Are Twinkies in decline? Hostess files for Chapter 11.
Hostess, the maker of Twinkies and Wonder Bread, has filed for bankruptcy for the second time in less than a decade.
The Chapter 11 filing shouldn't affect the flow of Twinkies, Wonder Bread, or the products of its other brands 鈥� from Nature鈥檚 Pride Healthy Multi-Grain bread to Drake鈥檚 Ring Dings.聽
Hostess doesn鈥檛 鈥渁nticipate any disruptions in the manufacturing and delivery of any of its bread or cake products,鈥� the聽company said in a press statement.聽Hostess is the largest wholesale baker in the United States, catering a myriad of baked goods to convenience and grocery stores throughout the country.
Still, the privately held company that fed a generation of young boomers with sandwich bread, cupcakes, and other snacks finds itself in financial trouble. The sale of Twinkies, the company鈥檚 iconic offering, dropped 2 percent this year. In 2010, for the first time in the US, sales of sliced wheat bread outsold sliced white bread 鈥� a blow to the Wonder Bread label.
The company blames labor costs for its woes. Riddled with debt, (the company is currently worth $981.6 million, but has debts totaling $1.43 billion) Hostess says it can鈥檛 afford to pay its workers under the terms of current union labor agreements.
鈥淭he Company鈥檚 current cost structure is not competitive, primarily due to legacy pension and medical benefit obligations and restrictive work rules,鈥� says the Hostess statement. 鈥淭hose issues, combined with the economic downturn and a more difficult competitive landscape, created a worsening liquidity situation that prompted the need for a reorganization.鈥�
Pending court approval, the company has received a commitment for $75 million in financing from a group of its private lenders, which would allow Hostess to 鈥渃ontinue routine operations while undertaking a comprehensive financial and operational restructuring to transform it into a strong, competitive company. 鈥�
This isn鈥檛 Hostess鈥� first bankruptcy. In 2004, the company, then called Interstate Bakeries, sought Chapter 11 protection 鈥� a move that resulted in the closure of nine of its 54 bakers, the shutdown of over 300 outlet stores, and the layoff of approximately 10,000 employees. It took five years for Hostess to emerge from the bankruptcy, then the largest in US history.
