Hostess Files Bankruptcy
Hostess has enough cash to keep stores stocked with its Ding Dongs, Ho Hos and other snacks for now as it battles rising labor costs and increased competition, but longer term, the 87-year-old company has a bigger problem: health-conscious Americans favor yogurt and energy bars over the dessert cakes and white bread they devoured 30 years ago.
Last year, 36% of Americans ate white bread in their homes, down from 54% in 2000, according to NPD Group. Meanwhile, about 54% ate wheat bread, up from 43% in 2000.
Consumption of healthy snacks is growing, too. About 32% of Americans ate yogurt at least once in two weeks in 2011, for instance, up from 18% in 2000.
"We're less likely to be snacking on items that we shouldn't be snacking on," said Harry Balzer, chief industry analyst for The NPD Group, a consumer marketing research firm.
Hostess, which is privately held, does not disclose sales figures. Hostess has introduced some healthier options in recent years, including 100-calorie packs of cupcakes and Twinkies. The company also is working on lowering sodium in some products. However, those efforts have not helped the company's junk-food status much.
"The iconic status of Twinkies is partly this perception that there's nothing real in it," said Ken Albala, professor of history at the University of the Pacific, in Stockton, Calif., who specializes in food history. "It's this cake filled with an unidentifiable sugary cream filling that never goes bad."
Hostess has other problems, too. In Hostess' Chapter 11 filing, the company said its rivals have combined and expanded their reach, heightening competition in the snack space. Hostess' competitors range from Bimbo Bakeries, which makes Entenmann's baked goods, and McKee Foods, which make Little Debbie snack cakes. It also faces competition from larger food makers like Sara Lee and Kraft Inc.
Additionally, Hostess employees are unionized while most of its competitors are not. As a result, Hostess has high pension and medical benefit costs. The company has 19,000 employees and operates in 48 states.
Hostess did not announce layoffs, but spokesman Lance Ignon said the company will make future decisions "in the best interest of the company."
The company's filing comes nearly three years after its predecessor emerged from bankruptcy proceedings. That company, called Interstate Bakeries and based in Kansas City, Mo., filed for bankruptcy protection in 2004 and changed its name to Hostess Brands after it emerged in 2009.
Hostess said its previous efforts to change, including the prior Chapter 11, were insufficient. Under its most recent bankruptcy filing, it is looking to restructure into a "strong, competitive" company.
In its filing with the U.S. Bankruptcy Court for the Southern District of New York, Hostess listed about $860 million in debt. The company's biggest unsecured creditor is the Bakery & Confectionary Union & Industry International Pension Fund, which it owes about $944.2 million.
In the filing, Hostess also listed its estimated assets between $500 million and $1 billion and its estimated liabilities at more than $1 billion.
The Irving, Texas-based company said that it will be able to maintain routine operations thanks to a $75 million financing commitment from a group of lenders led by Silver Point Capital LP.
From the January 12, 2012, Prepared Foods' Daily News.