Twinkies made their sweet comeback in stores nationwide Monday, but hundreds of workers who helped make the sponge cakes an American staple are not celebrating.
That’s because only 20 to 25 percent of jobs at Hostess Brands, the Twinkies-maker that sank under bankruptcy last year, are likely to reemerge, estimates Natalie Everett, a bread and snack industry analyst with IBISWorld. Under its new business model, Hostess will likely axe jobs and replace workers with machinery in an effort to rein itself back into financial health, Ms. Everett says.
While the former Hostess ran 11 factories that produced just half of what they were capable of making, the new company is operating four factories that are producing closer to 90 percent of their capacity, according to Hostess. Additionally, instead of hiring truck drivers to deliver products directly to 50,000 stores across the country, the new Hostess is using third-party truckers to drop off products at warehouses – a move that will save the company gas money and allow it to cut drivers' positions.
The company has also trimmed jobs in other places: 600 thrift stores that sold Hostess products before the company folded have been shut down for good, meaning Twinkies fans will only be able to buy Hostess products at convenience and grocery stores.
In total, Hostess says it expects to have 1,800 employees within the next few months – a sliver of the 2,500 employees who previously produced Hostess snacks, according to CNN. Hostess told CNN that the reduction in employees is in part due to it not acquiring all of the former Hostess’ brands (which include not only Twinkies but also Ding Dongs, Donettes, Suzy Q’s, and other sugary snacks).
The new Hostess will not only have fewer jobs, however. None of its current employees are unionized – a dramatic shift from the previous Hostess, where 79 percent of employees were members of a union.
Without unions backing them, the new Hostess’ employees could face an uphill battle in any future labor conflicts. The former Hostess’ bakery union shouldered $100 million in labor concessions before being asked to take an immediate 8 percent pay cut last year amid tumbling profits. At the same time, Hostess’ acting CEO exempted his $1.5 million salary from the cuts.
From management’s perspective, the labor unions were ultimately to blame for Hostess’ bankruptcy. When the Bakery, Confectionary, Tobacco Workers and Grain Millers union rejected Hostess’ reduced wages, walking out of nearly two-thirds of the company’s factories, Hostess reportedly lost tens of millions of dollars in unfulfilled orders.
The company’s chief executive has also defended the company’s lack of unionized workers. Hostess has "put together an excellent and competitive wage and benefits program for our employees," C. Dean Metropoulos, chief executive and co-owner of the new Hostess, said to the Wall Street Journal earlier this month.
So while the shakeups may be to the detriment of employees, they could bode well for Hostess, which was crushed under more than $860 million in debt by the time of its November demise.
Management estimates that the changes to the way Hostess delivers products to stores will allow the company to more than double its reach by the end of the year. It has also expressed confidence about Hostess’ second coming.
The private equity firms that acquired Hostess for $410 million earlier this year, Metropoulos & Co. and Apollo Global Management, have a track record for revitalizing failing brands. Metropoulos has acquired and successfully repackaged brands like Aunt Jemima, Log Cabin, and Duncan Hines over the past few decades.
But Twinkies remain, well, infamously unhealthy. They are just one product that has taken a hit as American consumers, picking up on health trends like low-carb and gluten-free diets, have shied away from the $36.9-billion bread production industry, Everett says.
Even then, there may be surprises in store. Hostess has expressed interest in possibly creating gluten-free, low sugar, and low sodium versions of its snacks.
With Americans projected to focus less on healthy eating throughout the year and the unemployment rate slowly declining, Everett says she expects that more consumers will reach for convenience foods, including Twinkies.
Hostess has a 4.9 percent market share in the bread production industry, a figure that "will likely grow on the strength of Twinkies," Everett added.