Friday, November 16, 2012

Hostess Goes Belly Up

A true American icon has died. I'm talking about Hostess, the makers of Twinkies and Ho Hos and Ding Dongs and, of course, Hostess Fruit Pies. The company closed its doors today after 82 years of operation. Almost immediately, Facebook erupted with the news and went into full-on psycho mode as many people re-posted articles blaming the closure on everything from Obamacare to the Mayan Apocalypse. In order to understand what's really going on here, a little background is needed.

Hostess didn't just suddenly decide to shut it doors based upon who won the recent Presidential election. No, Hostess' problems have been plaguing them since their merger with Continental Baking back in 1995. Since then, the company has filed for bankruptcy twice, with the most recent filing being in 2011. This recent filing came after Hostess gave  a 50% stake in the company to Ripplewood Holdings and had received a loan from GE Capital. Hostess soon began struggling to remain current on the $700 million loan while keeping up with mandatory pension payments. Depending on who you talk to, the reasoning for this will differ. Some say that poor management decisions from a corporation bent on milking every last dollar out of the company while inflating upper-managment salaries in an economy where consumer trends had turned against them killed the company. Some will say that greedy labor unions refusing to make financial concessions to keep the company afloat delivered the death blow to Hostess. The truth is probably somewhere in between.

What we have now is a shuttered company and 18,000 workers, both labor and management, out of the job. This is the free market at work. This would have been the likely fate of the Detroit automakers had the government not stepped in to bail it out. Now, the vultures will descend to pick at the corpse of Hostess. With Hostess being such a popular brand, it's very likely that the rights to its products and recipes will be picked up by a corporate entity or group of entities. Perhaps that insulin-inducing whore, Little Debbie will give some of those products a new home. The Twinkie will no doubt rise again.  It's just a matter of time.

Meanwhile, I'm stocking up on Hostess Fruit Pies and hunkering down in order to get through this Twinkpocalypse. I hope they're not gone too long. I don't think I can stand the switch to Mrs. Freshly's.

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