Just in case you’ve been living under a rock lately, the iconic American snack giant, Hostess, filed for bankruptcy and closed for business last month. In a polarized standoff between bakers’ unions and company executives, financial agreements failed to be realized and the entire enterprise collapsed as a result.
After 82 years of cream-filled, chocolate-dipped spongey goodness, the company’s failure to evolve and adapt caught up with them. According to an article in the Portland Press Herald, the distinct lack of growth is largely responsible for the company failure, not the union conflicts: “It’s a little bit of a scapegoat — the union problem,” said Bob Goldin, executive vice president of food industry analysis firm Technomic. “If their business was growing 10 to 15 percent a year, these union problems wouldn’t have been as much of a factor. A growing business would have saved a lot of ills.”
On Nov. 21 of this year, the court finalized the approval of Hostess’ bankruptcy claim. This resulted in the closure of 33 bakeries, and over 15,000 jobs lost, with more to come upon complete dissolution in the coming year.
Unfortunately, what most people don’t know is that this is not the first time Hostess has filed for bankruptcy. They filed their first claim in 2004, and after failing to properly utilize a re-infusion of financial investments. They struggled with corporate restructuring and funding dispersement for the next decade, with no success.
Throughout this tumultuous period, their executive turnover was devastatingly high, with a different chief executive almost every year. Among their most threatening obstacles were the inflating prices of their principle commodities such as wheat, sugar and flavorings. According to analysts, as these prices escalated, consumers were spending less and wavering in brand loyalty as a result.
Additional major missteps on Hostess’ behalf were their resistance of America’s shift in taste towards healthier foods and their outdated marketing, utilizing characters that have remained unchanged since the late 1940s.
In the article by Jessica Hall of the Portland Press Herald, many industry professionals weighed in on their marketing missteps:
- ‘”In the snack business, they hadn’t done anything to grow that business,” Goldin said. “No marketing. No innovation. It’s the same darn products they’ve had for generations. The same cakes, the same flavors. It’s the same old, same old. They were riding on momentum and their audience is old — the people who grew up eating these products. And they haven’t bought one in years.”‘
- “There’s been an increased emphasis on product innovation — reduced calorie packs, variation of products. Product innovation that resonates with the consumers is what drives incremental category growth. For a lot of companies, price is just one of the levers they have — they adjusted packaging sizes, used different ingredients, introducing new varieties.”
- “Hostess failed because its six management teams over the last eight years were unable to make it a profitable, successful business enterprise. Despite a commitment from the company after the first bankruptcy that the resources derived from the workers’ concessions would be plowed back into the company, this never materialized,” said Frank Hurt, president of the bakery union.
- “Management refused to invest in modernizing its bakeries or devote necessary resources to advertising and marketing, product development and new technology. Business plan after business plan failed, leaving the company ever deeper in debt.”
As they stand now, there is speculation of high interest in the purchasing of the company, post dismantling. It is estimated that the liquidation could raise $1 billion. It is also speculated that the Twinkie and Drake brands will remain in demand and be resurrected, whereas Wonder Bread will disappear.
BUT WAIT! THERE’S MORE….
In the spirit of learning from mistakes and maintaining a competitive edge, a recent graduate of the Communications Design program of Syracuse University, Cristina Castro, created a full-scale packaging redesign. It was so notable and contemporary, my favorite team at The Dieline featured her under their Student Spotlight section. Some of the packages are featured below, with more in the main article on their page, which you can reach by clicking the pictures below.
“Bite into an American classic before they go away. As Hostess announces its bankruptcy, this new packaging concept attempts to rebrand Hostess and save them from going under.”
“This design takes the the once leading snack pastry company and gives them an exciting bold new look. The smaller single serving packages aim to grasp the attention of calorie conscious individuals who previously turned down the occasional Hostess snack because of the overwhelming previous 2 pack.”