5 years ago on the friday before thanksgiving the nation’s largest wholesale bakery shut down, laying off around 20,000 workers.
Hostess was a the merging of Continental Baking and Interstate Bakeries, both founded in the 1920s when they applied mass production to baking, flouting the antitrust laws and probably prohibition too. Continental became the very model of an industrial bakery until ITT bought it in the 60s and cut investment. Ralston Purina bought Continental in 1984 and closed dozens of bakeries while further neglecting investment. Meanwhile, Interstate was bought by a computer company, taken private then public, until it merged with Continental in the 90s. Under the Interstate moniker they kluged together a few “new” bakeries, switched to new preservatives that kept bread sorta fresh for a week or more, and kept a bunch of their relatives employed as managers by keeping open duplicative facilities that should have been combined. This incompetence resulted in the first bankruptcy in 2004, and after fleecing the unions they emerged as Hostess with an even more bloated management- they had two company headquarters! By 2012 Hostess was bankrupt again, quit making pension contributions, and demanded further labor concessions while tripling their pay and secretly planning to close many more bakeries anyways. Union bakers called a strike and walked out of the soon to close bakeries. After less than a day of negotiations Hostess management retaliated by shutting the whole company down and liquidating.
As a Teamster Hostess retiree I’ve read most of the bankruptcy filings as well as scholarly and not so much analysis of Hostess’ demise. While cutting wages and stealing pensions, Hostess MIS was so lacking that they were sending half full trucks on thousand mile delivery routes, losing money on every loaf. Despite customers and bakers telling them that the new preservative laden bread tasted awful, Hostess plugged on with it while losing the number one sales position they’d held for decades. Hostess had a too high worker injury rate, and tried to cover it up with fraudulent financial misstatements that hid Hostess’ unprofitability for years. Management cut corners by kluging together trucks and bakeries- Their were several six figure truck rental bills in the bankruptcy filings, and the new owners of the supposedly “new” Kansas City bakery ended up having to pretty much rebuild the place.
And then there was Walmart… With over 20% of the grocery market and Hostess being their bakery supplier for both branded and private label bread in much of the country, Hostess paid damn near as much in “slotting fee” kickbacks to get on Walmart’s shelves as they sold in bread there. Supplying Walmart multiplied the cost of the company’s inefficiencies- I’ve heard of bread trucked 600 miles from Chicago and Peoria to western Minnesota, then trucked 50 miles back to a Walmart to be sold at a loss. Walmart quit paying Hostess for bread months before the shutdown and may very well have pushed Hostess over the edge. Walmart had window shopped Hostess for years, did they try to push Hostess into liquidation so they could buy their very own bakeries at a bargain price?
The bankruptcy liquidation was managed even worse than Hostess was- Instead of getting multiple bids for bakeries and other facilities individually and in combinations, the court allowed “stalking horse” bids and just a few competing bids from potential buyers. Over a thousand trucks were given away while other assets were sold with little notice and thus received low bids. When all the sales were totaled up and the lawyers and managers got their cut, there wasn’t even enough left to pay the workers their earned vacation pay, never mind the billion or so dollars owed to the pension plans.
Five years later, less than 10 of Hostess 30 odd bakeries have reopened. Investors bought the Hostess and Dolly cake brands and 5 cake bakeries, never reopening one, and closing another after the workers re-unionized. 2 of the 3 reopened bakeries have re-unionized while new Hostess has shifted work to the non union plant, and the speculators have “pumped and dumped” the company with an IPO and suffocating mountains of debt. 20 bakeries and most of the bread brands like Wonder were sold to Flowers Baking, who have reopened only 3 of the bakeries and are stripping and selling most of the rest. Why would Flowers spend 400 million to buy 20 bakeries, then turn them into Class B and C warehouse space? Perhaps to keep Walmart or other bakeries from reopening them and restore a hint of competition to the near monopolized wholesale baking biz. The only “white knight” was Franz Bakeries who bought Hostess entire bread operations in the northwestern states, rehired many of the Hostess workers, reopened every bakery but the one in Seattle that had been stripped, and signed a union contract. While the Salt Lake City bakery didn’t have enough volume to be kept open, today Franz is turning a profit with the same system that Continental perfected, proving that it was corrupt and incompetent management that killed Hostess, not overpaid workers.
But otherwise, 5 years on, neither Hostess owners old and new nor the bankruptcy process have done squat for Hostess workers...