Let’s get a few things clear. Hostess didn’t fail for any of the reasons you’ve been fed. It didn’t fail because Americans demanded more healthful food than its Twinkies and Ho-Hos snack cakes. It didn’t fail because its unions wanted it to die.
It failed because the people that ran it had no idea what they were doing. Every other excuse is just an attempt by the guilty to blame someone else.
Take the notion that Hostess was out of step with America’s healthful-food craze. You’d almost think that Hostess failed because it didn’t convert its product line into one based on green vegetables. Yet you only have to amble down the cookie aisle at your supermarket or stroll past the Cinnabon kiosk at the airport to know that there are still handsome profits to be made from the sale of highly refined sugary garbage.
It’s true that the company had done almost nothing in the last 10 years to modernize or expand its offerings. But as any of the millions of Americans who have succumbed to Twinkie cravings can attest, there has always been something about their greasy denseness and peculiar aftertaste that place them high among the ranks of foodstuffs that can be perfectly satisfying without actually being any good.
Hostess management’s efforts to blame union intransigence for the company’s collapse persisted right through to the Thanksgiving eve press release announcing Hostess’ liquidation, when it cited a nationwide strike by bakery workers that “crippled its operations.”
Harder to Digest Than Twinkies
Myth: Twinkies have a shelf-life of forever. They don’t; they stay fresh for about 25 days.
Did union workers simply get their ‘Just Desserts’ for backing Hostess into a corner with too many unreasonable demands? Consider the evidence.
Union workers have now completed their mission. 18,500 jobs are gone forever.
The national labor bosses stood firm. Labor leaders are proud they stood up to those nasty ‘suits’ [see Entourage for definition] who refused to run a money-losing business simply to continue paying salaries and benefits.
Hostess posted a $341 million loss in 2011 on revenues of about $2.5 billion. Contributing to those 2011 losses:
$52 million in Workers’ Comp Claims
Dealing with 372 Distinct Collective-Bargaining Contracts
Administration of 80 Separate Health and Benefits Plans
Funding and Tending to 40 Discrete Pension Plans
$31 million in year-over-year increases in wages and health care benefits for 2012 v. 2011
Uncounted in the above numbers were the outrageous union-imposed rules that made for a too-high-to-bear cost of sales:
No truck could carry both bread and snacks even when going to the same location
Drivers were not permitted to load their own trucks
Workers who loaded bread were not allowed to also load snacks
Bringing products from back rooms to shelves required another set of union employees
Multi-Employer pension obligations made Hostess liable for other, previously bankrupted, retirement plan contributions from employees that never worked for Hostess at all
And this: Hostess’s failure was compounded by having six CEO’s in 8 years who had no experience in the bread or cake baking industry, and despite their financial woes, the company’s CEO got a 300% salary increase from $750,000 to $2,250,000, and other top executives received raises worth hundreds-of-thousands of dollars; all while the company was struggling. Instead of acknowledging the lack of competent leadership and exorbitant executive salaries as contributing to the company’s decision to close its doors, CEO Gregory Rayburn issued a statement saying, ‘We deeply regret the necessity of today’s decision, but we do not have the financial resources to weather an extended nationwide strike.’ However, Rayburn and Hostess management claimed the strike would be responsible for closing plants even before there was a strike, and they had made plans to close plants whether or not workers accepted the Draconian wage and benefit cuts the company offered, or if they went on strike.