Talk about sweet sorrow: Hostess Brands, manufacturer of lunchbox staples like Twinkies, Hohos and Ding Dongs, is planning to file for bankruptcy this week, the Wall Street Journal reported Tuesday. The company, which also makes Wonder Bread and the Drakes line of snack cakes, has more than $860 million in debt. This is Hostess’s second bankruptcy filing in less than a decade. Will it be able to sell enough cupcakes this time to come back from the brink? Although Hostess has sales of $2.5 billion annually, that’s not enough to keep up with the rising costs of ingredients like flour and sugar; the company also employs roughly 19,000 people, according to the Journal.
Hostess went through a Chapter 11 bankruptcy back in 2004 and had trouble regaining its footing afterwards, in spite of investments and loans from private equity firms and hedge funds. The Journal reports that Hostess has lined up financing that would allow it to continue operating while in bankruptcy, so its ovens won’t be shut off just yet.
But it appears America’s appetite for plastic-sheathed snack cakes might be waning; although we gobbled up 36 million packages of Twinkies last year, that’s actually a 2% decline from the year before. In response to an increasingly health-conscious public, Hostess started making whole-grain bread, but the Journal says it hasn’t been a hit.
The big question is whether or not Hostess will be able to iron out its fairly significant financial issues — which include an underfunded pension plan and numerous labor union contracts that would have to be renegotiated — and avoid liquidation.
If Hostess does become the latest casualty of a challenging economy, what are fans of its iconic snack cakes going to do? Unfortunately for them, the rumor that Twinkies will last indefinitely is just an urban legend, so they’ll have to find an alternative to stockpiling their junk food.