The Truth Behind The Possible Twinkies Bankruptcy

I’m from Ozark country and it is against the law for any home south of Rolla to have a Twinkie-less pantry. Alright, so maybe not “against the law,” but I’ve yet to see a pantry without one. All my kin abided by this unspoken rule. Because of my history with the snack cake, I was dismayed, to say the least, when news hit that Hostess was trying to stave off bankruptcy. I was further dismayed that they sort of obfuscated the reason why.

From USA Today:

Hostess Brands is hoping to take a bite out of its high costs as it heads back into bankruptcy protection for the second time in less than a decade.

Hostess has enough cash to keep stores stocked with its Ding Dongs, Ho Hos and other snacks for now. But longer term, the 87-year-old company has a bigger problem: health-conscious Americans favor yogurt and energy bars over the dessert cakes and white bread they devoured 30 years ago.

Last year, 36% of Americans ate white bread in their homes, down from 54% in 2000, according to NPD Group. Meanwhile, about 54% ate wheat bread, up from 43% in 2000.

Consumption of healthy snacks is growing, too. About 32% of Americans ate yogurt at least once in two weeks in 2011, for instance, up from 18% in 2000.

I’m sorry, but I call BS.

You’re Hostess. It’s not difficult to sell creme-filled heaven snacks and America isn’t exactly eating healthier. If anything, America is eating leaner because the price of everything has increased eleventy-fold because the cost of energy is passed to us, the consumers. Now for the truth: this is what Hostess cited as the real reason behind their move against bankruptcy.

Although Hostess has sales of $2.5 billion annually, that’s not enough to keep up with the rising costs of ingredients like flour and sugar …

… Annual sales have been hovering around the $2 billion mark, but unfortunately these sales have not been able to keep up with rising costs … Rumors are also swirling that Hostess will try and renegotiate labor contracts with local labor unions such as International Brotherhood of Teamsters, as well as the Bakery, Confectionery, Tobacco Workers and Grain Millers International Unions. The Wall Street Journal quotes a source close to the situation saying that Hostess is facing debts in excess of 800 Billion, but does not identify where these debts are coming from …

Can’t tell from where the debts originate? Read a but further into the explanation [my emphasis]:

… Hostess, a privately held company based in Irving, Texas, has outstanding debts of more than $860 million and owes over $50 million to vendors, an economic situation that sources attribute to rising prices for sugar, flour and other ingredients and higher labor costs which the company’s approximately $2.5 billion in annual sales have not been able to cover.

Higher energy and labor costs. Likely promises made to union bosses that the company is unable to keep because inflated wages and inflated energy prices are eating profits and everyone knows wages and sustainability come from profits.

USA Today finally adds further down the page:

Additionally, Hostess employees are unionized while most of its competitors aren’t. As a result, Hostess has high pension and medical benefit costs.

Until you reached the middle of the story and put two and two together, you’d have figured that the company is tanking due to eating habits.