The Demise of Hostess: Businesses Need Purpose

By David Thomas

The disintegration of Hostess Foods is telling for sustainability advocates.

How does a company as big and as pertinent to America as Hostess fail?

By not listening to the changing needs of customers - by not evolving.

Sustainability is about more than just ‘continuing to subsist.’ It’s about caring about something enough to want it to continue in health. It’s about renewal, not replacement.

Did 18,500 workers lose their jobs because Hostess and its products became irrelevant? They’ve always been unhealthy and some even say, disgusting, but people were once enamored with them. What happened?

Who or what is Hostess?

Hostess is the U.S. foodstuff company responsible for producing such illustrious products as Twinkies, Wonder Bread and Ding Dongs. Its products are sugary, soft preservative-packed snacks. Today many people today would prefer not to consume them, but they were once upon a time the hottest product on the shelf. Wonder Bread was not the best thing since sliced bread. It was sliced bread.

Twinkies, featured in countless Hollywood movies, are known as an item of Americana beyond the States by people who have never even tasted the vanilla-flavored cream inside, or smelled the chemical-laden sponge pastry exterior.

Snakeskin

The demise of Hostess might be seen as a natural process by some - products and companies go out of fashion - new trends emerge like a snake shedding its old skin. Hisss!

But the truth is, the creative destruction that sees one company die and another replace it, buying up its assets and so forth, is not an ideal or natural outcome. A more sustainable option is for businesses to adapt and change with the times. Apart from some seeded loaves Hostess has innovated not at all. And sales suffered as tastes changed.

What is the lesson here?

Businesses of all sizes can learn how not to fail from the decay of Hostess. Twinkies are rumoured to last for up to 25 years. The mental image of an ageless, preservative-filled product which will last beyond the company is profoundly telling. Companies need to grow and evolve in order to stay alive and Hostess was as stagnent as its products.

When we live and work surrounded by everyday tools like smartphones, cloud computing, and GPS tracking, and when even machines with a single purpose such as franking machines and printers are equipped with more tech than home computers were five years ago - how does a multi-billion dollar company fail to evolve?

Let’s start on the surface. Hostess hasn’t done anything smart with its image, logo or products for many years. But, on a deeper level, the values associated with the America that first fell for Wonder Bread and Twinkies and Ding Dongs sugary charm now are very much dated, and ‘of an era.’ Just look at the little cowboy on the Twinkie label.

The history of Hostess

The Twinkie itself was once an innovation. The product was launched in a time of financial hardship and quickly because the favorite snack of the Great Depression, according to the now defunct Hostess website. Shelf stable products were once novel and tremendously useful in trying times.

Wonder Bread was released with a clever marketing stunt - helium balloons were delivered to children to demonstrate the fluffy bread. Another innovation: Wonder Bread was the first U.S. bread to be sold ready-sliced.

These products of convenience were popular because they solved needs. But this focus on the customer did not stay with the company.

So again we ask:

… How does North America’s #1 selling bread go out of business? Hostess blames the striking bakers’ union but a widely reported story is that senior management and investors had been sucking the company dry for a while with bonuses and lofty paychecks.

Both sides agree the strikes came about because workers were being asked to put up with pay cuts of 8 percent. Meanwhile the CEO was happily accepting a 300 percent pay raise - $750k to $1,225,000 – and other senior executives enjoyed similar massive pay increases. The last CEO Ted Driscoll left the job, which had been inflated to a salary of $1,500,000, with almost a $2,000,000 severance package. You get the picture.

One theory is that the new CEO, Greg Rayburn, had been hired to put the company down like a dog, and share out the profit among senior management. As a liquidation specialist Greg was experienced enough to navigate the ship onto the rocks in such a way that all the cash spilled into the right pockets. To the right people it was worth tripling his salary.

It's a simple explanation for a complicated situation.

So what?

This story is another example of a company that, despite all the sophisticated communications equipment available, still cannot figure out a meaningful purpose or a common goal to unite and stimulate its team. There’s the same old split between workers and management. The unwillingness to embark on bold new ventures.

Many commentators are saying this: Hostess deserves to crumble, but eighteen and a half thousand people do not deserve to lose their jobs.

[Image credit: Eleventh Earl of Mar, Flickr]

David Thomas writes about specialist equipment and business efficiency for ExpertMarket.co.uk. You can speak to him at @expertmarket or in the Old Fountain on Saturday night, in between tracks being performed by the blues band.