“Oh, this Twinkie thing, it ain’t over yet.”
–Woody Harrelson as the character Tallahassee, in the movie “Zombieland”
With venerable brands like Wonder Bread, Ding Dongs, Ho Hos, and Twinkies, who would have thought there was a Sno Balls’ chance that Hostess would go out of business? Our 140-character Twitter mentality can’t even absorb the number of brands actually affected by this shutdown, which includes Drake’s Yodels, Devil Dogs and Ring Dings, Nature’s Pride and Dolly Madison, and lesser known products like Suzy Qs and Honey Buns.
Yet Hostess Brands, amid a nasty contract battle between management and its principal union, has announced it will shut down operations and liquidate its assets. More than 18,000 workers will lose their jobs, and with snack food manufacturing seen as far less vital to our economy than, say, General Motors, there is likely no bailout on the horizon. Hostess, it would appear, is small enough to fail. (Hostess has, in fact, received several cash infusions from investors in recent years, amounting to hundreds of millions of dollars, but these were unable to completely solve their financial challenges. This staggering amount of debt was part of the reason management was demanding such large concessions from their unions.)
Many of the Hostess brands will survive because they are legendary, but, in a way, that’s part of the problem. Everybody has heard of Twinkies and its sister brands, but who’s really buying them? Not enough of us, apparently, to overcome what appear to be monumental problems with actually running the business behind the brands. The Hostess sales decline began decades ago–as early as the 1980s, according to a July article on CNN.com. Certainly, there is now far greater awareness of the negative consequences of consuming these tasty treats excessively. It shows how empty the concept of brand awareness can sometimes be, when (pardon another Woody Harrelson reference) everybody knows your name, yet relatively few wish to buy your product.
But let’s say Tallahassee was right, and this Twinkie thing ain’t over yet. Hostess was truly a GM of snack foods. Once highly dominant, it still has value in some of its best-known brands. Sno Balls and Honey Buns are likely to be the Pontiac and Saturn of this round of brand culling, but if Twinkies is anything, it’s Chevrolet, and I want to believe that Yodels must have some miles left on it as a brand.
Junk food junkies can breathe a little easier because Hostess claims that they already have 110 interested parties for their brands, including several national supermarkets or retailers who would provide an instant path to distribution. And, since these products have a relatively short shelf life, they will likely be made here in the U.S., which would help recover some of the jobs lost to the Hostess shutdown, or the economy, in general.
There are companies that focus entirely on reviving tired or dormant brands—River West Brands is a good example. They have recently introduced a new fortified version of Brim, a decaf coffee brand that was off the market for 15 years. “Brand awareness is a rocket booster–immediate credibility and authenticity,” their CEO Mark Thomann said in a “Fast Company” article last year. And this is largely what the suitors are thinking who are lining up outside Hostess headquarters like it was the next iPhone debut. They can buy highly recognized and respected brands with little or none of the baggage that dragged its current owners under. Assuming they can actually make the products taste the same and deliver their singular sweet-tooth sensations, Twinkies et al. will live on.
Yet, Hostess will also become the latest cautionary tale that says a good brand can be all but indestructible, but it doesn’t mean that sustaining the brand will be magically easy. Brands need a stable business model underlying them to survive and, no matter where the blame for Hostess’s failures are placed (and there is plenty to go around),they were unable to do that, leaving few assets other than the brand itself amid lost jobs, plant closures and squandered investment capital.
In 2007, Hostess warded off a $580 million bid from its biggest competitor, Bimbo Bakeries USA (yes, Bimbo). Many millions of lost dollars later, they will be lucky to get half that for their brands. So, this Twinkie thing ain’t over yet, but it has likely left its glory days behind.
As published in the Central Penn Business Journal.