in America right now. Bad financial choices, bad food, bad management.
In 2004, the makers of Twinkies first filed for bankruptcy, a five-year process that ranks among the longest such proceedings in U.S. history. The company continued to struggle financially, and now risks complete liquidation, as it cannot make payments on its $700 million line of credit, has $2 billion in unfunded pension obligations to retired employees, and owes $860 million in current debt.
Hostess sold $2.5 billion worth of snack products and breads last year, but sales of Twinkies, the company's signature product, fell by 2%. Soft Twinkie sales haven't brought the company down, however. The Wall Street Journal cites high labor costs for employees who are members of the International Brotherhood of Teamsters and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, high costs for staple ingredients, and poor market share for new, healthier baked products such as Nature's Pride whole grain breads.
Some people will see union labor as the reason Hostess is teetering on the brink of oblivion, while competitors like Grupo Bimbo (Bimbo Bakeries USA) have surged to become the largest bakery corporation in the U.S. and the fourth-largest food manufacturer in the world (behind Unilever, Kraft, and Nestle). Bimbo employs union workers, but with far less generous contracts than those negotiated with Hostess. Others will see Hostess' seemingly inevitable demise as justifiable, considering the unhealthiness and deceptive nature of the Twinkie and many other similar Hostess products.
Hostess' problems — unwise spending; overoptimistic sales projections; over-generous union contracts and pension obligations; and public disenchantment with hydrogenated fat, superfine sugar, and cellulose fiber advertised as "cream" — all sound an awful lot like America's problems in general right now.
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