Death of the Twinkie?

[ChiliPepr]

Quote:

Originally Posted by MasterBlaster Evidently the hedge funds took so much money out of the company and loaded it up with debt that it just couldn't function anymore. The unions, as usual, weren't flexible enough to keep it going.

Really? I have not been able to find any references to the hedge funds making money.

One of the best articles on this is from last summer in Fortune Magazine.

I do think that in the end Hostess will be sold, probably to Bimbo (owners of Sara Lee, Ball Park (buns), Entenmann's and many others), unfortunately, I also think the manufacturing will be opened as a non-union shop or out of the country.

I do agree with you that there is a lot of blame to go around.

[JoeWras]

The Bimbo bear makes me smile. I was driving behind a Bimbo truck the other day and couldn't stop smiling. I'm serious! A very clever icon.

Question: does NAFTA or any other law allow free exchange of baked goods in trade? It seems like you don't see much of that. Maybe some stuff made in the Northern US looks like it was targeted for Canada with the bilingual packaging. ("President's Choice", which I think is a Canadian brand.)

But I don't see anything from Mexico in mainline products, only specialty. If Bimbo bought the brand would they just make here in the US?

[ERD50]

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Originally Posted by GrayHare Old twinkies don't die, and they don't just fade away. This science teacher has had one in the classroom for over 30 years USATODAY.com - 30-year-old Twinkie soon to become teacher's legacy Then there are Tests With Inorganic Noxious Kakes In Extreme Situations The T.W.I.N.K.I.E.S. Project

But you can go to the "Health Food" store and buy a product with centuries-long shelf life.

from wiki:

Quote:

Because of its unique composition and chemical properties, honey is suitable for long-term storage, and is easily assimilated even after long preservation. Honey, and objects immersed in honey, have been preserved for decades and even centuries.

-ERD50

[Texas Proud]

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Originally Posted by MasterBlaster Yet another sad American Corporate story... Hedge funds takeover and pilage a viable company. Union workers then won't work for industry-competive wages. The business goes down the tubes... This story reminds me of the plight of Eastern Airlines.... Another tragic American story.

Not sure where you get your info... from the little that I can see, it was not a viable company without major changes or it would not have gone into BK...

What did the hedge funds pilage Maybe they did, but without facts this is just BS...


IIRC, Eastern Airlines also went down because the workers would not accept lower wages to keep it going.... sure, as an employee you have the right to not accept the lower wages, and it can be because of bad management.... but like this, they were told what would happen if they did not accept lower wages and their gamble did not work...

[ERD50]

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Originally Posted by ziggy29 I know you take it upon yourself to be this board's "staunch defender of the free market" -- but just because someone says they don't like the economic trends the "free market" is taking us doesn't mean they are advocating that government intervention you are so keen in arguing against. Just a thought.

I'm not sure where the jump to 'government intervention' came in?

I'm merely pointing out that businesses act the same as us consumers do. We look for the best value at the best price point for our needs. That holds for buying labor, or buying dessert. I have trouble criticizing a business for acting as I do.

That should not be taken to mean we always go for the lowest price for everything no matter what. I might choose to pay a worker $20/hour if I know he will do a better job than the workers I can get for $15. I try to support some little mom/pop shops when I can, even if it might cost a bit more, as I value having them around as it gives me another option when shopping. It's all about value, not simply lowest $.

IME, I have seen very few cases where the free market was not the best solution for allocating resources. Why not defend it?

-ERD50

[ERD50]

Quote:

Originally Posted by Texas Proud Not sure where you get your info... from the little that I can see, it was not a viable company without major changes or it would not have gone into BK... What did the hedge funds pilage Maybe they did, but without facts this is just BS...

And wouldn't the BK court have some say over this?

-ERD50

[HawkeyeNFO]

Sounds like the union got what they wanted. They told the company, "make us a better deal, or shut down!" And that is what is happening. Congrats to the union.

[Chuckanut]

The last time I checked Price was a function of supply and demand. Cost of production is not a direct part of that. I can make a twinkie like product in my kitchen for about $6 a twinkie. But, I doubt if many people are willing to pay that price plus profit just because I have high costs. On the other hand, if people are willing to pay 50 cents for a twinkie and I find a way to reduce costs by 7 cents a twinkie, why should I reduce the price? ( Well, I might want to expand the market penetration or run a competitor out of business in order to help my long term profits).

Obviously, pricing is not quite this simple, but the idea that price is only a function of cost is not correct. Supply and demand are what count. Costs influence supply, of course.

[W2R]

There is a limit on how many baked goods I can allow myself, due to my weight problem. To be honest would so much rather choose hot, freshly baked French bread instead of a Twinkie if/when I can afford the calories and carbs.

Surely in the 21st century we can make better choices for ourselves and our kids. At least, that would be my hope. But on the other hand, if there is actually demand for Twinkies, then I hope they bring them back. I just won't contribute to that demand.

[Bestwifeever]

Quote:

Originally Posted by W2R There is a limit on how many baked goods I can allow myself, due to my weight problem. To be honest would so much rather choose hot, freshly baked French bread instead of a Twinkie if/when I can afford the calories and carbs. Surely in the 21st century we can make better choices for ourselves and our kids. At least, that would be my hope. But on the other hand, if there is actually demand for Twinkies, then I hope they bring them back. I just won't contribute to that demand.

I think this is the real key to the Hostess demise. Not a lot of so-called healthy choices in the Hostess arsenal, not a lot of buyers, not a lot of shelf space in stores.

[ERD50]

Quote:

Originally Posted by Chuckanut The last time I checked Price was a function of supply and demand. Cost of production is not a direct part of that. I can make a twinkie like product in my kitchen for about $6 a twinkie. But, I doubt if many people are willing to pay that price plus profit just because I have high costs. On the other hand, if people are willing to pay 50 cents for a twinkie and I find a way to reduce costs by 7 cents a twinkie, why should I reduce the price? ( Well, I might want to expand the market penetration or run a competitor out of business in order to help my long term profits). Obviously, pricing is not quite this simple, but the idea that price is only a function of cost is correct. Supply and demand are what count. Costs influence supply, of course.

They are all inter-related. It isn't just supply/demand - it is supply/demand at a given price point.

Sure, in a vacuum, cost of production doesn't matter. If 'the market' places the value of a Twinkie at 50 cents, it is as you say. If it costs you $6 to make them, you close shop. If you reduce costs and still get 50 cents, you can keep the savings.

But the consumer has alternatives. So if your competition found the same cost savings that you did, they will probably try to take business from you by undercutting your price. And then you do the same to maintain market-share, and everything hits an equilibrium again. The real key is finding cost advantages beyond your competition.

Early in my career, we had a product that was a near monopoly in the market. I recall asking one of the product managers why we didn't raise the price and just make a 'killing' on that product. He said that we would be 'subsidizing' our competition. He explained, with high prices the competition could make that product inefficiently, invest in R&D, and still make a profit. That would give them experience and a foothold in the market, and they would get better. He said we were better off taking a good (but not great) profit over a longer term, than to try to over-graze the pasture (to switch to a metaphor in the middle of the stream).

-ERD50

[HFWR]

Hostess Brands - Wikipedia, the free encyclopedia

Lots o' blame to go around, but I think the "legacy" costs of pensions and such are being "blamed" for much of the problem, not so much current costs. Much the same as the much maligned Postal Service...

[Koogie]

Quote:

Originally Posted by ChiliPepr Really? I have not been able to find any references to the hedge funds making money. One of the best articles on this is from last summer in Fortune Magazine. I do think that in the end Hostess will be sold, probably to Bimbo (owners of Sara Lee, Ball Park (buns), Entenmann's and many others), unfortunately, I also think the manufacturing will be opened as a non-union shop or out of the country. I do agree with you that there is a lot of blame to go around.

Apparently they are still going to make all this crap up here in Canada as the brands are owned by local companies here... gotta say they aren't anywhere near as popular here as in the States though. We prefer to pollute our arteries with Timbits and dutchies..

[Texas Proud]

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Originally Posted by ERD50 And wouldn't the BK court have some say over this? -ERD50

Over what That the company is viable or that the hedge funds made a killing


I would say most of the time if a company requests to be liquidated in BK, the BK agrees...

[ERD50]

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Originally Posted by Texas Proud Over what That the company is viable or that the hedge funds made a killing I would say most of the time if a company requests to be liquidated in BK, the BK agrees...

Sorry - regarding the hedge funds. I'm not sure the details are clear anyhow, and maybe this happened before the BK court got involved. But if they were in BK, I would think the court would have some say regarding the HF pulling any profits out?

-ERD50

[Midpack]

Pretty amazing how "we" can take a simple OP topic and turn it into an Econ/PolySci 101 debate. Where else have I seen this kind of thing?




At least I didn't "help" this time, maybe I'll learn one of these days...

[FIREd]

I tried to buy a box of twinkies for DW this morning, but they were all gone. Looks like people have gone into hoarding mode.

[mickj]

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Originally Posted by FIREd I tried to buy a box of twinkies for DW this morning, but they were all gone. Looks like people have gone into hoarding mode.

twinkies | eBay

hoarding and price gouging.. the government needs to intervene now!

[ERD50]

Quote:

Originally Posted by Midpack Pretty amazing how "we" can take a simple OP topic and turn it into an Econ/PolySci 101 debate. Where else have I seen this kind of thing? At least I didn't "help" this time, maybe I'll learn one of these days...

What's 'simple' about a company going into BK? This is like a Hollywood drama - Unions fighting Capitalists, greedy hedge funds, a bad economy, a familiar old brand name, health food concerns. All we need is some racy romantic liaison or something between competing factions.

-ERD50

[Texas Proud]

Quote:

Originally Posted by ERD50 Sorry - regarding the hedge funds. I'm not sure the details are clear anyhow, and maybe this happened before the BK court got involved. But if they were in BK, I would think the court would have some say regarding the HF pulling any profits out? -ERD50

Yes, I would agree that the BK would not let the hedge fund take out profits in BK... I was even questioning if there were any profits to take out before BK...

This is a wild guess (with no facts, just speculation)... but I bet that the hedge fund thought they could come in, redo the union contracts, keep the company alive and then flip it for a big profit...

The question that remains is if the brands have enough value for them to make a profit when they are sold...