In less than a week, the Twinkie returns to store shelves. It’s a sweet victory for fans of the iconic cream-filled snack cake. And for lovers of Ding Dongs and Ho Hos too.
This is all thanks to the resurrection of the Hostess brand less than a year after declaring bankruptcy.
But metaphorically speaking, the new Twinkie is not the same. It has new ingredients. Like bankruptcy.
“The single most important thing that happened to the Hostess brand was bankruptcy,” says Steven Davidoff, professor of law and finance at Ohio State University.
The story of Hostess is the story of much of industrial America, says Davidoff. “It was a historically unionized labor force with a management that was unwilling to change. And it got caught between the two.”
Bankruptcy allowed the company to restructure. Factories shut down. The brands were sold off. And, in the case of Hostess snacks, the new owners — C. Dean Metropoulos and Apollo Global Management -– offered some workers their jobs back at lower pay.
So ingredient number two? A lower cost, non-unionized work force.
Union pensions had helped cripple the old Hostess — the Bakery, Confectionery, Tobacco and Grain Millers International Union rejected a contract that would have reduced pension contributions.
To be fair, the company was already weak because as a result of poor management and “accumulated bad decisions,” says Davidoff. “The company didn’t diversify, didn’t expand the brand, and it just stopped growing, but the costs remained.”
The new owners plan to expand the Hostess brand by offering healthier products and new varieties. Gluten-free Ding Dongs anyone?
Another tweak to the ingredients in the new Hostess’ formula: less gasoline.
“You might not realize it but goods like beer, soda snacks and such — we think of them as a food business, but they’re really a distribution business,” says Thomas Hubbard, professor of management at the Kellogg School at Northwestern University. “It’s really a challenge to make sure shelves are stocked with goods, especially for snacks which have so many outlets.”
The new Hostess has worked to bring distribution costs down. Instead of drivers delivering products directly to store shelves, they’ll be shipped to warehouses. That will let retail outlets figure out where the cakes should go. Union rules that required certain snacks to be delivered separately from other goods don’t apply anymore.
Hostess will also start freezing Twinkies so it can ship the further and store them longer. By longer, we’re talking 45 days compared to 25 for the old version, which is a big deal in terms of supply chain management.
No — contrary to popular belief, they don’t last forever.
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