The Ring Dings and Wonder Bread baker Hostess Brands blames high ingredient costs and pensions for its financial woes
guardian.co.uk, Wednesday 11 January 2012 17.00 GMT
Hostess Brands, bakers of edible icons and nutritionists’ nightmares – including Wonder Bread, Twinkies, Ho Hos and Ring Dings – has gone bust.
The company, founded in 1930, blamed pension costs and rising prices of sugar, flour and other ingredients for its decision to declare bankruptcy. This is the second time the company has folded: it declared bankruptcy in 2004, blaming the Atkins low-carb diet craze for its woes.
Sales of the company’s famous Wonder Bread in particular have suffered as people have shifted to whole grain alternatives, and tortillas have eaten into its market share.
“There are a lot of issues at play that make this a very challenging market,” said Harry Balzer, food trend expert and vice president of NPD research group.
Balzer said bread sales were changing, people were eating less at home and buying more from fast food restaurants.
“Fresh is an issue in America, it’s why we don’t eat more fruit and vegetables,” said Balzer. “Bread is a hassle. It has to be fresh and we are handing that responsibility to restaurants.”
And when it comes to snacks Balzer said baked goods were being outsold by yogurt and snack bars. Yogurt sales specifically have almost doubled in the last decade.
“Yogurt is breakfast for some people, lunch for others and desert for others too,” he said.
Texas-based Hostess, which filed the petition with the US bankruptcy court in the southern district of New York, said it would continue operating its bakeries, outlet stores and distribution centres during the proceedings.
Hostess operates in 49 states and employs 19,000 people.
“Hostess has some of our industry’s most powerful and resilient brands,” said president and chief executive officer Brian Driscoll. “With generations of loyal consumers, numerous iconic products and a talented and experienced workforce, Hostess Brands has tremendous inherent strengths to build
Driscoll said legacy pension and medical costs for staff made the firm uncompetitive. He is hoping to renegotiate with his pension funds during the bankruptcy in a move that would slash benefits for former workers.
According to the filing, Hostess owes the Bakery and Confectionary Union and Industry International Pension Fund approximately $944.2m. It also owes the Central States, Southeast and Southwest Areas Pension Plan $11.8m.
Wonder Bread has been an American staple since it was launched in 1921, and was one of the first sliced loafs to be sold in US supermarkets. Twinkies were invented in 1930 by James Dewa, manager of a Chicago-area Continental Baking plant. Originally, Twinkies had banana-flavored filling. Hostess switched to vanilla after bananas were rationed during World War II.