With U.S. bakery giant Hostess Brands Inc. preparing to pull the plug on its operations, what happens to its mix of famous brands – notably Twinkies, that those spongy, sugar-laced confections embedded in American popular culture – is very much up in the air.
Irving, Tex.-based Hostess, still in bankruptcy protection and dealing with a nationwide strike by its second-largest union, says it will seek bankruptcy-court permission to close up shop and sell off the assets, which include 36 plants and brands such as Wonder Bread, Ding Dongs and Drakes.
Besides lousy labour relations, Hostess has also been struggling with a consumer shift to healthier eating habits, and with high raw-materials costs.
Hostess had warned that a strike launched Nov. 9 by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union would force the permanent shutdown of the company if it wasn’t ended by late Thursday.
The 82-year-old industrial baker had been seeking concessions from the union, which refused to budge.
The work stoppage “crippled the company’s ability to produce and deliver products” across the United States, Hostess said.
A total of about 18,500 employees are to be thrown out of work. Chief executive officer Gregory Rayburn said he doesn’t know how many of the company’s 30 or so brands might be sold off.
Among snack makers mentioned as potential buyers are Grupo Bimbo, which owns the Sara Lee and Entenmann’s brands, and Kellogg Co.
In Canada, Saputo Inc., the country’s largest snack cake maker, and George Weston Ltd. already own the rights to some Hostess brands.
Weston’s senior vice-president of investor relations, Geoffrey Wilson, said the company is not interested in any Hostess assets that might come up for sale.
But Weston is keen on continued investment in and marketing of Wonder Bread, for which it owns the Canadian rights, rights that are not affected by events south of the border, he said.
“It’s a very good seller. It’s a very important brand to us,” he said.
Meanwhile, dairy giant Saputo – whose ownership of the Canadian rights to the Hostess brand name is also not threatened by the liquidation – isn’t saying whether it might take a look at some of the Hostess brands and facilities.
The breakup of Hostess certainly represents an opening for rivals eager to gain market share, said Lionel Ettedgui, president of Saputo’s bakery division.
“This will create opportunities for all the players in the market,” he said.
Saputo – whose snack cake brands include Jos. Louis and May West – has been steadily building a presence in the United States and remains committed to its corporate strategy to make further inroads, Mr. Ettedgui said.
“There is a lot of potential for us in the United States,” he said.