The strike by the members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union that began last week has broken Hostess Brands, producer of many familiar products including Ding Dongs, Twinkies, and Wonder Bread:
Hostess Brands Inc., the bankrupt maker of Twinkies and Wonder Bread, said it had sought court permission to go out of business after failing to get wage and benefit cuts from thousands of its striking bakery workers.
Hostess, which has about $2.5 billion in sales from a long list of iconic consumer brands of snack cakes and breads said it had suspended operations at all of its 33 plants around the United States as it moves to start liquidating assets.
There are two sides to every story:
Union President Frank Hurt said the company’s failure was not the fault of the union but the “result of nearly a decade of financial and operational mismanagement” and that management was trying to make union workers the scapegoats for a plan by Wall Street investors to sell Hostess.
I have no first-hand experience of Hostess or the baking industry in general. My impressions about what’s going on here are that Hostess has been unable to adapt to a changing market, the company is probably worth more to the investors dead than alive, and what the workers expect to receive on unemployment or disability might well exceed what Hostess was willing to pay them.
Over the period of the last several decades small independent bakeries have practically disappeared, there’s been a tremendous growth in franchises, and there’s been a move to healthier (and fresher) products. One of the biggest changes is the move towards in-store baking in groceries and specialty stores. Even my little independent grocer, Happy Foods, bakes some products in the store.
Hostess relied on a business model that’s been around since the Great Depression—a network of regional industrial-style production facilities with local distribution. That’s a setup that’s a lot more amenable to organization than the model of commercial baking that I see emerging.
I think the union has made a major miscalculation. They should have been going for equity for a long time. Many of the Hostess brands will be acquired and continue to exist but the new owners of those brands probably won’t have any use for Hostess’s production facilities.
With 20,000 employees Hostess is a major player in the baking industry. That’s just a bit smaller than Chicago-based Sara Lee, a likely candidate for taking over some of the brands. A lot of those union workers will in all likelihood never work in the baking industry again. Grupo Bimbo, the Mexican-owned largest bakery in the U. S., probably doesn’t need them.
When Hostess closes its doors its pension obligations for its salaried employees will go to the Pension Benefit Guarantee Corporation, i.e. you and me whether we have pensions or not, while the pensions of its union members will go their unions. I don’t have hard statistics but I strongly suspect that the membership of the BCTWGMIU has been shrinking for decades and is about to shrink again.