Hostess Going out of Business

Say goodbye to the tasty Twinkies. Their maker is going out of business due to employees on strike. Hostess Brands Inc. plant operations were not able to weather the conditions of the strike.

Hostess Brands Inc. not only produces the well-known Twinkies and Ding Dongs, but it also makes Wonder Bread, Nature’s Pride, and Dolly Madison products.

What started this downfall was its second trip through bankruptcy earlier this year. The company, founded in 1930, referenced increasing pension costs for employees as one of the reasons for this bankruptcy filing. Other reasons for the downfall include increasing competition and Americans’ increasing consciousness about healthy eating.

After an employee strike, Hostess Brands Inc. agreed on Nov. 14th to the U.S. Bankruptcy Court’s demand to liquidate the company if not enough striking employees came back to work by Nov. 15th in order for the company to begin normal operations again.

Unfortunately, there were not enough employees back at work, and Hostess started winding down the company on Nov. 16th. It received permission from the U.S. Bankruptcy Court to close and sell all its assets. On Nov. 19th, it announced its close, and the company’s hearing to close and wind down took place on Wednesday. “We deeply regret the necessity of today’s decision, but we do not have the financial resources to weather and extended nationwide strike,” said Hostess CEO Gregory Rayburn.

Hostess is trying to get permission to pay senior management a 75 percent bonus of their annual salaries in hope of their stay as they wind down the business. But the court documents oppose the wind-down because of these improper bonuses. The company feels that the winding-down plan is the most beneficial option because it will preserve its decreasing amount of cash.

Hostess suspended operations at all factories but kept its stores opened for several days so that all its already-baked products could be sold. As it winded down, 33 bakeries, 565 distribution centers, 5500 delivery routes, and 570 bakery outlet stores closed in the United States.

Most of Hostess’s 18,500-member workforce will be laid off and its assets sold to the highest bidders. The company’s popular brands will most likely be sold to rivals and the money will be put towards repaying the company’s creditors. Interest to purchase the company has already been expressed from private equity groups such as Metropolous & Co and Sun Capital. Many predict the recipe for Hostess products will be bought, produced, and sold under a different brand name.

Now that Hostess Brand Inc. has come to an end after 82 years, Americans are in a hurry to get to the stores to buy the last of the products. They are clearing the shelves and are even trying to resell the products on the Internet. Some sellers were offering packages of Hostess products for anywhere from hundreds to several hundred thousands of dollars. One seller on eBay even offered one box of Twinkies for $15,000,000.

Even after the unfortunate downfall of the company, Hostess is hopeful it will find buyers because of its popularity.