The Real Reason Hostess Went Under: The Way We Eat Has Changed

News reports that Hostess Brands will file for bankruptcy have mostly centered around the debilitating fight between the company and one of its largest unions. But there's a more underlying reason why Hostess is disappearing.

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Tina Fineberg / Bloomberg / Getty Images

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.

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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.

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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.”

12 comments
aSingleBrainCell
aSingleBrainCell

$2.5 BILLION in sales of anything is BIG!  The yogurt comment is completely inappropriate based on Hostess sales.  

You can have all the sales in the world, but if the unions choke the life out of a company with there ridiculous  self-serving rules and demands, they simply deserve to be out of work. 

There was a day when the employees of a company actually cared about their brands, there fellow workers and their customers.  It was that pride that built companies like Hostess into Billion Dollar enterprises. 

Unions are a one way street, self-serving and defiant, and now the generations of Hostess followers are out in the cold.  I hope the point that the bakers were making was worth it.  I don't think so.

If this country doesn't start working together, these 18,500 people out of work will be a drop in the ocean of closings to come.

KingDL1
KingDL1

Wow the cost of wheat and corn, sugar cane have all gone up dramatically with the introduction of ethanol. Ethanol for fuel is a mandate and need to be repealed it does no good of any kind. It destroys machinery, cars get less gas mileage, and it takes more energy to produce than it puts out. Not to mention it is in direct competition with food crops and it is subsidized by our government. So we are paying to raise our own food prices. Ethanol Sucks

rivkahchaya
rivkahchaya

I didn't mean that people are suddenly eating a much more healthy diet than ever before. But a lot of people do think that avoiding certain very bad things, like saturated fat, will off-set other bad habits, like over-reliance on packaged food, instead of food prepared from scratch. And it's a fact that there are more people who identify as vegetarians than there have ever been in the US, and certainly more people who read food labels. Not to mention, a lot of people are vegetarians just because they don't want to eat animal products, not because they are trying to maintain a healthy diet. I know vegetarians who live on Froot Loops and Diet Coke.

Not to mention, the obesity "epidemic" (it shouldn't really be called that since it isn't infectious, but nevermind), is due as much to the fact that people don't move as much as they used to, as to what people eat.

bryanfred1
bryanfred1

Whatever the ultimate cause of Hostess' problems, increasing focus on health eating isn't it.  American obesity rates continue to skyrocket, largely due to consumption of enriched grains (i.e. white bread, etc.) and soft drinks.  To those talking about executive compensation, the CEO is gone and the company is being run by a turnaround professional.  Plus bankrupt companies have to issue retention bonuses to key employees or they will all leave before the paychecks stop coming.  Relative to the magnitude of Hostess' problems those payments are sand on the beach.

Chekpnt
Chekpnt

$1.75 million in incentive bonuses to 19 senior managers...I agree it's insensitive but, lets get real $1.75 million was not going to pay for $160 million pension.  It's like telling a life insurance agent he can't get his commission bonus because the company going into bankruptcy.

Chekpnt
Chekpnt

Josh That's one hell of a spin. Just because it's true that america's culture been going toward a healthier alternatives doesn't mean that was the "real reason" why hostess went under. If their sales decreases though out time...its just means hostess needed to cut expense to survive.  The Union representatives did a dis-favor to it's member by not recognizing Hostess financial dilemma, disregarded it's survival strategy, and stuck to what they think is some God given benefits and or compensation rights that eventually cost them their Jobs...plain and simple.

rivkahchaya
rivkahchaya

There's another problem with Twinkies, Ding-Dongs, and the other dessert products. They have animal fat. If you read the label, you see they have either lard of beef fat-- it may be either one, depending on your region, so the label is ambiguous. Aside from the fact that there are more people who are vegetarians, there are more people who avoid unnecessary saturated fat. Beef fat is OK when it's attached to a steak, but there's no reason to have it in a cake, when corn oil works just as well. There are store brand and off-brand versions of Hostess products that are not only cheaper, but don't have animal fat (some of them are even specifically labeled kosher). Up until about 25 years ago, Hostess had no competition whatsoever from other brands, and then, when it did, the alternatives were inferior, but in the last 10 years or so, the cheaper, no-animal-fat versions have been indistinguishable from the Hostess products. I don't know anyone who buys Hostess products, other than people who buy the past-sell-by ones at the outlet stores for 10% of the original price.

wsmarketbell
wsmarketbell

Twinky Twinky little star, Wonder Bread where you are.  Hostess Brands up so high, like a diamond in the sky.  When the revenues are gone, failed marketing shines upon.  Then you show your bankruptcy light, Twinky Twinky all thru the night.

jouleno
jouleno

This is also Obamas fault , right? consequently obama care passes and now hostess goes under. Nice way to start off your term Hussein . 

</sarcasm> 

Robirish
Robirish

Yea doesn't have anything to do with the CEO giving himself a 300% raise while trying to cut bakers salaries by 8% and benefits by 32%, all while giving 9 Executives 60% to 100% raises while filing for their second bankruptcy. Meanwhile not paying into employees pensions owing over 160 million dollars. But typical big business blame it on workers not the bad management getting bonuses and raises for driving the company into the ground. Why not report on that?

DrMan
DrMan

With the price food continuing to climb, people are going to be even more conscious of what they're eating and what they're spending. Hostess is not the first, and won't be the last food company to go under. The problem is that food processing is about the only thing almost solely done in the U.S. for the U.S. With the push to cut costs (and reign in union demands), even that could go overseas.

really?
really?

@Chekpnt As I was reading...I was thinking similar thoughts...but what you said is soooooo spot on!!!!  When is our Country going to wake up to the fundamental principals of economics that got us where we are...instead of listening to the likes of this article or Michael Moore????