Hostess Brands today ceased baking operations and blamed a
union strike for the decision. The keyword in that sentence is “decision”.
Management chose this seemingly drastic choice after declaring
bankruptcy not once, but twice in the last 3 years. Two reorganizations failed to right the ship
so management decided to scuttle it. When
they went Chapter 11 the first time, they threated a complete shutdown but
never did it. This time they’re serious.
Before wholesale panic sets in, rest assured that there will
be no shortage of bidders for the intellectual property (big word for recipes)
and the coveted brand names that Hostess owns.
How much would you pay to sell under the names “Wonder Bread”, “Twinkies”,
“Ding Dongs” (he said dongs, hehe) and “Ho Hos” (he said… nevermind). If you think for a moment that somebody hasn’t
already considered that huge additional potential created by the recent votes
in Colorado and Washington (and the trend they likely have started), you’ve
missed the boat more than Hostess management.
A strike by one of the unions representing Hostess workers
is being blamed unfairly in my opinion.
They do share a small part of the responsibility for refusing to accept
further wage and benefit reductions.
This union represents some or all of the bakers (as well as tobacco
workers, for some reason) who have no doubt agreed to serious cuts in pay while
Hostess pissed away any hope of profitability by maintaining an ineffective
distribution and sales strategy. Hostess’
website has been all but shut down. The only
page I could find was the “Careers” page, which lists over 600 open
positions. More than half are for sales
jobs, another third for operations (line management) and exactly none for
bakers. These open admin jobs are in
over 300 locations across 45 states (no Delaware, Hawaii, New Mexico, Oregon
and Vermont facilities have openings, but that doesn’t mean Hostess doesn’t
maintain plants or offices in those states).
Many years ago while working at Texaco’s headquarters in
White Plains which is actually not in White Plains but in Harrison, NY, which
you can tell because when you enter the driveway, you’re in Purchase, NY – they’d
prefer you not know where you are, but I digress. Anyway, one day I bought a Drake’s Coffee
Cake from a vending machine in the building and to my great delight, two Coffee
Cakes came out of the machine. Owing to
the nutritional value of Drake’s in general, I put one of them into a desk
drawer intending to save it for another day.
It got lost under some hanging folders and I didn’t find it again until
at least 18 months later. The cellophane
package had swelled as though it had been inflated, but there was no mold, no
decay and on opening it, it smelled just like a brand new one. We laughed and joked about for hours (which
contributed to higher gasoline prices, I’m sure). One of guys observed that you could put a
Twinkie on the railing of the Staten Island Ferry and it would last 5 years. Long, dumb story for what purpose, you
ask? If the stuff doesn’t go bad, why
would you need to make them everywhere?
If seems to me that transportation costs would be offset by not
maintaining so many bakeries, and most of the jobs would be shifted to the ones
that remain. Sure some jobs wouldn’t be
needed as a result of economies of scale, but that’s what management is
supposed to do.
Next on the hit list is the sales force. Does anybody really need to sell
Twinkies? Shouldn’t they just be able to
deliver them. Excellent observation and
yes, they should. But a lot of what they
pay sales people to do relates to product placement. This is another example of horrible
management at Hostess. The people who
buy their products would find them if they were between the mops and the SOS
pads. Product placement doesn’t come
into it. Close two thirds of those
office they have et voila. I know what
you’re thinking, “What about the economy and unemployment?” Better to fire 2,000 sales people than put
18,000 out of work.
But the American entrepreneurial spirit will prevail and
Twinkies won’t go away. So party on,
Garth.
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