There’s something wildly appropriate about Hostess’ demise: a company that made its living on the gimme-sweets-now palates of Americans goes bankrupt due to the instant-gratification obliviousness of venture capitalism.
And Hostess blames it on the little people. Health nuts: those danged people who have changing tastes, who are starting to demand that their food have the USDA recommended one millionth of healthiness. Unions: those danged people(again with the people!) who organize into groups to demand that corporations pay them enough to live on.
How dare they?
This is SO American, isn’t it? A CEO triples his own pay over 3 years and then blames their financial ruin on “unions”. A company that sells vaguely cake-like preservatives baked in sugar – a delicious cloud of absolutely effing nothing of value – spent the last 10 years doing the same thing with their company finances. This is surprising, how, exactly?
Hostess, in an oddly appropriate way, built their product while sacrificing the health of Americans. Similarly, they built their financial statements on by sacrificing the health of their books. It's a pyramid based on unhealthy products supported by unhealthy financials. It's as is the company gained 500 pounds eating Ho Hos and decided to inject themselves with malaria.
I’m not badmouthing Hostess. Really, I’m not. Hostess is a business. It was "trying" to do what businesses do: maximize shareholder value. In fairness, a business is not really asked to do much more than that, and if the books look good one year at the expense of the firm’s long-term health, well, this is America baby. It’s how we do. The fact that business debts have a tendency to Snoball, well, it’s Hostess’ right to do so. If they want to be Ding-Dongs about it.
They certainly did. The company has/had 1.4 Billion in debt to service, was unable to reach an agreement with the people who actually make the products, and the CEO’s salary had tripled in recent months. Guess he didn’t see the need to start a diet when the company’s balance sheets were already obese, right? I wonder if he had a case of Twinkies delivered to his desk every day, just to emphasize the metaphor?
Americans demanded less confections in the marketplace while Hostess demanded concessions from its workers.
As one Hostess worker describes, pay would be cut under the new proposed deal to unions by 27% over five years. Oh, and their pensions would be gone. Oh, and the money Hostess ‘borrowed’ and promised to pay from the workers years before would be gone. Oh, and their insurance plan will be worse. Oh, and their worse insurance plan would cost twice as much. The AFL-CIO blog called these “Bain-style tactics”. It's an easy comparison to make.
This is somehow the union’s fault for not taking this deal: a worker making $48,000 in 2005 at a Hostess bakery would be paid $25,000 in five years under the new contract. Those stupid unions probably wanted that salary number to go UP over the next few years, right? Evil, rotten unions(shaking fist).
How DARE they?
As of this writing, Twinkies are selling on eBay for around $4 each. You wouldn’t want to miss out on the gold spongecake rush, wouldja? Some enterprising Twinkiephiles/gougers are selling them for thousands. Even millions, though some of those posts are just silly. Imagine that. Silliness in the Twinkie markets.
This is much like the financial snake-oil salesmanship of Hostess as its gone through several bankruptcies and its debts have been inflated even as wages and employee hours were cut. Hostess has been almost classically preyed upon by Bain-esque vulture capital firms like Ripplewood and hedge funds like Silver Point and Monarch. I should rephrase that. As David Kaplan wrote,
“whether you call them saviors or vultures depends on whether you're getting fed or getting eaten.”
It’s ironic that we’re talking about Hostess and venture capital together. Venture capital is the ultimate in instant gratification. But in your financial statements, just as in your body, you can’t live on a diet of Twinkies forever. I wonder if Ripplewood chuckled as they handed the Hostess CEO a pen: “A moment on the lips, a lifetime on the financial statements.”
Will the demise of Hostess, purveyor of empty calories and empty promises, change the way business is done in The USA?
Oh hayuls No.
Twinkies are to your personal health what Private Equity firms are to corporate financial health. It's painfully obvious to those who look at the practice that the debt-loading practice must be curtailed. Like compulsive Drake Cake gobbling, it requires an intervention. Despite this, isolated and public incidents like this will not change our business practices. It raises awareness, but only marginally when you have pundits like Rush Limbaugh saying that the Hostess affair is an example of how the Obama administration is unwilling to compromise and Michelle Obama is probably glad to see a snack food company go under. Nice.
This kind of spin-doctoring is, in itself, a kind of snack, a diversionary tactic for the health of America. Take something bad, like sugar. Spin it into a creme, airy and light, and inject it into a chocolate cupcake with a cute little squiggle across the top. YUMMY! Also, a very popular radio show.
It’s the brands. This is what is important – the ideas will continue, though the people moving the pieces change, the idea of Twinkies, like the product, has a shelf life of FOREVER. The brand will be sold, the product will be marketed and eaten, and we will continue to be satisfied with zero percent nutritional value. The corporate raiding that ravaged the corporate person-hood of Hostess will be a footnote no one reads, like the “Nutrition Facts” label on a box of Ho-Hos. Such things are studied mightily in the halls of business academia – after all, one must know the rules if one wishes to circumvent them – but for the rest of us, we know it’s all a sham. Nutrition facts? Of Ho-Hos? Really?
This is AMERICA, for God’s sakes. There will always be room in the American markets for such fluffed-up, empty, and fundamentally useless products. And, lest we forget, there will also be room for fluffed-up, empty, and fundamentally useless companies like the company Hostess had become.