July 09, 2016

Hostess And Twinkies saved by Automation And Firing 95% Of The Union Workforce

Hostess, the producers of Twinkies went bust, twice, as a result of heinously bad union arrangements.

The most recent investors who bought it out of bankruptcy did not in fact buy “the company.” They bought just some of the assets. By buying the Hostess assets out of bankruptcy, Apollo and Metropoulos took them on free of employee benefits and other labor obligations that had weighed down the company.

They went from local bakeries and delivery routes to a much more concentrated production system and delivery into warehouses.

Employing people is a cost. And when that cost rises, fewer people are going to be employed.

In 2012, the end appeared nigh for the humble Twinkie, the yellow sponge cake and American icon: A trend toward healthy eating and a bitter union brawl had forced its baker into bankruptcy.

Now, Hostess Brands is back with a vengeance, with new plans to become a publicly listed company and return to a market that had once left it for dead. The deal, announced Tuesday, would give the maker of Twinkies, CupCakes and Ding Dongs a market value of roughly $2.3 billion.

The sweets giant has in recent years staged a remarkable revival, spearheaded by a billionaire turnaround artist and promoted in company marketing as “the sweetest comeback in the history of ever.”

The company just five years ago had 8,000 employees — 75 percent of whom were represented by unions — the company now says in filings that it has a “streamlined employee base” of roughly 1,170 workers. That workforce is the shadow of a once-vast empire, which shortly before its troubles totaled 22,000 workers across more than 40 bakeries.

The company has invested $130 million to upgrade production lines and industrial ovens in its three core bakeries in Indianapolis; Emporia, Kan.; and Columbus, Ga. Its other bakeries have disappeared

Based in Kansas City, Mo., the company has closed all 600 or so of its Hostess outlet thrift stores and now delivers directly to warehouses, helping avoid the inefficiencies of regional bakeries, small distribution lines and direct-to-store delivery.

SOURCES - Washington Post, Forbes

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