Are Twinkies in decline? Hostess files for Chapter 11.

Twinkies, Wonder Bread, and other Hostess products should still reach consumers, the company says. Hostess blames labor costs, not declining Twinkies sales, for Chapter 11 filing.

By , Correspondent

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    Hostess Twinkies are on display at a grocery store in Santa Clara, Calif., Jan. 11, 2012. Hostess Brands Inc., the maker of Twinkies and Wonder Bread, is seeking bankruptcy protection, blaming its pension and medical benefits obligations, increased competition, and tough economic conditions.
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Hostess, the maker of Twinkies and Wonder Bread, has filed for bankruptcy for the second time in less than a decade.

The Chapter 11 filing shouldn't affect the flow of Twinkies, Wonder Bread, or the products of its other brands – from Nature’s Pride Healthy Multi-Grain bread to Drake’s Ring Dings. 

Hostess doesn’t “anticipate any disruptions in the manufacturing and delivery of any of its bread or cake products,” the company said in a press statement. Hostess is the largest wholesale baker in the United States, catering a myriad of baked goods to convenience and grocery stores throughout the country.

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Still, the privately held company that fed a generation of young boomers with sandwich bread, cupcakes, and other snacks finds itself in financial trouble. The sale of Twinkies, the company’s iconic offering, dropped 2 percent this year. In 2010, for the first time in the US, sales of sliced wheat bread outsold sliced white bread – a blow to the Wonder Bread label.

The company blames labor costs for its woes. Riddled with debt, (the company is currently worth $981.6 million, but has debts totaling $1.43 billion) Hostess says it can’t afford to pay its workers under the terms of current union labor agreements.

“The Company’s current cost structure is not competitive, primarily due to legacy pension and medical benefit obligations and restrictive work rules,” says the Hostess statement. “Those issues, combined with the economic downturn and a more difficult competitive landscape, created a worsening liquidity situation that prompted the need for a reorganization.”

Pending court approval, the company has received a commitment for $75 million in financing from a group of its private lenders, which would allow Hostess to “continue routine operations while undertaking a comprehensive financial and operational restructuring to transform it into a strong, competitive company. “

This isn’t Hostess’ first bankruptcy. In 2004, the company, then called Interstate Bakeries, sought Chapter 11 protection – a move that resulted in the closure of nine of its 54 bakers, the shutdown of over 300 outlet stores, and the layoff of approximately 10,000 employees. It took five years for Hostess to emerge from the bankruptcy, then the largest in US history.

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