November 16, 2012

Hostess labor strike takes the cake, company claims

Hostess Brands Inc. plans to close after 82 years, putting 500 Mainers out of work

By Jessica Hall jhall@pressherald.com
Staff Writer

Hostess Brands Inc., the bankrupt maker of Twinkies and Wonder Bread, plans to shut its doors after 82 years, selling off its snack foods and bread brands and laying off 18,500 workers.

click image to enlarge

Doreen Campbell, of West Gardiner, shops for bread on Friday afternoon at the J.J. Nissen Hostess Bakery Outlet on Leighton Road in Augusta.

Staff photo by Joe Phelan

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Wonder Bread was on sale Friday afternoon at the J.J. Nissen Hostess Bakery Outlet on Leighton Road in Augusta.

Staff photo by Joe Phelan

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The move ends a decade of financial tumult for the company, which had filed for bankruptcy twice. By the time Hostess announced it was closing Friday, it was more than $1 billion in debt, had seen six CEOs within 10 years, and was facing stiff competition and consolidation in the bakery industry as well as a decline in demand for its products.

The company, however, laid the blame on its bakery workers union, which went on strike Nov. 9.

"We deeply regret the necessity of today's decision, but we do not have the financial resources to weather an extended nationwide strike," said Hostess Chief Executive Gregory Rayburn.

Hostess employed 500 workers in Maine, including 370 people at its Biddeford plant.

On Friday, the Irving, Texas-based company was making final deliveries of products made by managers and replacement workers on Thursday night.

Hostess on Friday asked a bankruptcy judge to hold a Monday hearing to approve its request to close its 33 remaining bakeries and 565 distribution centers. The company closed three bakeries earlier this week and said it will retain some workers to clean the plants and mothball equipment.

Hostess's top-selling products, once a staple of children's lunchboxes, include Twinkies and chocolate cupcakes with the white-icing squiggle, products that saw a drop in sales as health-conscious consumers stopped buying the snacks.

"It's unfortunate that it had to come this far," said John Jordan, a business agent for the bakery union's Local 334.

In September, 92 percent of the bakery union rejected contract concessions that included an immediate 8 percent wage cut. The contract had already been approved by the Teamsters union.

Hostess filed for bankruptcy in January, listing assets of $982 million and liabilities totaling $1.43 billion. Over the past year, the company, which has $2.5 billion in annual sales, had stopped payments to union pension plans, and sought cuts of as much as 32 percent in wages and benefits.

"Hostess' problems go back almost a decade. The company has clearly been mismanaged for quite some time. However, the workers should not suffer because of poor management," Teamsters General Secretary-Treasurer Ken Hall said in a statement. "The company's operating and financial problems were so severe that it required steep concessions from a variety of stakeholders but not all stakeholders were willing to be constructive."

SunTrust Robinson Humphrey analyst William Chappell Jr. said Flowers Foods Inc. is a likely buyer for some of Hostess' brands, as is Bimbo Bakeries USA, a division of Mexico-based Grupo Bimbo, or Pepperidge Farm, a division of Campbell Soup Co.

"The Hostess case shows that a strong brand needs a strong organization behind it: labor disputes redirected management attention and in the wake destroyed this brand," said Boston University School of Management marketing professor Susan Fournier.

Hostess employees still hope a buyer may be found.

"Hopefully other companies will come in and buy the brands and the facilities," Jordan said. "If not, we'll be getting our workers retrained and back out in the community. We believe several dozen facilities will be picked up right away. We don't know about this one but we're hopeful and we've done our best to present a skilled workforce."

The Biddeford workers will continue picketing over the weekend to ensure that Hostess actually shuts down the bakery and not try to reopen with replacement workers. "We still have a trust issue with the company so we will be out here until we know for sure," Jordan said.

(Continued on page 2)

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Additional Photos

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The JJ Nissen Hostess Bakery Outlet is located on Leighton Road in Augusta.

Staff photo by Joe Phelan

  


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