Tuesday, July 7, 2015

Last Call For Hungry For More

Twinkies are back from beyond the grave, and two years into the comeback of Hostess, we finally are learning what the cost of putting Ho-Hos and Ding Dongs back on shelves really means: the new Hostess Brands, owned by a billionaire venture capitalist, who has automated more than 90% of the company's bakery jobs out of existence.

In 2012, Hostess, the iconic American bakery giant behind Ding Dongs, Ho Ho's and Twinkies, was bankrupt, with plans to slash more than 18,000 jobs and close its doors for good amid a crippling nationwide strike. 
Then, in 2013, a snack-cake savior appeared. The Missouri-based sweets maker was bought for $410 million by a partnership between private-equity giant Apollo Global Management and C. Dean Metropoulos, a billionaire turnaround artist known as "Mr. Shelf Space" for his revival of brands like Vlasic, Hungry-Man and Chef Boyardee. 
Now, the iconic dessert titan is resurgent, selling its golden, cream-filled Twinkies across the world under the name Hostess Brands and turning down $2 billion offers from a pack of hopeful buyers. On Tuesday morning, the company reached its latest peak when Reuters, citing anonymous sources, suggested Hostess would head to Wall Street with an initial public offering that would value the company at around $2.5 billion.

That's a huge turnaround, from Chapter 11 to IPO.  But the true cost has been thousands of jobs.

The Hostess Brands of today, launched in 2013 under an Apollo-Metropoulos holding company, owns sweets and cakes under the Hostess and Dolly Madison brands, including Cupcakes, Donettes, Snoballs and Zingers. 
But it looks and operates very differently than the chain from whence it came. The newer, thinner bakery giant kept only five of the 14 original dessert plants: Of those five, one was sold and another, an eight-decade-old bakery in suburban Chicago with 400 employees, closed in October. 
The investment helped bring the classic American snack food into the 21st century. One 500-worker Kansas bakery outfitted with a $20 million Auto-Bake system, according to Forbes, now spits out more than a million Twinkies a day, doing 80 percent of the work once done by 9,000 workers across 14 plants.

From 9,000 bakery employees at 14 plants to 500 at one plant in Kansas.  That's just the bakery division.  Thousands of more supporting jobs were lost when the plants closed for good. This may be an extreme example of automation in the 21st century, but more of it is coming, and it's going to put a lot of people out of work very quickly.

In fact, we're seeing it now.  How much of the "labor participation rate" being the lowest in 50 years is due to automation as a factor?

Do those Twinkies still taste good to you now?


RepubAnon said...

Somehow, I doubt the other 8,500 people got jobs repairing the robots in that Kansas factory... As automation increases, and good-paying jobs become scarce, fewer people will be able to afford consumer goods. Not to worry, though, the ultra-rich will still buy their $1MM+ sports cars past our cardboard shacks.

Horace Boothroyd III said...

Player Piano.

We are doomed to keep repeating this cycle, of destroy everything and reinvent ourselves at the cost of tremendous waste and anguish, until we learn the wisdom of shooting all the anarchists and expunging all the seminar marxists and overthrowing all the capitalists and adopting a humane social democracy in which production is wisely controlled for use and the richness of our industrial economy is dedicated to setting men free instead of enslaving them.

Deer in the Works.

I have been in the situation, of applying and accepting and hearing the pudgy manager drone on about the five lines on the salary progression curve. In my day, HR had grown cunning such that everyone's first annual review was reluctant to admit that you could chew gum without breaking your own fingers - in case they needed a pretext to dump you without incurring the risk of a lawsuit. My deer was a ground hog, but he appeared to be in no danger so I failed to help him escape or to escape in time myself.

Vonnegut was a character. I used to shoot pool at the van Dyck down in the Stockade; our paths never crossed, but I heard some stories. There was a hotel down the street, scene of many a business dinner where the salesmen would ply the purchasing agents with hookers and booze until the signature was on the contract. The salesmen are pretty much gone, although men such as they typically land on their feet - unlike a lot of your bakers. One of my buddies designed a high efficiency turbine, which everyone mocked until all of a sudden fuel was expensive and he was the hero for saving the company: after the first billion dollars in sales, they gave him a plaque and five hundred dollar honorarium.

Odie said...

No plus Ding-Dongs suck anyway.

Related Posts with Thumbnails