NEW YORK (AP) — Twinkies may not last forever after all.
Hostess
Brands Inc., the maker of the spongy snack with a mysterious cream
filling, said Friday it would shutter after years of struggling with
management turmoil, rising labor costs and the ever-changing tastes of
Americans even as its pantry of sugary cakes seemed suspended in time.
Some
beloved Hostess brands such as Ding Dongs and Ho Ho's likely will be
snapped up by buyers and find a second life, but for now the company
says its snack cakes should be on shelves for another week or so. The
news stoked an outpouring of nostalgia around kitchen tables, water
coolers and online as people relived childhood memories of their
favorite Hostess goodies.
Customers streamed into the Wonder
Hostess Bakery Outlet in a strip mall in Indianapolis Friday afternoon
after they heard about the company's demise. Charles Selke, 42, pulled a
pack of Zingers raspberry-flavored dessert cakes out of a plastic bag
stuffed with treats as he left the store.
"How do these just
disappear from your life?" he asked. "That's just not right, man. I'm
loyal. I love these things, and I'm diabetic."
After hearing the
news on the radio Friday morning, Samantha Caldwell of Chicago took a
detour on her way to work to stop at a CVS store for a package of
Twinkies to have with her morning tea and got one for her 4-year-old son
as well.
"This way he can say, 'I had one of those,'" Caldwell, 41, said.
It's
a sober end for a storied name. Hostess, whose roster of brands dates
as far back as 1888, hadn't invested heavily in marketing or innovation
in recent years as it struggled with debt and management changes.
As
larger competitors inundated supermarket shelves with an array of new
snacks and variations on popular brands, Hostess cakes seemed caught in a
bygone time. The company took small stabs at keeping up with Americans'
movement toward healthier foods, such as the introduction of its
100-calorie packs of cupcakes.
But the efforts did little to
change its image as a purveyor of empty calories with a seemingly
unlimited shelf life: Twinkies, for instance, have 150 calories and 4.5
grams of fat. A Ding Dong chocolate cake with filling has 368 calories
and 19.4 grams of fat.
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 Twinkies alone generating $68 million so far this
year.
Hostess' problems ran far deeper than changing tastes,
however. 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,
based in Irving, Texas, said it was saddled 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 agree to reduced salaries, others — including
former CEO Brian Driscoll — had left the company by the time the pay
hikes came to light.
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. Bankruptcy 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.
In
a statement, the bakery union said Hostess failed because the six
management teams over the past eight years weren't able to make it
profitable — not because workers didn't make concessions.
"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.
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.
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. The plants
were operating well below 50 percent capacity and customers were not
getting products," he said. "There's no other alternative."