Let’s talk about Twinkies, HoHos and Ding Dongs. They have long been found in the snack food aisle and have even been described as having “a legendary history” (!). One fun fact: the cream inside a Twinkie was banana flavored for many years. But when Worl
Let’s talk about Twinkies, HoHos and Ding Dongs. They have long been found in the snack food aisle and have even been described as having “a legendary history” (!). One fun fact: the cream inside a Twinkie was banana flavored for many years. But when World War II brought rationing, including of bananas, Hostess changed the flavor of the crème to vanilla. Ok, one more fun fact: Although there is an urban legend that Twinkies never go bad, it seems that the reality is they have a shelf like of about 25 days. That is considered quite a long shelf life for a baked good product. What is the secret? It may be that Twinkies lack any dairy products. Unfortunately, whatever the flavor of the “cream” inside or the shelf life of a Twinkie, the company that makes them, Hostess Brands, recently declared bankruptcy. However, Metropoulos & Co. and Apollo Global, the new owners of Hostess Brands, will be reopening four bakery/plants, in hopes of getting snacks to Twinkie-deprived consumers shortly. One thing Hostess will not do going forward after reopening plants is to use union workers. The 86-year-old company closed down and entered bankruptcy, in part, due to a nationwide strike by one of it unions. Chief Executive C. Dean Metropoulos said $60 million in capital investments will be spent on the plants and that the plan is to hire at least 1,500 workers. But Mr. Metropoulos in an interview made his view on the role of unions clear: There will be no role. Hostess Brands Inc. once employed 19,000 workers. Of those, unions represented 15,000. The Teamsters union, which represented the largest share of Hostess Brands workers, after difficult negotiations, agreed to a new collective bargaining contract following the bankruptcy trial in court. In contrast, the second-largest union, the Bakery, Confectionery, Tobacco Workers & Grain Millers International union, began a nationwide work stoppage after failing to agree on a contract with the company, which led to the company imposing a mew. Less favorable contract on the union. The resulting strike, according to the company, crippled its operations, ultimately leading the company to shut down. The company and the Bakers union expressed different views on the importance of the unionized bakers. The president of the Bakers union, David Durkee, stated that because only members of the plants used to bake snacks, the Bakers union members would be hored back to work. In contrast, the new owners of Hostess have said that they will be able to find capable nonunion workers in the areas where plants are re-opening, which are all located in areas where unemployment is high. Prior to bankruptcy, Hostess plants had been running at less than 50% of capacity. Going forward, the plants are expected to run at 855 to 90%capacity, making production much more efficient and, presumably, allowing the company to make an adequate profit. Of course, if the nonunion workers to be used going forward are also less costly, that will further bring costs down and profits up. The caveat is that it remains to be seen whether new nonunion bakers can quickly learn how to efficiently do the work in the plants. To avoid hiring Teamsters as drivers, Hostess plans to outsource driving/delivery and related tasks. It will also outsource sales.
QUESTIONS
1. Why did Hostess Brands Inc. go into bankruptcy?
2. Did unions act in the best interests of the workers they represented? Did the two unions involved follow the same strategy?
3. Will the new company, Hostess Brands LLC, perform better? Why or why not?
