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WHAT OTHERS SAY: In the Hostess Twinkie saga, something for every taste

Friday, November 23, 2012 | 2:22 p.m. CST; updated 3:00 p.m. CST, Friday, November 23, 2012

“They (Twinkies) have a popular pull on us as Americans. They are cute. They are blonde. They are small. They are very sweet.”

— Steve Ettlinger, in “Twinkie, Deconstructed.”

For all of the books and feature articles, for all of the jokes about slacker diets and the “Twinkie defense,” for pop culture references like Pixar’s “Wall-E” feeding a petrified Twinkie to his pet cockroach, the annual per-capita Twinkie consumption in the United States is one.

That one Twinkie weighs about 1.5 ounces. The annual per-capita consumption of Brussels sprouts is 5 ounces.

So why is it that the bankruptcy liquidation of Hostess Brands has caused so much weeping and lamentation?

Maybe it’s because 18,300 workers lost their jobs overnight, 365 of them in St. Louis. Some of them might go back to work, if the parties agree to a mediated settlement or if Sun Capital of California can work out plans to buy Hostess out of bankruptcy.

But there wasn’t much consternation in September when Hewlett-Packard announced it would be laying off 29,000 workers over the next two years, or when Bank of America announced it would lay off 16,000 employees by year’s end. Americans are not nostalgic for calculators and bank tellers.

Ah, but Twinkies and Hostess Cupcakes, Ding-dongs and Ho-Hos and Wonder Bread. Everyone’s got a story to tell, even those who haven’t eaten a snack cake or white bread in decades.

The Hostess story has a moral for everyone. For those who can’t let go of the 2012 election, it’s the continuation of the mooching unions versus rapacious Wall Streeters saga. For the food police, it’s the triumph of whole grains over empty calories. In a consumer society, everyone has a Devil Dog in this fight.

We like it because of its excellent St. Louis connections. Not only does Hostess have a bakery here, James A. “Mr. Twinkie” Dewar, the Chicago bakery manager who invented Twinkies in 1930, claimed he named them after seeing a billboard in St. Louis for “Twinkle Toe Shoes.”

And then there is the role played in the Hostess bankruptcy saga by former U.S. Rep. Richard A. Gephardt, D-St. Louis, who has cashed in big time on his union connections since leaving Congress in 2005. His consulting firm was an adviser to the Teamsters Union in 2008 when Hostess’ predecessor was first in bankruptcy. With the Teamsters’ help, Hostess emerged from that bankruptcy, though carrying more debt that it had when it went in. There was even a nice $100,000-a-year post-bankruptcy gig on Hostess’ board for Mr. Gephardt’s son, Matt.

And then there is the fact that for 11 years, Hostess was a St. Louis company. Sort of. Ralston Purina purchased Continental Baking Co. in 1984, and Continental had purchased Taggart Bakeries of Indianapolis in 1925. Hostess was one of Taggart’s brands.

Ralston sold Continental to Interstate Bakeries in 1995. Interstate had started in Kansas City in 1930, was sold to a computer leasing company called DPF, which changed its name back to Interstate Bakeries, took it private as IBC Holdings, and was again a public company when it bought Continental and its precious Hostess brand from Ralston.

While all of this buying and selling was going on, the various bakeries were snacking on smaller regional bakeries. Every time a deal closed, someone else got rich and more debt got piled on. The unions were appeased with excellent contracts, including multi-employer pension plans (if your company fails, another one picks up your pension) and work rules that, among other things, had one set of Teamster drivers delivering bread and another delivering snack cakes. To the same stores.

Meanwhile, America was discovering whole grains. Carbohydrates became public enemy No. 1. Interstate filed for bankruptcy in 2004 and operated under the court’s protection until 2009. It emerged leaner by 10,000 employees and nine bakeries, but with $670 million in debt. Ownership was shared among Ripplewood Holdings, a venture capital firm, and lenders that included two other private equity firms. Also it got a new name: Hostess Brands, Inc.

With all that debt, lagging sales and nearly $2 billion in legacy pension costs, post-bankruptcy Hostess was not markedly more healthy than pre-bankruptcy Interstate. The firm has lost revenue for nine straight years; losses reached $341 million last year.

Remarkably, on both the executive side and the union side, people looked at this company and decided they could milk it for more. Top executives got big raises. Unions saw that and decided they weren’t going to cave this fall on their contract demands.

The Teamsters reached a deal (they almost had to, since the union was holding equity in the company), but 92 percent of the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union apparently decided it was 1955 again and rejected a contract calling for a 30 percent pay cut. They walked out Nov. 9, humbly calling their action “an inspiring display of courage and conviction.”

The Teamsters honored their picket lines. A week later, on Nov. 16, Hostess’ chief executive announced plans to liquidate.

On Friday, the bankruptcy judge urged the company and union to agree to mediation. If they fail, some of Hostess’ competitors may be interested in picking up some of its brands. Sun Capital, yet another private equity firm, might be interested in a bid.

All of this means that some day there probably will be Twinkies again: cute, blonde, small and very sweet. It doesn’t mean people will eat more of them.

Copyright St. Louis Post-Dispatch. Reprinted with permission.


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