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Hostess CEO: We’re Already Hearing From People Who Might Buy Our Brands

The sudden end that came to Hostess Brands, Inc. on Friday caught many people off guard and led to the somewhat bizarre spectacle of people hitting stores, and even online sites like Amazon and e-Bay to stockpile everything from Twinkies to Ho-Hos. As I noted on Friday, though, it’s unlikely that all of the companies brands will disappear forever given that many of them have value that a potential buyer would likely be interested. Yesterday on ABC, just a day before heading Court to make the application for Bankruptcy Court liquidation official, Hostess’s CEO said that the company has already heard from potential buyers:

Hostess Brands, the maker of the iconic Twinkies snack cakes, may find a buyer when it heads to bankruptcy court today to liquidate the 82-year-old company, the company’s CEO says.

“I think we’ll find buyers,”  CEO Gregory F. Rayburn told ABC News on Sunday.  ”A few have surfaced already since Friday expressing interest in the brand to acquire them.”

Con Agra and Flowers Foods are among the companies that have expressed interest in Hostess, but Mexican company El Grupo Bimbo may have an edge, the Christian Science Monitor reported Saturday.  Grupo Bimbo, headed by Mexican billionaire Daniel Servitje Montull, is the largest bread-baking company in the world.

Economists say part of the reason Hostess struggled was due to high sugar tariffs meant to protect local producers, the Monitor reported.  Grupo Bimbo could take advantage of lower sugar prices in Mexico.

Hostess makes Twinkies as well as popular snacks including Ho Hos, Ding Dongs, Suzy Qs, Sno Balls and Wonder Bread.

Last week the company announced it would close after it imposed wage and benefit cuts to its workers, prompting a bitter nationwide strike.

“The problem has always been the cost structure, the union rules, the pension legacy, the pension cost and the cost structure,”  Rayburn told ABC Sunday.

Of course, another reason for Hostess’s problems was the fact that, across the corporation, they were dealing with 12 different unions and 40 separation pension plans, none of which it was able to afford to fund by the time the January 2012 Chapter 11 filing rolled around. While I still reject the idea that it was the Bakers Union alone that was responsible for the company’s demise, one cannot deny that, like the auto companies, Hostess was saddled with legacy labor contracts that contributed to the cost issues that were the company’s ultimate undoing. Which is why it’s ironic that the head of the union seems to have such a delusional view of how this all may end:

Frank Hurt, president of the Bakery, Confectionery, Tobacco Workers and Grain Millers Union told the Wall Street Journal that there’s “more than a good chance” someone would swoop in to buy the company’s 30 brands and preserve jobs. He said that Twinkies and Wonder Bread are popular and they will be “produced somewhere, some time and by our members.”

Well, that certainly won’t happen if Grupo Bimbo buys the brands and shifts production down to Mexico in order to take advantage of the lower price of sugar. Of course, these being baked goods, you can’t make everything in Mexico and expect to be able to sell it nationwide in the United States. However, what I expect you’ll see in that case is that new ownership would locate their bakeries in right to work states as much as possible, and to the extent they can’t they certainly aren’t going to let themselves get suckered into the same contracts that contributed to the downfall of Hostess. Mr. Hurt, you gambled here, and you and your members lost big time.

So, there’s probably no reason to continue hoarding the Twinkies, Ding Dongs, and Wonder Bread, because they will likely be back on store shelves in short order.

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About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May, 2010 and also writes at Below The Beltway. Follow Doug on Twitter | Facebook

Comments

  1. Davebo says:

    Of course, these being baked goods, you can’t make everything in Mexico and expect to be able to sell it nationwide in the United States

    Of course you can. Where do you think Canada get’s tulips? And do they not sell “Mexican Cokes” with real sugar in VA?

    Like or Dislike: Thumb up 1 Thumb down 0

  2. JKB says:

    The Twinkies can be made in Mexico. Obama can impose a punitive tariff to support his union cronies and the sugar lobby. The illegals can start bringing a case or two of Twinkies with them when they cross the border. They can sell them stateside for a bit of startup capital.

    It’s win-win. Twinkies are made, Obama benefits from cronyism. Americans get Twinkies and associate illegal aliens with tasty treats. The illegal aliens have a chance to stay off welfare and build on their smuggling returns like the Kennedys and other big names.

    And, since Twinkies don’t go stale, it all works out fine.

    Like or Dislike: Thumb up 2 Thumb down 10

  3. Tsar Nicholas says:

    [W]hat I expect you’ll see in that case is that new ownership would locate their bakeries in right to work states as much as possible, and to the extent they can’t they certainly aren’t going to let themselves get suckered into the same contracts that contributed to the downfall of Hostess. Mr. Hurt, you gambled here, and you and your members lost big time.

    Yep.

    Plus there are two other constituencies who lost on this deal: Other businesses and taxpayers. Virtually every one of those union rank-and-file workers went straight from the picket line to the unemployment office. With Hostess as a company now defunct no longer will they be paying into the unemployment insurance tax pool. Meaning that healthy businesses now will subsidize those layoffs. And since extended unemployment benefits now are de rigueur in D.C. it’s probable that ultimately federal taxpayers directly will subsidize those layoffs. And without extended benefits some of those laid off workers ultimately will seek and obtain other forms of government assistance, e.g., food stamps, Medicaid, housing assistance, etc., which to the great shock of liberals everywhere, are not funded by magical unicorns dropping sacks of free money from the money gardens in Moneytown.

    Lastly, take that above-quoted paragraph, remove the reference to Hostess, and substitute the following in its stead: the steel industry, the textile industry, the automotive industry, the auto parts industry, the airline industry and the lumber industry.

    Unions are to the overall economy and jobs what serial killers are to people.

    Like or Dislike: Thumb up 2 Thumb down 13

  4. Dave Schuler says:

    This might be a good time to mention that the high price of sugar in the United States relative to the rest of the world is due, at least in part, to our ban on trade with Cuba, a policy that certainly needs to be revisited. (Not to mention the cigars, Michael.)

    Like or Dislike: Thumb up 5 Thumb down 0

  5. JKB says:

    While I still reject the idea that it was the Bakers Union alone that was responsible for the company’s demise,

    That is true but it was the Bakers’ Union that decided that there would be no more chance to save the company. They made a choice, their choice also made the decision for 12,000 other employees and the supporting businesses and their employees. They are not alone responsible for putting the company on the brink, but they are responsible for pushing it over the edge.

    One thing to keep in mind, the PE who pulled the company out of bankruptcy a few years ago was one designed to be union friendly. But even they could not work with the Bakers union. Who else would entangle themselves with this union? That means the bakeries in union mandatory states have little value as bakeries.

    Like or Dislike: Thumb up 2 Thumb down 3

  6. anjin-san says:

    I’ve been hearing reports that senior executives were getting huge raises even as the company was going into bankruptcy. Does anyone have more info on that?

    Like or Dislike: Thumb up 6 Thumb down 0

  7. anjin-san says:

    @ Dave

    Could not agree more about the stupidity of our Cuban trade policy (and Cuba policy in general)

    Like or Dislike: Thumb up 1 Thumb down 0

  8. C. Clavin says:

    “…However, what I expect you’ll see in that case is that new ownership would locate their bakeries in right to work states as much as possible, and to the extent they can’t they certainly aren’t going to let themselves get suckered into the same contracts that contributed to the downfall of Hostess…”

    So the jobs will go to people whose salaries are bouyed by union contracts in the right-to-work states. Big deal. People making cars in Kentucky don’t make good wages because the car company wants to pay good wages. They make good wages because of the threat of unionization. If you are in favor of doing away with unions you are in favor of racing to the bottom with China and the like.

    All the right-wing zealots here jump right to union bashing. No one points out the business flaws in a model where:

    “…across the corporation, they were dealing with 12 different unions and 40 separation pension plans…”

    Clearly there were some pretty major management issues here. But yeah…go ahead blame the unions.

    We saw the same thing with Chrysler. If you listen to the guy from FIAT that took over you find out that the problem with Chrysler was not the Unions…the Unions came to the table and helped in the turn-around…the problem was piss-poor management. Marchione…the CEO from FIAT…has his office on the floor with the engineers…and the penthouse that used to house upper level management is closed off as a reminder.

    Like or Dislike: Thumb up 3 Thumb down 1

  9. Just Me says:

    The snack cakes have a longer shelf life than fruits and veggies and we get those from Mexico and South America.

    My guess is it is probably more than snack cakes than the Wonder Bread various companies will be bidding for. People who ran out to buy the last Twinkies and Ho Hos will likely buy them again whether they are US/Union made or Mexico made.

    I wonder where the teamsters will fit in all this (the baked goods will still need shipping and delivery whether they are baked in Mexico, the US or some other state that likely is going to be a right to work state).

    Like or Dislike: Thumb up 0 Thumb down 0

  10. C. Clavin says:

    “…Unions are to the overall economy and jobs what serial killers are to people…”

    What utter nonsense…but then consider the source.
    Unions helped build the middle class.
    Since Republicans began the war on the Unions under Reagan…the middle class has languished…until today we have the greatest economic inequality this nation has seen since before the Great Depression.
    Obviously Tsar is incapable of doing that math.

    Like or Dislike: Thumb up 4 Thumb down 1

  11. Neil Hudelson says:

    Coming from a long line of hog farmers, there are many, many economic opportunities lost from our Cuban policy.

    Like or Dislike: Thumb up 0 Thumb down 0

  12. Andre Kenji says:

    The biggest problem of Hostess is that they stopped in the time. In the 1950´s a Brazilian traveled to the United States and he brought home the idea of mass producing the Pullman Loaf. In 1976 his company began producing his own version of Twinkies, a snack aimed at children called Ana Maria. In 2001, his company was bought by Grupo Bimbo.

    Today, there are something like a dozen versions of this cake – there are versions with chocolate, with carrot flavor, strawberry, etc. I think that everywhere you can find better products.

    Like or Dislike: Thumb up 1 Thumb down 0

  13. john personna says:

    The best take on this, by far has been:

    The Real Reason Hostess Went Under: The Way We Eat Has Changed

    Time’s Curious Capitalist is still a good feed, even with Justin Fox moved on.

    Best line?

    “Yogurt’s been the problem,” says Harry Balzer, NPD Group’s chief industry analyst.

    Like or Dislike: Thumb up 2 Thumb down 0

  14. C. Clavin says:

    Yeah…do some research…Vulture Capitalists are looking for their payday…the former CEO was giving himself a raise on the way out the door…and the big bad Unions have already taken a major haircut in previous Chapter 11 proceedings.
    But it is always the Unoins fault.

    Like or Dislike: Thumb up 5 Thumb down 0

  15. al-Ameda says:

    Sounds like another investment and union breaking opportunity for Bain, no? Romney’s first post election challenge.

    Like or Dislike: Thumb up 2 Thumb down 0

  16. C. Clavin says:

    PBR (Pabst Blue Ribbon for those who live in their mothers basement…Tsar, JKB, Jenos, Florack, etc.) is looking to buy Hostess. Seems like a cross-promotional hit if ever there was one.

    Like or Dislike: Thumb up 1 Thumb down 0

  17. Facebones says:

    Of course, these being baked goods, you can’t make everything in Mexico and expect to be able to sell it nationwide in the United States.

    It’s not like Twinkies go bad. You could send them 4th class mail.

    Like or Dislike: Thumb up 1 Thumb down 0

  18. Whitfield says:

    There is hope after all. This is the best news I have heard since the return of the McRib !

    Like or Dislike: Thumb up 1 Thumb down 0

  19. Davebo says:

    CEO of Hostess nets a mere 300% raise in the year they file (again) for bankruptcy.

    It’s a Libertarian dream world! Provided they are just dreaming.

    Like or Dislike: Thumb up 2 Thumb down 0

  20. John Burgess says:

    @Dave Schuler: While that might be true to some extent, it’s to a far lesser extent than the protectionism given to FL and HI growers. How else explain the punitive duties applied to Brazilian or other Latin American sugar?

    Like or Dislike: Thumb up 0 Thumb down 0

  21. anjin-san says:

    @ Davebo

    A CEO who loots a failing company is a job provider. A worker who wants a halfway decent hourly wage is a parasite. Get with the program.

    Like or Dislike: Thumb up 1 Thumb down 0

  22. Just 'nutha ig'rant cracker says:

    @Dave Schuler: I can buy Cubans in Korea. I’m not as much of a cigar afficianado as you guys are (I mostly smoke a pipe) but in my mind, the mystique of Cubanos is more of a factor than we realize. Over the years, I’ve smoked some Honduran (and even Mexican) cigars that were better for the money outlay.

    Like or Dislike: Thumb up 0 Thumb down 0

  23. Just 'nutha ig'rant cracker says:

    @anjin-san: Well said!

    Like or Dislike: Thumb up 0 Thumb down 0

  24. Nigl says:

    Impotent adult men hardly ever experienced that so good. The blue pill pioneered any oral strategy of Impotence Problems. Plus the baton, this indicates, has become gone to live in Cialis. Between, Levitra equally produced her existence sensed. But Cialis stands out as the future medication which includes the entire world on her feet.

    Like or Dislike: Thumb up 0 Thumb down 1

  25. bookdragon says:

    The idea that this is all the union’s fault is so hackneyed and, frankly, lazy wrt looking up the facts that it’s pathetic.

    Those bakers went from almost $50k/year to accepting ~$35k/year. Then the bosses, who had given themselves huge bonuses and 60-100% raises while stiffing the pension fund to the tune of $160 million, came back and wanted the workers to accept salaries ~$25k/year and increases in co-pay for healthcare.

    $25k is poverty level if you have a family. You can do better going on unemployment, which at least leaves you with extra hours to go out and look for another job, not to mention regain some sanity after dealing the pricks who ran the company you had been working for into the ground.

    Like or Dislike: Thumb up 0 Thumb down 0