The Rise And Fall Of Twinkies | Rise And Fall

a mainstay in pop culture and lunch boxes for more than 80 years twinkie that's a big twinkie the twinkie is an american icon the vanilla cake stuffed with cream even made it into the national millennium time capsule when you think about kind of the pantheon of food grants there aren't a ton that kind of rise to the level of twinkies but two bankruptcies heavy debt loads and changing tastes push twinkies off shelves and almost to their death people were starting to sell boxes of twinkies on ebay for a thousand dollars a pop i mean just crazy stuff right it was like the death of a piece of americana but just when everyone thought that they were gone for good twinkies rose again so what happened twinkies were invented in shiller park illinois in 1930. this guy james dewar managed a bakery plant at the start of the depression he wanted to make better use of expensive strawberry shortcake equipment sitting unused when strawberries weren't in season so he stuck banana cream in a shortcake d'awar sold the twinkies in packs of two for five cents when bananas were rationed during world war ii the simple vanilla cream we know today became the filling in the next two decades twinkies and its parent brand hostess dominated the packaged cake market marketed to children in everything from tv commercials to batman comics twinkies rose to the status of a cultural icon you're getting ready for school here here's a swell dessert that you can take along with you a package of two big hosted twinkies the hostess snack cemented itself in kids lunchboxes across america it was an affordable indulgence for families it was just so woven into the fabric of the culture of america in 1971 the brand introduced its mascot twinkie the kid [Music] the anthropomorphic cowboy twinkie became popular among kids for sharing his namesake cakes but growing talk of twinkies high sugar content would soon butt heads with the brand's kid-friendly marketing first the federal trade commission came down on hostess for false nutritional claims the agency concluded that sugar was the main ingredient in twinkies and then in 79 the trial of a san francisco man charged with murdering the mayor gave rise to the term twinkie defense the defense team argued he had diminished capacity thanks to his addiction to twinkies and the murder charges were lessened to manslaughter it was a trial that balked at the wholesome cake brand hostess was trying to build fresh wholesome hostess meets my tough standards so when i say yes it's hostess then began a string of new owners for hostess in the 70s telephone company itt ran twinkie's parent company in the 80s dog food maker purina acquired hostess and a decade later it landed under its final owner interstate bakeries corporation the sale created the largest baking company in the u.s with at its peak 58 factories over 10 000 delivery routes a boost in twinkie sales and 3.2 billion dollars in total sales but in the late 90s america's changing tastes would soon spell trouble for the sugar-packed twinkies with the growing popularity of low-carb atkins and later the south beach diets some americans were becoming more health-conscious loaded with calories sugar and preservatives most people hadn't heard of let alone could pronounce twinkies became a casualty of the health revolution sales fell and then flattened in october of 98 because of missed earnings shares dropped 25 in just one day but it wasn't just the product that was the problem pensions and raw goods got too costly as other food companies were modernizing manufacturing hostess ran inefficient factories operating at 54 capacity utilization that's very poor in the manufacturing world the company also relied on a tired delivery system a dsd model direct store delivery model has really high cost because you've got trucks drivers gas insurance that you have to pay for and you're going to every store in america every few days to drop off product delivery alone ate up 36 percent of revenue an important way to capture this moment in time would be by filling a national time capsule in 1999 president bill clinton included a twinkie in the national millennium time capsule so twinkies still had a huge fan base but by then the damage to hosus's bottom line had been done by 2004 with 700 billion dollars in debt twinkie's parent company interstate filed for chapter 11 bankruptcy over the next five years interstate cut seven thousand employees and shut down eight factories the company came out of bankruptcy in 2009 and rebranded itself hostess brands but it didn't work but unfortunately many of the legacy problems that really hampered the company didn't get solved through that bankers then the recession took a huge hit on hostess's bottom line with year-over-year sales down twenty percent to make matters worse a worker strike and labor dispute soon followed that fight turned into production stopping and the management team then threatened to shut the company down given pressure from its creditors and that's exactly what happened by january 2012 with nearly a billion dollars in debt hostess brands filed for chapter 11 bankruptcy again the company that makes twinkies wonder bread and ding dongs announced this morning that it is going out of business in november twinkies were pulled from shelves and headlines across the country reported the death of twinkies customers started you know honestly losing their minds over it people who would have never cared about the twinkies in fact suddenly one of them right or thought oh my god well if they're going away forever i need to stock up the rush was on to grab the last of those tasty treats people scrambled to get the last twinkies off those store shelves it was like the death of a piece of americana in december 2012 hostess began laying off all its employees things were looking bad for hostess but this guy still saw value in the nostalgia attached to the brand there was a real brand here and it's hard to kill a good brand andy is half of the duo credited with saving the twinkies if you hold people age 20 and over there's 95 brand awareness i mean it's unbelievable it's not every day that you can buy a brand like this that's ubiquitous in consumer's mind and has leading market share had a billion dollars in revenues and an 80-year legacy after the second bankruptcy andy approached legendary investor dean metropolis about joining him and rescuing hostess dean had turned around bumblebee tuna chef boyardee blasting pickles ribbon dean's reputation historically really fit well for this but unlike the first hostess bankruptcy in 2012 there was no coming out of it with a simple restructure that bankruptcy process was unique because it turned into a true liquidation and what's known as a 363 asset sale process basically what was left of hostess was sold for parts instead of having to inherit that expensive delivery system underfunded pension plans and old union contracts andy could cherry pick what he and dean actually wanted and forget the rest so the two showed up to the 363 asset sale ready to fight for hostess not one buyer showed up other than us anybody could have showed up and topped our bid and nobody showed up it was frankly very surprising andy and dean purchased hostess for 410 million dollars out of the sale they got the hostess brands including twinkie recipes and five factories that's it there was no employees there was no ingredients there was no inventory and i have to tell you it was very odd during diligence walking through plants where when you walk in they're empty and the person who's walking you through the plant has to turn on the lights and quickly andy and dean got to work fixing the company first they tackled that delivery system the old company did direct store delivery we were going to transform it into a distribution to warehouse model instead of going direct to every grocery store in america you then go to walmart's distribution centers or kroger's distribution centers instead and then they ship it out to their various stores but in order to move twinkies through a warehouse they first had to increase the shelf life historically twinkies only lasted 25 days people would put twinkies in their earthquake shelters because everybody had this perception that twinkies would last forever that really wasn't the case andy and dean invested millions to develop a twinkie that tasted the same but lasted longer we're first able to get the shelf life for 45 days and then ultimately to 65 days of self-life and so that really helped get the retailers comfortable that they could take it into their warehouses and that the product quality would not be compromised the new recipe and warehouse delivery model helped cut delivery costs by 20 it also meant hostess could affordably deliver twinkies to drugstores and dollar stores markets they'd never reached before dollar general became one of our top five customers next up andy turned to factory efficiency andy and dean wanted to be able to make a billion dollars worth of cake yearly but with the ninth of the labor and a fifth of the factories we ended up doing getting to 85 capacity utilization plus finally the duo worked on innovating the product line with smaller pack sizes and mini twinkies those products really didn't get the resonance in the marketplace and so then we just jumped wholeheartedly to embrace the brand embrace what you are which is indulgence the team had to make all these changes in a matter of months in july 2013 the once dead twinkies returned to shelves to tons of fanfare the world is a better place tonight because twinkies are back the tagline was the sweetest comeback in the history of ever it all went viral it was really kind of unbelievable a lot of that frankly that excitement buzz ironically could have never come about if tv's never came off the shelf the trite saying is what you don't know what you've got until it's gone twinkies quickly sold out in stores across america during our first year we had 555 million in revenues from nothing with profit versions of 27 in a company that lost money and had to go bankrupt twice by 2015 hostess was making a million twinkies a day 400 million a year and 180 million dollars in profit at the time twinkies made up 80 of the company's product output and the success just kept rising in 2016 apollo and metropolis took hostess public the ipo valued the company at 2.3 billion dollars nearly five times what andy and dean had paid for it apollo and metropolis's gamble that americans still loved twinkies had paid off but was the bluff snack revived for good the stock price has been relatively flat to a little down but overall the health of the company is very strong the coronavirus pandemic has helped hostess that's because a lot of americans are buying more food especially more processed foods but the key question going forward is to what degree will that continue do they continue eating twinkies alex says adding more limited time offer flavorings like peppermint and s'mores twinkies could help or diversifying into new product lines like twinkies cereal twinkie's a big brand but at the end of the day postus probably realizes that they need to diversify and while diversifying certainly might be part of it hosus's greatest success has come from leaning into twinkies nostalgia it'll always have a special place in my heart and my stomach you

Channel: Business Insider

Views: 1,817,669

Rating: 4.9070382 out of 5

Keywords: Business Insider, Business News, Food, Business, Twinkies, Hostess, American Cuisine

Id: JTuB5tfuz4Y

Length: 11min 30sec (690 seconds)

Published: Sun Dec 27 2020