Unions Killed the Twinkie

[Gaspar]

Our very own Phil Wilson.

http://www.foxbusiness.com/on-air/varney-co/index.html#/v/1383561509001/unions-killed-the-twinkie/?playlist_id=87060

[AquaMan]

Simplistic. Fits you. Unions...bad. Incompetent bakers...good.

[Gaspar]

Expensive labor. . .bad.  Inexpensive cash flow. . .good.

[AquaMan]

Failure to keep up with consumer changes in demand....bad. Failure to understand and cope with growth of organics and healthy food movements....bad.

Insistence that white bread is the fault of Unions...headline material.

[Conan71]

12 unions and 400 different labor contracts?  Does anyone understand how much that equates to in administrative costs just to deal with union labor?

One of our vendors explained to me several months ago that the union labor hourly rate isn't vastly higher than non-union in our primary industry.  Yes, union wages and benefits do increase payroll costs but he said it's the administrative bullshit to deal with the union that makes it much more costly.

[Conan71]

Failure to keep up with consumer changes in demand....bad. Failure to understand and cope with growth of organics and healthy food movements....bad.

Insistence that white bread is the fault of Unions...headline material.

Have you looked around Reasor's lately?  Unfit and unhealthy are still in vogue.  At least in this area.

[Townsend]

Unfit and unhealthy are still in vogue.  At least in this area.

Thus Dunkin Donuts chomping at the bit.

[RecycleMichael]

These baked goods are all made by union workers...

» bimbo
» boboli
» brownberry
» EarthGrains
» Entenmann's
» francisco
» freihofer's
» marinela
» mrs baird's
» oroweat
» sara lee
» stroehmann
» thomas'
» tia rosa

They seem to be doing just fine.

[Conan71]

These baked goods are all made by union workers...

» bimbo
» boboli
» brownberry
» EarthGrains
» Entenmann's
» francisco
» freihofer's
» marinela
» mrs baird's
» oroweat
» sara lee
» stroehmann
» thomas'
» tia rosa

They seem to be doing just fine.

Or just haven't filed bankruptcy yet.

[AquaMan]

Wonder totally missed the healthy foods movement. Add to that the decrease in per capita bread consumption, the proliferation of junk food to compete with Twinkies, Cupcakes and SnoBalls and you're looking at a company that needed to blame its failures on labor. Past negotiations reduced their labor costs but not enough to compete with importing of packaged goods made with really cheap labor.

One of the biggest labor problems they faced is not in manufacturing, though, but in transportation. Trucking costs and merchandising. Every business now is facing exploding costs of fuel, maintenance and the complexity of routing. Most just farm it out. I don't believe they owned their own transportation. Truck drivers are already pretty poorly paid and often forced into buying their own trucks and contracting with the manufacturer. That accounts for the 12 unions and 400 different contracts.

Too bad. I liked the brand and some of the products were my childhood mainstays. Mike is right. The mgmnt got out managed by others and are blaming the unions like I blamed my big brother for everything.

[RecycleMichael]

You are spoiling their fun. All business failures are because of unions and all business success is based on tax cuts for the rich.

[nathanm]

I suspect any future lack of Twinkie "goodness" might have much more to do with it having been trotted out as an example of the worst "food" evar since at least the 80s. It's interesting how in Gaspar's world, unions are always at fault.

[Conan71]

2012 Bankruptcy

By December 2011 it was reported that Hostess Brands was on the verge of filing for bankruptcy a second time after it suspended payments for union pensions and was struggling to remain current on its $700 million loan.[11]

On January 10, 2012 Hostess Brands filed For Chapter 11 Bankruptcy for the second time. In a statement in its filing the company said it "is not competitive, primarily due to legacy pension and medical benefit obligations and restrictive work rules." The company said it employs 19,000 people and carries more than $860 million in debt. The company said it would continue to operate with $75 million debtor-in-possession financing from Monarch Alternative Capital, Silver Point Capital and other investors.[3]

Read more: http://www.answers.com/topic/interstate-bakeries-corporation#ixzz1jGPFTbfC

Certainly behemoths like Hostess suffer from high overhead costs simply due to how large a corporation they are and how many facilities they operate.  They are caught in a squeeze between higher operating costs and demands for lower price points from major grocers and retailers.

That said, you can't ignore that union costs do impact the bottom line of American industry. Union pensions and health benefits for the retired are costly legacies for companies.  Look at it another way, RM, how financially sound would the MET be if 1/3 of the people on your payroll were no longer employed by you?  Companies are paying quite a bit for no return in productivity moving forward.  I suspect the days of corporate pension plans and good medical coverage for retirees is numbered.  Cities and states are finding this out too with their retired civil service jobs.

If you take a look at McKee Foods, manufacturer of Little Debbie snack cakes, there are some significant differences:

They only operate three plants for their primary brands.  To my knowledge, McKee has never been unionized and according to their web site they offer a 401K plan and profit sharing.  Something much more common to non-unionized environments and something which lowers their legacy costs going forward.  They are a profitable business model.  Certainly, being non-union is not the focal point of their financial success, but it definitely adds to their bottom line and gives them a competitive edge their unionized competitors do not enjoy.

[guido911]

These baked goods are all made by union workers...

» bimbo
» boboli
» brownberry
» EarthGrains
» Entenmann's
» francisco
» freihofer's
» marinela
» mrs baird's
» oroweat
» sara lee
» stroehmann
» thomas'
» tia rosa

They seem to be doing just fine.

"I will take 'businesses I will no longer buy from' for $100 Alex"

[AquaMan]

I think you make the point well Conan. They got outmanaged in a difficult business environment. No matter how low and simple their labor costs could be cut they aren't going to be able to compete with a more recent start up that doesn't have the same model. To blame labor as the reason for their failure as Gas did is just scapegoating.

Labor costs incurred in previous environments (pensions) that were necessary at that time, became a weight they couldn't bear.  But they don't operate in a vacuum. Other companies, GM for instance, also have those heavy weights and have adapted.  Some grocers faced this and simply sold their business or closed it down and reopened with new management, resigned old employees (thus eliminating higher labor costs) or found other ways to streamline. Some even paid off others to assume their previous obligations.

This is like payback for past sins. Keep in mind why many companies like McKee (whose Little Debbies are simply awful) are not unionized. They are well managed enough that a union has little reason to get any traction. That means respect for employees, competitive wages and fair treatment.  Or they operate in a state, like OK, that make it difficult to do so.