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