Case Study: Hostess Baking Company

Superior Essays
Hostess Baking Company: Never a Full Recovery
Hostess Baking Company was founded in 1919 by selling their baked goods in the Continental Baking Co in New York City. Hostess began to succeed in the 1950’s after being exposed on the TV show “Howdy Doody” and has been well known ever since. In 2012, Hostess Baking Company, which is famously known for Twinkies and Wonder Bread filed for bankruptcy. Hostess had already filed for bankruptcy once before this time and had struggled financially for years. Just in 2011, the company had lost more than $300 million. That is almost three times the amount that they lost in 2010. In 2012, Hostess was one of the largest known distributors of breads and baked goods. In the US alone, they had 36 bakeries,
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After the first bankruptcy, Hostess tried to reinvent itself, but was unable to due to their poor management and weak sales. Hostess was in a time of transition by hiring new upper management, which does lead to a loss of time and money. This is because when new leaders are appointed they have to adjust and learn the values of the company and also create their own. After the first bankruptcy, there were new positions filled on the board of directors. In 2010, the CEO Craig Jung left Hostess and was replaced by Brian Driscoll. The company was criticized for how it did not invest any profits back into the company. The management did not invest any money in upkeep of the factories or delivery trucks. For more than 30 years Hostess had been expanding the company, while letting its debt pile up and continue to grow. Another factor was that goes along with poor management were the weak sales and increased costs. In 2010, Hostess’ sales were $2.5 billion, which was down 11% since 2008 and 28% from 2004. At the time, Twinkies continued to be the top seller, Hostess sold 323 million Twinkies in 2011. By the beginning of 2012, their debt had accumulated to about $860 million, on top of that, also had $1.4 billion in liabilities and less than $1 billion in assets. This was also due to the large amount of interest due on their debt, which was roughly While going through this hard time, Silver Point, …show more content…
After already going through one bankruptcy less than a decade apart, Hostess tried to reinvent the company, but was unable to succeed. Unions going on strike, poor management, and not updated products is what lead to the second bankruptcy of Hostess. There are multiple steps that I believe Hostess should have taken to avoid this financial collapse. Ownership should not consider the short-term profits that they could gain, but they should think about the long-term development. Only when the company develops stably and sustainably can ownership gain long-term revenuer. While it is smart to constantly be expanding the company, Hostess did not properly control their funds by constantly spending, even in a time of hard times financially. Hostess should have taken a harder look at how things could be more efficiently structured before spending. I also believe that Hostess’ weak sales were from the company not innovating their products. Even the most popular food brands should be reinventing their products every few years. Their products date back many years and the generations have changed since then. The consumer is always looking for the newest product. If I were in Hostess’ position, I would have a team assigned within the company that is designated to research to find what consumers are wanting at the time and then develop and create new products for

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