Twinkies are more popular as nostalgia than as part of the daily diet. That’s certainly one factor behind the company’s bankruptcy. But there’s more to the story of the fall of the Twinkie, and it’s no sweeter than the tale of countless other companies that were riding high a few decades ago.
There are some unusual items on the Thanksgiving table this year — in the conversation if not on the plates: Twinkies, Wonder Bread, Ding Dongs and other Hostess brand delights.
Twinkies and their cousins popped back into the national consciousness with the news that the company that made them is going out of business. If unions and management can’t reach a last-minute deal, the Hostess empire will be liquidated.
The dinner conversation will likely dwell on the iconic stature of the Twinkie, which stems in part from its proud unhealthiness. It is the essence of junk food, a universal guilty pleasure. People will talk about how much they used to love Twinkies, or Snoballs, or Hostess Orange Cupcakes. Then they’ll say how they can’t remember the last time they had one.
Twinkies are more popular as nostalgia than as part of the daily diet. That’s certainly one factor behind the company’s bankruptcy. Junk food isn’t as popular as it once was, at least with some segments of the market.
But there’s more to the story of the fall of the Twinkie, and it’s no sweeter than the tale of countless other companies that were riding high a few decades ago. Founded in 1930 as Interstate Baking Co., the firm went through a dizzying series of acquisitions, sales, name-changes and bankruptcy proceedings. Along the way, it acquired an ever-increasing load of debt, which is what makes the world of acquisitions and mergers go around. It had also acquired as many as 372 collective bargaining agreements, the Wall Street Journal reports, along with pension obligations and work rules that made balancing its books nearly impossible.
By early this year, the company was owned by a collection of hedge funds, which filed for bankruptcy, even as it paid its CEO $1.5 million in salary and gave raises as high as 80 percent to top executives. Management negotiated wage and benefits concessions with most of its unions, but the bakers’ union balked at the company’s demand that they accept sizeable cuts in salaries and health benefits.
Last week, Hostess Brands Inc. asked a bankruptcy judge to authorize the company to close down, sell off its assets — and award $1.75 million in bonuses to its executives. The judge ordered a last-ditch effort at mediation, and the outcome was in doubt at press time.
For those who only care if Twinkies will still be on the shelf next time they get a craving, rest easy. Some firm will likely purchase the brand names and recipes. They just won’t be baked by the same unionized workforce.
As for the larger issues here, there was some hope the just-completed campaign would spark a discussion of “vulture capitalism,” in which speculators operating with borrowed money swoop down on sickly companies and pick the bones clean before flying off to their next meal. But while candidates, Republican as well as Democrat, used the practice to beat up Mitt Romney over some Bain Company actions, we didn’t hear anyone suggest what should be done about it.
Page 2 of 2 - As long as people hunger for junk food, someone will provide a crème-filled confection to satisfy it. The 18,500 jobs at Hostess Brands, like millions more at companies in similar situations, are topics for a more serious conversation.