Return of the Twinkie, Sans Union Labor

Categories: Biz

cupcakes.jpg
Catherine Downes
Twinkie is risen from the ashes of its liquidated parent, Hostess, and will visit the shelves of grocery stores and gas stations once more on July 15. That means Ho Hos and Ding Dongs will return in what its new owners have dubbed "The Sweetest Comeback in the History of Ever."

Private equity firms C. Dean Metropoulos, owner of hipster-legacy suds Pabst Blue Ribbon, and Apollo Global Management, which bought and flipped Chef Boyardee and Bumble Bee tuna, snapped the snack cake brands out of bankruptcy for $410 million. Now they apparently plan to reinvent the brands in a way Hostess never could (or should have?). Think Cup Cakes made with dark cocoa and crunchy Twinkies. Think about dietary qualifiers: added fiber, gluten free and low sodium, according to this AP report.

Don't think labor, though. That wasn't baked into the deal. The shedding of all union obligations definitely was. Some of the original employees have returned, but they don't pay dues anymore. From bankruptcy to union-slamming bankruptcy, this was always inevitable. Interstate Bakeries, as it was known then, was a Frankenstein, cobbled together out of smaller bakeries until it had hundreds of different union contracts, several dozen bakeries and more than 2,000 distribution centers and outlet stores. The company was making good money, but more of it was going out the door.

Interstate filed for bankruptcy in 2004, and there it remained for five years until a private-equity firm with $130 million to burn came along and persuaded the unions to agree to eliminate 10,000 jobs, close bakeries and outlet stores, in the process saving the company $110 million. Meanwhile, top management received big bonuses, to the dismay of the rank and file that had sacrificed so much.

But as part of the deal, the private concern known as Hostess would invest its savings from labor concessions into new products and equipment upgrades. That didn't happen. Hostess somehow managed to come out of bankruptcy with more debt at around the time the recession hit. Management came back to the unions, asking for more sacrifice. The unions told management to piss off. Hostess stopped contributing to their pensions while top executives again received substantial raises.

By now you can see where this is going. The baker's union went on strike, Hostess declared bankruptcy and now the new company is utterly devoid of union labor.

The company, however, appears to be making some good moves. It's trimmed down. It's tweaking its venerable (but stale) product line. It's delivering to warehouses instead of directly to stores, reaching more shelves, cheaper. I don't know if there's a lesson here. Is this about getting out from under bad management? Or are these kinds of middle-class, pensioned jobs simply anachronisms in the global economy?

America's favorite cellophaned confection is returning to the shelves. Odds are, that won't be what its consumers think about when they sink their teeth through that creme filling for the first time in months.


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13 comments
joeinbost
joeinbost

The Vulture Capitalist  raped this company and drove it into the ground while taking 7 and 8  figure bones. As a Bill board says in Maine, Are you an Hourly Employee and you are still voting Republican. What kind of Special are you ?

Tim.Covington
Tim.Covington

If I remember correctly, it was only one union that was not able to come to a deal and forced this situation. It really pissed off everyone who was not a member of that union.

MikeWestEast
MikeWestEast

The only thing valuable in the company was the brand name.  Everything else management, labor, equipment, marketing, distribution, finance was expendable.  You really do not want to work at a company where practically anybody can make the product in an industry with significantly underutilized capacity.  Labor should have done whatever it could to keep a paycheck coming while getting ready for the time when it would eventually die.  When you are on a Titanic, you do anything to stay alive one more hour in case a ship comes by. for you.

HelenTrent
HelenTrent

so I guess we are all better off being at the mercy of the those who raided the company and management who kept getting raises for running the company into the ground.  The old saw is the raising the minimum wage will bankrupt a company -- but somehow paying ALL of that money to a few people doesnt.

txcwby6990
txcwby6990

The unions and their antiquated contracts had to go. This is what inflexibility and living in the past costs you.  Hostess did it to themselves but the union reps didn't help the process.

txcwby6990
txcwby6990

Good riddance to the unions.  It was a no-win situation that required Hostess to eliminate the burdens associated with union contracts...Good luck to Hostess.

ruddski
ruddski

"Some of the original employees have returned, but they don't pay dues anymore."

Neither do most union members if the state stops deducting dues from pay checks.

ChrisDangerShow
ChrisDangerShow

The modern union shop isn't the same one your grandfather belonged to down at the local hall. Its become a bloated entity that cannot sustain itself. Sure, I believe in unions especially in jobs like this, but they have to modernize, become more efficient in their dealings both with the employee and management and realize not everyone wants to be in the union...

holmantx
holmantx topcommenter

Cancer killed Wonder Bread, as it has soooooo many American products, and Wall Street dropped down from the overhanging limbs, picked over the carcass, jammed its head into the chest cavity, and pulled out the viscera to carry off.

Leaving the cancer.

You complain about the cancer's lot in life.

PersistentID2345
PersistentID2345

@joeinbost So you vote Democrat so that more illegals can come and take your bakery jobs and Obama can kill your Keystone pipeline jobs?

Dub919
Dub919

@ChrisDangerShow The key is in the Local having full autonomy to make decisions for itself.  The Local exists for the benefit of the members.  More and more, it seems the International exists to benefit the International.  Weak Locals that rely on the International to do their business for them are the ones who seem to fail most often.

I'm union labor, but my Local doesn't take it's cues and orders from the International.  We use the resources of the International (primarily legal counsel), when needed, but we've been successful in simultaneously maintaining a great relationship with the company while negotiating solid, mutually beneficial contracts for our membership without direct input from the International.  I would go as far as to say that we've done that by not following their advice in some cases and being willing to leave a few bucks on the table in return for better work rules...instead employing some of the International's "scorched earth" tactics.

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