As I assume most of you have heard, Hostess – the maker of Twinkies among other assorted goodies, is going out of business. Roger Ebert danced on their grave on Twitter, due to the unhealthiness of their product. More than a few people I know have said “good riddance.” This, in my view, is very much the wrong way to look at it.
The political arena is busy fighting it out. One side is blaming the unions that refused to budge. The unions appear to be looking at this as a moment of triumph. Yes, they’re out of the job, but they stood up to “Bain-style corporatism” or somesuch. I don’t think either of these takes are exactly right. Indications are that Hostess had some foundational problems that were what required them to appeal for renegotiated labor settlement in the first place. They’ve been in and out of bankruptcy for a while. Besides which, it is ultimately the decisions of the employees as to how to read their interest, and if they got this wrong it was due to a miscalculation rather than to a sense of entitlement. When you’re asked to take a pay cut, it’s not a sense of entitlement to refuse.
On the other hand, it’s unknown whether the company could have kept going and could have rebounded, and the union did put the final nail in that coffin. They may not have been the primary cause of the shuttering of Hostess’s doors, but they were a part of it. At least, in a “facts on the ground” sort of way. They might be getting less money, but they’d still have a job. The notion that the concessions being asked of them were “outrageous” are undermined by the fact that the other union, the Teamsters, agreed to them. (To my knowledge, it wasn’t the case that one got a sweeter deal than the other.)
There are questions, I suppose, as to the extent to which dissenting employees should have to live with the decisions made by their union, but I don’t see a clear-cut answer either way on that one. I tend not to have a remarkably favorable disposition when it comes to enforced union membership, and so in my world those who wanted to work could have continued to, but (a) there are good arguments going in the other direction and (b) even some of the workers striking may well have produced the exact same result. The company was hanging by a thread, and there is little indication to me that this was solely or primarily due to labor.
So what was it due to, then? That’s where Ebert (a paragon of good eating and health?) dances on their grave. I’ve seen a lot of arguments that Hostess’s problem is that they never diversified from sugary products in an age of health-consciousness. And thus the dancing, this is a market repudiation of unhealth. Yay! There are two problems with this.
First of all, the makers of Twinkies and Wonderbread also made Nature’s Pride. Nature’s Pride is a healthyish bread company. I have a loaf in my fridge and another in my freezer. Nature’s Pride has won accolades both for its naturalness (“no artificial preservatives, colors, flavors, trans fats or high fructose corn syrup”) and for its good taste. I don’t care much about the former, and don’t entirely agree with the latter, but as far as double-fiber wheat bread goes, theirs was the best. Nature’s Pride is the only product of theirs that I am going to miss. Given the inconsistent availability of double-fiber bread, if there is a health impact here it will be negative. Also, this wasn’t a me-tooism on their part: they were among the first to focus on factory hippie bread.
Second, this explanation is at odds with the notion that it was management’s fault. Which, maybe the blame of management is misguided. Ultimately, though, this is considered a big deal precisely because their Twinkies and cupcakes are beloved by large parts of the country. It just doesn’t seem to me that there is much room to argue that this is a repudiation rather than a product of a down economy and business practices.
I can pretty much guarantee that the void here is going to be filled by somebody. The Twinkies will be back. Ding Dongs and the distinct cupcakes will be back. Of all the products they made, it’s Nature’s Pride that is probably most vulnerable because they have the most direct competition (I am sincerely hoping that the supermarkets relying on Nature’s Pride simply go with a competitor so that I can still get my product.)
Meanwhile, this represents a shift from a moderate-sized competitor’s product being absorbed into a larger conglomeration. Maybe they’ll hire 18,000 employees or maybe/probably they will get by with less. To the extent that this is a triumph, it is for horizontal immigration and larger corporations. If you have ever complained at all about Frito-Lay’s dominance in the potato chip industry, this should not be seen as positive.
Heck, the end result could be Frito-Lay (and thus PepsiCo) inserting itself into the cakefood industry as well. Or maybe not because there are other cakefood companies looking to buy. Which suggests to me that any chest-pounding over a victory for our common health is off-base. Whether we blame management or labor, the primary end result of this is a temporary disruption of cakefood provisions and some permanently lost jobs.
I agree it seems like an odd place for the union to claim a victory. The company has been in deep doo for a while so they were very possibly doomed no matter what. One thing that stuck out for me was that while the union members were being asked to take another hit, the upper management was getting big bonuses. Big money for upper managment doesn’t mean the union is right but it seems to be the kind of tone deaf “yeah i’m a plutocrat, go bite me” move that isn’t productive. I would be interested to know, which i havn’t found, if the union was also being offered a road map to get their pay and benefits back at some point. I know in some other cases Unions gave back all sorts of benefits and pay, then the business rebounded started making big profits but the workers never got a taste of that.
The health benefits…meh. There will always be snack cakes, losing one brand doesn’t help anybody or anything. Ebert is off on this. This a losing argument for health advocates.
You should try Dave’s Bread if they are availble in your area. Great stuff.
It may be a victory for the union, or at least unionism in general, depending on the counterfactuals. I am skeptical that anybody – including the unions – know for sure. And again, that the Teamsters were on board (and are saying that the other guys were getting bad advice) suggests to me that their efforts here were misguided. On the other hand, the CEO (who was brought on in May) apparently specializes in liquidation, so there’s that.
Regarding management, I would make a distinction here between management and investors. In the latter case, I am actually inclined towards saying that they should get their money so that they don’t pull it out. With management, it’s more questionable. The fact that these two distinct entities with what should be divergent interests tend to converge as often as they do (not just here, but elsewhere and everywhere) remains somewhat perplexing to me. I don’t expect management to ever think that they shouldn’t get a raise, but I would think that the investors might look at the situation and say “Hold on, there.”
The only thing I can think of is that they’ll make enough from the asset sales that they have nothing to fear from bankruptcy? (A lot of this is over my head – and of course over the heads of a lot of people making grand proclamations about “what really happened.” I had actually posted this with the intention of focusing on Ebert’s comments, but it was hard to get from here to there without discussing the underlying issues.)
Well Ebert is missing lots of points here. I can’t actually understand how a company can make tasty unhealthy cream filled products in the US and go out of business. Seems like a casino not making money. Certainly there is a trend towards healthier foods and that is good. However its beyond easy to eat unhealthy in the US and one less snack cake maker isn’t relevent. There will always be enough healthy people to support healthy food and people to support every unhealthy food producer. We’re a big country we contain multitudes.
Health advocates should focus more on helping people make better choices if they want to make them. If someone wanted a twinkie but can’t get it, they are not going to have a salad instead. They’ll have oreos or butterscotch krimpets or one of a million other snacks. Unhealthy food availbility certainly makes it easy to eat unhealthy but education and motavation towards healthy goals are the answer to that.
It’s actually a touch of irony that yesterday I bought my first Hostess cakefood in years yesterday, in response to this (get’em while you can and all that)! Other than that, and Nature’s Pride or other brand names we don’t typically associate with Hostess, my exposure to Hostess cakefood has been limited to Twinkies at Dad’s house.
My unfortunate father is a big Twinkie fan… and he’s out of the country right now and so never had the chance to stock up.
I couldn’t agree more with the rest of your comment. I remember when Sesame Street had to pivot with Cookie Monster in explaning that cookies were a “sometimes food”… that’s a term we need in our national consciousness. There’s nothing wrong with a Twinkie. Sometimes.
It’s among my less charitable of views that I see comments like Ebert’s as SES chest-thumping more than anything else. I’ve been seeing a lot of comments like that around. He’s not alone. Sigh.
When i stopped in the local kwik e mart yesterday the hostess area had been completly cleaned out. I enjoy cookie treats myself sometimes. There is nothing wrong with them in moderation. Sometimes people put so much emotion into the memory of thing like a snack cake they don’t relize they are eating out for a memory of childhood or to bring back a happy time then for the actual cake.
I don’t see it as SES chest thumping. There is something to the point that people in poor communities have far fewer choices to eat healthy and healthy food often is more expensive making harder for poor people to eat healthy. That doesn’t mean twinkies going bye bye until they are brought back helps that in any way though. Little Debbie, etc. still lives.
We loaded up on some Hostess goodies on Friday. tehy’ll go in the freezer and be doled out sparingly. We don’t eat a LOT of stuff like that but it’s nice to have the option to indulge in some guilty pleasures once in a while.
Can you freeze a twinkie??? I like twinkies, but there are million cup cakes in the naked city.
The Wonder light wheat bread is my preferred choice.
I’m very particular about my bread. Sometimes I spend a lot of time in the bread aisle reading the nutrition information of every available option before making a choice. And the Wonder light wheat comes up tops whenever it’s available.
I go by the last three numbers on the nutrition panel: fiber, sugars, and protein, and I compare the calories and sodium (those last two are disqualifiers to reduce the range of options).
I’ll be sad to see them go.
It could very well be the case that the Baker’s Union made a strategic blunder by assuming the offer was a bluff. Although the management was clearly signalling “bluff” when they demanded concessions while handing out lucrative pay raises to themselves.
In any case I don’t know that a lot of political hay can be made here- if it was the bank that refused to extend a line of credit, leading Hostess to collapse, would we be saying “Those darn bankers, destroying jobs!”?
Don’t narc on me to Commissar Soros, but unions are just as capable of stupidity and short signtedness as management- did the Bakers and Teamsters use their leverage over the years to improve the workings, or did they just try to cash out each time? Did management? I don’t know, but the end result is a reliable source of profits and paychecks is now closed.
A company that’s hugely in debt with a highly clouded future, and management is giving itself raises? I know what the narrative is here, and it’s not about empty calories.
I wanted to address the union issues in a separate comment.
I think this is a bad move on the union’s part.
My own local took a pay cut several years ago, and we’ve made it back and then some. There were no contingencies in place; it’s the value of specialized labor as it’s needed.
I remember talking to a guy from Joliet about being combined into Chicago. There was some animosity against the Joliet guys form the Chicago hands, but it wasn’t too harsh (somewhat restrictive might be a more appropriate characterization). He said that Chicago’s retirement package was a lot less that Joliet’s, and they lost a lot on that deal, but he had been working steady ever since it happened, when he had spent a lot of time on the bench before.
Now those guys from Hostess are going to get to spend a lot of time on the bench, and those jobs, if they ever do come back, will come back far away from where they are now.
The issues of management did this-or-that don’t really mean much when all the cards are on the table. It is what it is, and looking at the other guy isn’t going to help.
I think typically financing arrangements and capital expenditures make more of a difference in whether a company goes under or not.
I think those union members voted to go into another line of work, basically.
I really can’t see it as a good decision.
The meme I’ve been seeing around the Internet (well, FB anyway) is that it seems counter-intuitive that Hostess would be going bankrupt just when states are starting to legalize marijuana. If they just coulda held on a little longer…
Buy stock in Frito-Lay!
Not that I would have any way of knowing this first-hand, of course, but it has come to my attention that there are circumstances in which Quaker 100% Natural cereal is the bomb. (Which makes sense because “Natural” or not that stuff is just awful for you. If it were any worse they’d have to call it “organic”.
I was under the — purely anecdotal, I haven’t done any first-hand research — that the union had been basically accepting cuts and clawbacks for some time now.
The company that took over Hostess has apparently made few — if any — attempts to rebuild the company, invest in better production facilities, or any of the host of other things that would indicate a serious attempt to regain market share and cut costs. In fact, it appears the vast bulk of their cost cutting measures were aimed at labor alone.
As I understand it, the owning company managed quite sizeable profits and management fees while doing very little to help Hostess.
If, in fact, the extent to which the company was ‘rebuilt’ under new management was pretty much entirely to cut labor costs, then I can understand the union’s position fairly clearly. Long-term, their jobs were gone — a serious attempt to revitalize the company requires investment, not just slashing labor costs while claiming large fees. If their jobs are gone, why exactly should they continue accepting slashed pay while the managing company pays out bonuses?
I wouldn’t call it the Bain model — stripping and selling Hostess did not appear to be a prime goal, nor was the company loaded with external debt (or the debt required to buy the company), but the few things I’ve read indicated Hostess was more being milked for profits and consultancy fees than revitalized.
(Then again, I have a very dim view of efficiency consultants and management consultants. For every one that seemed helpful, there were a dozen that accepted fat fees for dumb ideas. They were excellent con-men, crappy managers. And frankly upper management makes a darn good mark at times)
More on the Hostess situation. Yes its from all evil all the time Kos, but the writer is one of the bakery union memers. Assuming this is true, which i am, the Hostess management are, to use a tech term, Royal Douchnozzles.The union members appear to have not only repeatedly given up money and benefits but been ripped off in a way that shouldn’t be legal.
http://www.dailykos.com/story/2012/11/18/1162786/-Inside-the-Hostess-Bankery
If nothing else, if that is the view *inside* the union — right or wrong — one can certainly understand their vote.
When this story broke, I yawned. “Hostess will get bought out of bankruptcy sooner rather than later,” I said, I did. “There’s a buyer.” And of course there is a buyer.
Now, the thing to bear in mind is that bankruptcy court is where management goes to bust unions. And for all of the buyer’s talk about being willing to put a more labor-friendly deal on the table to the workforce, with the company and all of its contracts under court supervision, chances look good to me that the union’s hand is going to come out of this significantly weaker than it was going in.