Don't panic. Twinkies can survive bankruptcy liquidation, too. (AP)
Many Americans approach Thanksgiving this year with a heavy heart. Oh, there will still be turkey, there will be stuffing, gravy, green bean casserole and, yes, there will be pie. But there will be no nipping into the pantry Thanksgiving night for the how-could-you-possibly-be-hungry snack, the nightcap of HoHos. (If this didn’t happen in your household then perhaps you never had teenagers.)
While nutritionists everywhere are no doubt breaking out their dancing shoes for the Twinkie funeral, a piece of Americana died with the announcement last week that Hostess Brands of Irving will cease operations and liquidate. The decision came after thousands of union workers rejected management’s latest contract offer and went on strike, crippling the company.
Workers were unhappy with a contract that would have cut their pay yet again, a move that followed management’s efforts to slash pension benefits. The company owed about $950 million to its worker pensions, which were unfunded to the tune of $2 billion.
While much of the backlash for Friday’s announcement of Hostess’s liquidation has been directed at the unions, the strike was merely the final nail in a well-hammered coffin.
Hostess had been operating in bankruptcy since January, its second reorganization in less than a decade. The company faced a changing market in which customers began to worry more about things like empty calories and ingredients that sounded more like they were mixed up in a chemistry lab than a kitchen. While the company still sold $68 million worth of Twinkies this year, Hostess’s sales have been flat or down slightly in recent years.
Management, too, deserves some of the blame. It tried to take its turn at the trough, padding executives’ paychecks ahead of the bankruptcy filing. While those pay packages were later rescinded, it didn’t set an amiable tone for talks with creditors or labor groups. It also spoke to a far bigger problem that plagued Hostess: a lack of innovation. The company for years simply relied on its well-established brands, ignoring rising consumer concerns about unhealthy snacks and mounting competition from other snack makers.
So blame management, blame labor, and blame consumers, but while we’re at it, let’s also blame Congress. Since 1934, Congress supported sugar tariffs that force U.S. companies to pay twice the global market price for sugar. This, by the way, also factors into the economics of ethanol, which could be made more cheaply from sugar if it weren’t for the import tariffs. The sugar lobby, though, is so powerful that, as the Christian Science Monitor pointed out, “when Hostess had to cut costs to stay in business, it picked the unions, not the sugar lobby, to fight.”
As is so often the case when a company fails, there’s plenty of blame to go around in Hostess’s demise. As for the fate of the Thanksgiving HoHo, fear not, Twinkie faithful. To help pay for the company’s liquidation, Hostess will no doubt sell its brands and recipes to another company that will keep churning out the snacks we need to survive the zombie apocalypse.
