Stock Up on Those Twinkies

Hostess, the maker of beloved names like Twinkies, Wonder bread, and Ding-Dongs, filed for bankruptcy protection for the second time at the beginning of this year. This time, however, they just couldn’t pull things together and the company is being liquidated.

So how did this happen?

Our Internet marketing firm found out that Hostess was in trouble back in 2004 when it filed for bankruptcy the first time: The company was in debt $450 million and as government regulators issued new dietary guidelines, low-carb diets like Atkin’s and South Beach became popular and sales of the brand’s many treats declined. During their bankruptcy, the Hostess workforce dropped from 32,000 employees to 22,000 and they closed nine of their bakeries.

The company was able to emerge in 2009, thanks to lenders like Silver Point, Monarch, and others who agreed to provide a loan of about $360 million and things looked promising for Hostess. They re-introduced their banana Twinkies and published their Twinkie cookbook, but as the Great Recession hit, the prices of sugar, corn, and flour went up and because of their first bankruptcy, the company was in debt almost $670 million. Sales continued to drop; Hostess lost $340 million in the fiscal 2011 and grew their debt to around $860 million. Silver Point, Monarch, and other lenders contributed another $75 million to help the company after they filed for bankruptcy again in January of 2012, but things continued to go downhill.

Once Hostess re-wrote a new contract for its bakers in the fall of 2012, all hell broke loose. The bakers went on strike, refusing to accept the new contract and forcing Hostess to shut down three of its plants. When they still refused to return to work a few days later, the company announced it would be liquidating its 33 bakeries, 565 distribution centers, 570 outlet stores, and over 18,000 employees.

All of Hostess’ assets are being sold, which means its products could potentially be continued or even reinvented, but as of right now, no one knows the fate of America’s beloved Twinkie.

…so make sure you stock up.

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