What killed the Twinkie?

That should be the legal and financial question we ask as we assess the most recent bankruptcy filings of Hostess, the maker of the cream-filled confection.

Hostess Twinkie

The Hostess Twinkie: Will it survive?

Last week, a new, cholesterol-laden version of Black Friday occurred, when distraught shoppers besieged stores seeking anything made by the company. They feared that the bankruptcy meant Twinkie’s, Ding Dongs, Wonder Bread and more would now be unavailable forever.

I was personally “along for the ride” as a friend went through his mournful exercise of seeking Hostess products. In a Phoenix Fry’s store, he eventually opted for what was left—a chocolate cream-filled Twinkie, which seems a bit like bastardizing a bastard product. But that’s just me, a former East Coaster, who prefers Drake’s Cakes (go ahead, Google it.)

The Twinkie eulogy (which may be premature, as this news story says) was written pretty well by Wall Street Journal reporters Rachel Feintzeig, Mike Spector and Julie Jargon:

“The seemingly imperishable Twinkie finally may have an expiration date.”

“Hostess Brands Inc., the 85-year-old maker of iconic treats such as Twinkies, Ding Dongs and pantry staples like Wonder Bread, on Friday said it would go out of business after failing to reach agreement on wage and pension cuts with its bakers’ union.”

OK, as far as it goes. The newspaper was able to get the dreaded “U” word (“union”) right up top in the story, parroting Hostess’s management’s view of its demise. Later in the story, the reporter showed at least a little critical-thinking in that regard. But it’s not until you get to the story 12th paragraph—roughly halfway through the story—that we learn there may be players other than the dreaded union in Hostess’ untimely demise:

“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.”

“‘I think there’s blame to go around everywhere,’ said Chief Executive Gregory Rayburn, a turnaround expert hired this year.”

“Increased costs for ingredients and fuel, a failure to adjust to demands for healthier foods, and the U.S. recession combined to weaken Hostess.”

The story goes on to explain that, following its second bankruptcy in 2009, Hostess “was owned by private-equity firm Ripplewood Holdings LLC and saddled with more than $700 million in debt that crimped investment. Ripplewood and lenders, including hedge-funds Silver Point Capital LP and Monarch Alternative Capital LP, hired new management that failed to keep pace with shifting consumer tastes to healthier foods and pursued marketing promotions that backfired.”

No Bain Capital to be seen, but you get the picture. I do enjoy the WSJ world, where $700 million may “crimp” investment.

Sounds a little like the Twinkie defense.

You can read the entire article here.


The clearly superior Drake’s Devil Dog