Ding Dong the Witch is Dead – Post Apocalyptic Snack Obliterated by Bankruptcy

As I’m sure you know by now, as do most humans who sheepishly admit to liking the freakishly long-lasting creamy filled sensation that was the Twinkie, Hostess has gone the way of the dodo.  But why, do you ask, why did the makers of sugary moist Ding Dong expire even before its shelf life?!

Well… in the words of Fergie, “If you aint got no money take your broke ass home!” And that’s exactly what Hostess did, threw up their arms and said “word!”

Harsh words are flying around, no doubt after some 18k were left jobless yesterday, and with all the dung flinging it’s hard to clearly pinpoint a definitive source of Hostess’ failure. Both sides of the economic echelon have someone to blame… the C-level execs for taking massive pay increases only months before filing Chapter 11, and on the other end, the bakers union is getting heat (no pun intended) for squelching a business with its wails of entitlement and increased benefits. 

Where did Hostess fail? I think the question more likely is, WHEN did Hostess fail, and how could the makers of snack food legend sink to the pitfalls of bankruptcy?

A) Union Blame - Warned back in January that bankruptcy meant wage reductions, did Hostess employees sink themselves?

Reports state that striking workers across the country crippled the company’s ability to maintain production - “The strike affected roughly two thirds of Hostess's 36 plants, and made it impossible for the company to continue producing its baked goods, Hostess said Friday.” -via the Pittsburg Post

Hostess had been weighed down by its long standing battle to maintain high pension, wage and medical costs due to its unionized workforce. After rejecting a proposed contract last week, thousands of members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union rallied to strike after turning down a contract offer that reduced wages and benefits.

B) Societal Factors - If you're not competitive do you deserve to exist? The Almighty market says, "No."

CEO Greg Rayburn was swift to blame competitive market factors, “[Hostess] has been struggling to keep up with rising labor costs and the ever-changing tastes of Americans, who have grown accustomed to a dizzying array of new snacks flooding supermarket aisles every year,” encountering heavy competition from bigger movers like Mondelez International, the former snack unit of Kraft Foods  and makers of Oreos, Chips Ahoy and Nabisco.

Now we could get all societally conscious here and state that Hostess led to its own demise by avoiding the health food market, refusing to transition their products to lighter, more calorie conscious snacks, but the fact of the matter is that sugar sells. Too many businesses continue to successfully endure despite the health craze argument. For the sake of the Hostess bad business model we’ll keep that notion pleasantly on the backburner. You can’t measure social interest, what you can measure are financials and those say a great deal about Hostess, in fact…

C) Failing Financials - Hostess has been encountering quite a long and winding history of shaky finances, per their track record:

“The company's burdensome debt traces back to Hostess's first trip through bankruptcy in 2004. Missteps by a private-equity firm, hedge funds and managers since burdened the company, despite its more than $2 billion in annual sales.

Hostess emerged from its second stay in bankruptcy in February 2009 owned by private-equity firm Ripplewood Holdings LLC and saddled with more than $700 million in debt that crimped investment.

In fact, in January of this year, Hostess filed for Chapter 11 a second time, repeating its history of bankruptcy in less than three years." - via the WSJ 

D) Corporate Greed - It's hard to look over the numbers and not wonder...

While the company was filing for bankruptcy earlier this year, it tripled its CEO’s pay, and increased other executives’ compensation by as much as 80 percent.

“The Confectionery, Tobacco Workers & Grain Millers International Union pointed this out in their written reaction to the news that the business is closing: BCTGM members are well aware that as the company was preparing to file for bankruptcy earlier this year, the then CEO of Hostess was awarded a 300 percent raise (from approximately $750,000 to $2,550,000) and at least nine other top executives of the company received massive pay raises. ” –Annie Stasser reports for Thinkprogress.org

Here's what we're talking about:

Some creditors question Hostess pay raises approved in late July.

Brian Driscoll, CEO, around $750,000 to $2,550,000.

Gary Wandschneider, EVP, $500,000 to $900,000.

John Stewart, EVP, $400,000 to $700,000.

David Loeser, EVP, $375,000 to $656,256.

Kent Magill, EVP, $375,000 to $656,256.

Richard Seban, EVP, $375,000 to $656,256.

John Akeson, SVP, $300,000 to $480,000.

Steven Birgfeld, SVP, $240,000 to $360,000.

Martha Ross, SVP, $240,000 to $360,000.

Rob Kissick, SVP, $182,000 to $273,008.

In Closing, 

Failures never take place because of one thing, failure is collective, failure is allowed to happen over time, failure doesn’t listen to the voices of their customers, nor does it face the glaring red truth before it’s too late. *

A Tribute to Twinkie and Post-Apocalyptic Preparation 

Facing Reality in an Age of Risky Business

This week I've been following a lot of small businesses that have jumped into the icy cold reality of capitalism to discover they'd only planned partway towards their future as a business. Flashy colors and good branding might bring a round of local first-timers, but are you offering what people need, what they'll come back for, are your spreading the word? Even with all these questions answered many small businesses haven't fully considered the risks of entering this volatile market. Bolt Insurance Agency has put together a great infographic to evaluate some of the things that might be holding your small business back and what, if you're lucky, can be done to salvage it:

Via: BOLT Insurance

"Mom n' Pop" shops spring up all the time here in Orange County, faceless little nail salons or restaurants with more image than substance, businesses that haven't distinguished themselves or considered the broad range of factors that take to run a successful business. There are a wide range of resources available to help evaluate whether or not you're ready to run your own business, in fact SBA.gov has references up the ying yang, but few provide insights to determine whether your concept possesses enough creative zing and stability to weather tough critics in a tough economy. 

Being realistic is just as important as being creative, what niche and need are you filling, what makes you different, what is the best way to capitalize on your ideas, incorporate, partnership?

Facing reality is the first step of success in a small business. Understand it's going to be tough, understand the risks. 

Bad JuJu Bean: Good Ideas Misguided

After a trip to the open market this afternoon I was bristling with bad juju. Small local vendors baked in the unmerciful California sun, staring back at passersby like parched beached whales thirsting for business, but already too worn to save themselves. It was a pathetic display of mostly bad merchandise and poorly constructed business models. I was a ball of grumbling hot air as I hissed suggestions under my breath, the business major inside roaring for a chance to help these clueless people.

Most of my frustration was targeted at antique vendors with nothing but unorganized, vision-less crap with no image, no clear direction, and misguided price points. The main source of my grumbling today, however, came about because of a rather brilliant and simultaneously self-sabotaging product/business…

Meet Caffè Borsa, the makers of a clever portable “hand drip” coffee and strainer combination, similar to Starbuck’s “Via” but relatively fresher and more palatable. Okay, great, but tell me, have you ever had Caffè Borsa coffee, do you even know how it tastes, have you seen it in any of your local grocers or given it a chance??

I’m going to say no for you.

The point is, while the concept of a portable coffee/strainer is a brilliant idea, their promise of “premium” coffee with their own brand is totally misguided. The owners and inventors of the concept, which I met this afternoon, would benefit far more from this patented, registered trademark coffee preparation process by selling the concept to an already well known coffee/beverage distributor, like Starbucks or Coffee Bean and Tea Leaf.

The consumer enters the contract blindly, willing to acknowledge the cleverness of the concept and yet unaware of the quality of the coffee itself. Here, Caffè Borsa meets two challenges, promoting a different form of coffee consumption and promoting their own brand of coffee. Selling a new brand of coffee itself can be a challenge, combining the two might perk interest… no pun intended… but the concept would be better served by a company with market leadership. The Hand Drip concept coupled with the popularity and proven profitability of the Starbucks brand would eliminate the struggle and cost of self-promotion.

The taste of the coffee was smooth, the concept and the taste worked well together and yet the product was not memorable enough or enticing enough to lure me to pay $7 for 8 cups of coffee or $1 for 1 packet of their no-name, unstated, seemingly “regionless” coffee. I examined their clean, well presented brochure only to cringe inside at some of the claims of practicality… inventing reasons for people to bring their own coffee to work or to travel. They make the bold statement that their product is better than “buying lackluster, overpriced brews on the go.” Frankly, sadly, I think that’s exactly what they are selling.

New businesses excite me, and I never wish any ill but I hate to see good ideas fail because of misdirection. I wish Caffè Borsa all the best, but this is a case in point in understanding your core competencies and realistically facing your position in a highly saturated market. Know what you can do and what you can’t; know when to be a self-starter, and when to let the veterans sell your idea for you. *