Maker Of Twinkies Files For Bankruptcy
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Hostess Brand, the maker of Twinkies, Wonder Bread, and other legendary food items, has filed for bankruptcy. The company says it needs to restructure if it's going to stay alive.
As NPR's Larry Abramson reports, Hostess is struggling to keep up with changing tastes and labor problems.
LARRY ABRAMSON, BYLINE: This is actually the second time that Hostess Brands has gone to bankruptcy court. If the judge approves this restructuring plan, Hostess says it's gotten a commitment of $75 million in financing from Silver Point Capital to keep the company going. It's a dramatic fall for a household name.
MITCH PINHEIRO: Hostess used to be - and Wonder - used to be the largest bread company in the United States at one point.
ABRAMSON: Mitch Pinheiro is an analyst with Janney Montgomery Scott. Hostess has slipped from that lofty perch to number four in the bread biz. It's still a big player, with a 10 percent share. But Pinheiro says even that slice of the market is at risk because the company is losing ground to competitors that are, well, less white bread.
PINHEIRO: Hostess missed the move by consumers from white bread to your better-for-you breads.
ABRAMSON: Hostess tried to beef up the Wonder Bread's reputation by fortifying it and by coming out with a whole-grain bread, but the slow erosion of market share continues. People in this country still need a lot of bread for sandwiches. But Harry Balzer, with the NPD Group, says mom just isn't as likely to slap a piece of Wonder Bread on your plate at meal time.
HARRY BALZER: That piece of toast that you had in the morning time. That side dish at dinnertime that was a piece of bread, less likely to occur.
ABRAMSON: But Hostess says the real problem is not changing tastes. In a statement today, the company pointed the finger at a slew of labor contracts. Spokesman Erik Halvorson says the company's cost structure is no longer competitive.
ERIK HALVORSON: And that's primarily due to the legacy pensions that we have and the extensive medical benefit obligations and restrictive work rules.
ABRAMSON: The Teamsters Union scoffed at that idea today. The union represents thousands of drivers and other employees and says they made plenty of sacrifices when Hostess went into bankruptcy the first time, in 2004. The Teamsters Union says it remains committed to finding a solution. Hostess says no layoffs are planned as a result of the bankruptcy filing.
Unlike other companies, Hostess actually employs the drivers who distribute their baked good. Mitch Pinheiro, of Janney Montgomery Scott, says hostess will have to move to independent contractors to compete.
PINHEIRO: And without getting concessions and being able to restructure those liabilities, Hostess will forever be behind the eight ball.
ABRAMSON: Topping the list of those obligations, Hostess owes nearly a billion dollars to one union pension fund.
Twinkie sales are slowing but are still strong. They remain this country's most popular snack cake and are firmly ensconced in the pop culture lexicon. Generations of kids asked mom to put a Twinkie in their lunchbox, thanks to constant urging from TV characters, like Twinkie the Kid.
(SOUNDBITE OF A TWINKIE COMMERCIAL)
UNIDENTIFIED MAN: Hostess Twinkies, cupcakes and fruit pies. With Hostess, tasting is believing.
ABRAMSON: Since then, of course, the snack with the infinite shelf life has become a bit of a joke in an increasingly health-conscious culture. But for the company's 19,000 workers, the future of Hostess is anything but funny.
Larry Abramson, NPR News.
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