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Hostess moves to shut down amid strike, with 600 Utah jobs at stake

Published November 16, 2012 7:51 pm

Snack maker • The company blames union strike, but it has been struggling for years.
This is an archived article that was published on sltrib.com in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

Twinkies may not last forever after all.

Hostess Brands Inc., the maker of the spongy snack with a mysterious cream filling, said Friday it would shutter after years of struggling with management turmoil, rising labor costs and the ever-changing tastes of Americans even as its pantry of sugary cakes seemed suspended in time.

The company filed a motion Friday with U.S. Bankruptcy Court seeking permission to shutter its operations and sell assets because the plants' striking workers didn't resume normal operations by a Thursday evening deadline.

The closing would mean the loss of about 18,500 jobs, including nearly 600 in Utah.

"I don't know if they thought that was a bluff," Chief Executive Gregory Rayburn said Friday on CNBC. The financial impact of the strike makes it "too late" to save the company even if workers have a change of heart, he said. That's because retailers decide to stop carrying products when supplies aren't adequate.

Rayburn said he hopes the company will find buyers for its roster of about 30 brands, which include Ho Hos, Dolly Madison, Drake's and Nature's Pride snacks. The company books about $2.5 billion in sales a year.

In Salt Lake City and around the country, the news stoked an outpouring of nostalgia around kitchen tables, water coolers and online as people relived childhood memories of their favorite Hostess goodies.

It also prompted a run on Hostess Brands thrift stores.

Shelves were essentially bare of Devil Dogs, Hostess Cupcakes and other snack foods at the thrift store on North Temple in Salt Lake City as well as the company's regional bakery on 500 South, the latter of which has a "now hiring" banner on display. Inside, shoppers packed the aisles, snatching up the last of the Wonder Breads.

"Usually I'm the only one here," said Mason Clark, who was standing in a line of eight other customers. "I'm sad because I usually come here every day. I have a real sweet tooth."

Donna Bentley stopped at the Salt Lake store after discovering the Hostess outlet in West Jordan had already closed and Walmart near her West Valley City home had sold out of Hostess snacks.

"I want to sit down and cry," Bentley said as she and her three daughters filled a shopping cart with loaves of the puffy white bread. "If my parents were alive, they wouldn't believe this. The world is changing too much."

Brittany Stinson of Salt Lake City was one of the lucky ones. She scooped up the few remaining powdered Donettes although the Ding Dongs were gone.

Employees at the outlets declined to comment.

After Hostess filed for Chapter 11 in January, spokeswoman Anita-Marie Laurie said the company employed about 570 people in Utah. Salt Lake City and Ogden are home to two of its regional bakeries, while 11 Utah cities have Hostess retail stores and nine cities have depots where the company's trucks drop off and pick up goods.

Hostess, based in Irving, Texas, has suspended operations at 33 of its bakeries and said its stores will remain open for several days to sell packaged products on hand. The privately held company's Chapter 11 filing earlier this year was its second trip to bankruptcy court in less than a decade.

Thousands of members of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union went on strike last week after rejecting in September a contract offer that slashed wages and benefits. Hostess said Friday the company is unprofitable "under its current cost structure, much of which is determined by union wages and pension costs."

The bakery union, through Local 401 in Utah, represents about 300, or about half, of the Hostess workers in the state. Those union members, however, had not gone on strike, said Rob Rogers, business agent for Local 401.

"The International's strategy was to use rolling blackouts and not have strikes at all of Hostess' plants all at once," Rogers said. "Our turn just hadn't come yet."

Rogers said there were still workers on the job at the Hostess bakeries in Salt Lake City and Ogden on Friday.

"A lot of people want to point to the union as the cause of Hostess having to go out of business," he said. "The strike may have been the straw that broke the camel's back, but it was the long-term mismanagement that got the company into this mess."

Hostess CEO Rayburn said in a letter to employees posted on the company website that "Many people have worked incredibly long and hard to keep this from happening, but now Hostess Brands has no other alternative than to begin the process of winding down and preparing for the sale of our iconic brands."

He added that all employees will eventually lose their jobs, "some sooner than others."

"Unfortunately, because we are in bankruptcy, there are severe limits on the assistance the (company) can offer you at this time," Rayburn wrote.

Hostess had said the strike seriously affected production at about a dozen of its plants. Three plants were closed earlier this week.

The company had already reached a contract agreement with its largest union, the International Brotherhood of Teamsters. The Teamsters had urged the bakery union this week to conduct a secret ballot on whether to continue striking.

Hostess, founded in 1930, was fighting battles beyond labor costs. Competition is increasing in the snack space, and Americans are increasingly conscious about healthy eating. Hostess also makes Dolly Madison, Drake's and Nature's Pride snacks.

The Associated Press contributed to this story. ­—

Hostess in Utah

Employees • About 600

Regional bakeries • One each in Salt Lake City and Ogden

Retail stores • 11

Depots • 9, where company trucks drop off and pick up goods.