UPDATE, 3:30 p.m.: Multiple news outlets are reporting that Hostess and the company’s second-largest union have agreed to mediation, possibly avoiding liquidation.
News reports that Hostess Brands will file for bankruptcy and plans to sell off iconic American brands like Wonder Bread and Twinkies have mostly centered on the debilitating fight between the company and one of its largest unions. But there’s a bigger reason Hostess is disappearing.
While Hostess Brands makes a host of desserts and snacks — most famously Twinkies, Ding Dongs and Ho-Hos — the company is primarily a breadmaker, and its flagship loaf is Wonder Bread.
For decades, Wonder Bread was perhaps the most recognizable brand of sliced bread in the U.S. It’s the only brand that’s ever truly been national. It’s as American as a white picket fence. And in grocery stores throughout the country, it’s ubiquitous. Since the 1950s and ’60s, toast has been a staple of most breakfasts, while bread has been on the dinner table in almost every household.
Gradually, though, our diets have changed and our consumer preferences have shifted. Almost 95% of Americans still eat bread at least once every two weeks, according to food-industry-analysis firm NPD Group. But instead of just toast in the morning, we now have a multitude of options for breakfast: frozen waffles, toaster pastries, energy bars and, especially, yogurt.
“Yogurt’s been the problem,” says Harry Balzer, NPD Group’s chief industry analyst. “There are so many more options at breakfast, but yogurt is affecting everything because it’s very convenient.” Balzer says 45 million more Americans are eating yogurt today than 10 years ago, when only 17% of the population was buying the product. Now almost a third of Americans eat it.
Americans’ dinner preferences have changed too, with more and more opting for one-dish meals, says Balzer. Pizza, casseroles, pasta — anything that is quick and simple is what is sought after work, and the tradition of bread as a side dish is diminishing. Believe it or not, NPD Group tracks the percentage of U.S. households that include a side dish of bread at dinner. In 1984 it was 11%. Today it’s 7%.
“Dinner is changing,” says Balzer. “We spend 24 minutes eating dinner. It’s become less and less and less. So we’re always looking at where we can save time or money.”
Similarly, energy bars have become wildly popular over the past several years, not only as a snack but also as part of breakfast or lunch. And tortillas have become the second most popular bread type in the country, according to the Tortilla Industry Association; there’s been a 3.6% increase in tortilla revenues each year on average since 2007.
To a lesser extent, Americans have also become much more health conscious, which has hurt sales for companies like Hostess that make highly caloric, sugary products. Meanwhile, fitness-based industries are bringing in more and more revenue, according to Agata Kaczanowska, an industry analyst at IBIS World.
Hostess appears to have gotten stuck somewhere in the 1960s and never really recovered. It failed to innovate. It rarely advertised. It didn’t successfully market itself. And it didn’t contemporize its products.
“Their heritage legacy brands that have been around forever have not kept up with the times,” says Bob Goldin, executive vice president of Technomic, a food-industry-analysis firm.
Goldin cites the growth of in-store bakeries that often sell fresher bread than presliced commercial loaves. “Commercial bread has become kind of an economy item,” he says. “In-store bakeries have that image of freshness and quality that consumers are looking for.”
It’s possible that some of Hostess’s brands will survive. The company will be selling off those brands in the coming months. But many of them are likely to wither away right along with old eating habits.
“The industry has shifted,” says Goldin. “Some of them have a chance of surviving. But it’s hard to fathom how many will be relevant going forward.”