Hostess Brands will head to the US Bankruptcy Court today for an 11am EST hearing to ‘wind down’ business after mediation talks yesterday with its striking union BCTGM proved ‘unsuccessful’.
Teamsters, the firm’s majority union not on strike, said the fate is a “tragic outcome” for all employees.
The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union and Hostess Brands were forced into mediation talks by the judge heading up the case as a last ditch attempt to save business after Hostess filed a full business closure motion last Friday 16. See HERE.
‘We could start to see imitation Twinkies’
Matthew Hudak, research analyst for Euromonitor International, told BakeryandSnacks.com that should the firm shut down, “we could start to see imitation Twinkies”.
“If business goes into wind down, consumers will probably go elsewhere. I think there could be a shift towards private label, particularly with Wonder Bread consumers as it is already a low cost brand. Twinkies replacements will take hold too,” Hudak said.
Other manufacturers will see this as an opportunity to step up and provide alternatives for consumers, particularly if there is a delay in the sale of the brand and production, Hudak added.
Helping the extinct Twinkie
Last week saw desperate rush as consumers rushing to stores stocked up on their beloved baked good, causing sell-outs of Twinkies and other Hostess brands in a lot of retailers.
“The last two weeks could in fact very briefly help business – bring the Twinkie back into consumer thoughts as it was almost extinct,” Hudak said. The last week of sales will be strong, he said.
“There might also be a few Wonder Bread t-shirts out there!” he added.
The analyst noted that this is the biggest publicity the Twinkies brand has seen in years and ironically could be very productive.
“On the downside however, Twinkies could lose some support from customers who are concerned about how the firm is treating its workers,” he said.
Initial strikes by BCTGM members were sparked by a pay-cutting deal enforced upon them that would see 8% wage cuts and benefits withdrawn. Of the 18,500 employees set to lose their jobs, one-third are BCTGM members.
Brand damage to an ‘American staple’?
Hudak said that the past week’s events could spark hesitation in some industry customers, but for consumers, brand damage is unlikely to occur.
“Twinkies and Wonder Bread together have incredibly strong brand equity - these are American staples,” he said.
“For these majors it’s hard to hurt brand image. As long as the products are back on the shelves within a reasonable time, business won’t be hurt,” he added.
Hudak said that it would be the less-known brands that could be hurt because they are easier to substitute with other products.
Many analysts consider Mexican bread titan Grupo Bimbo as a likely candidate for a full takeover or brand purchases. Although financial struggles were clear in its third quarter.
Campbell Soup Company has also been put forward by Euromonitor for a full acquisition, along with Kraft and Kellogg as ‘outsiders’ possibly considering a buy. For the cake division, Little Debbie-maker McKee Foods has been flagged as a potential buyer.
However, Hudak told this site that private equity firms would be the likeliest candidates as Hostess Brands needs to be driven forward with a growth strategy, which is what these firms do.