Thursday, February 16, 2012

WMD

Blink:
Enriched Bleached Wheat Flour [Flour, Reduced Iron, B Vitamins (Niacin, Thiamine Mononitrate (B1), Riboflavin (B2), Folic Acid)], Corn Syrup, Sugar, High Fructose Corn Syrup, Water, Partially Hydrogenated Vegetable and/or Animal Shortening (Soybean, Cottonseed and/or Canola Oil, Beef Fat), Whole Eggs, Dextrose. Contains 2% or Less: Stop! Sounds like a WMD!

Read On:
February is National Snack Food Month. The bad news is one of America’s best known snacks, a cultural icon that President Clinton placed in a time capsule and that some people fry, is under siege. Yes folks, Twinkies, a true WMD (Weapon of Mass Destruction – ingredient statement listed above), the snack creation of inventor Jimmy Dewar (1930, Schiller Park, Illinois) is battling hard times. Hostess Brands, the privately held company that produces the product filed for bankruptcy back in January, the second time in a decade. Financial issues attributed to $860 million in debt, high labor costs and rising commodity prices forced the company to file. However, the good news is senior management indicated they will continue rolling Twinkies off their production lines. Bravo Hostess Brands for not laying off any of your labor force (19,000 people in 48 states) despite being under attack.

Competition in the snack business is fierce, but candidly there is one other major reason Hostess Brands, also the manufacturer of Wonder Bread, is in trouble. America’s snacking eating behavior is gradually changing. Overall, in the food-away-from-home channel, the NPD Group estimates that the overall annual serving’s per capita consumption of snacks (all types) for consumers 13+ years of age is 1,256. They also reported that the overall consumption of healthier snacks is growing. One healthier option is yogurt – 32% of Americans ate yogurt at least once in two weeks in 2011 compared to 18% in 2000. The Produce for Better Health Foundation reported in their last State of the Plate Study (2010) that the per capita cup consumption of fruit increased +5% versus 2004 and that 15% of the fruit was consumed as a snack.

Have healthy snacks declared war on WMDs?

9 comments:

  1. Hi Jim,

    In addition to the problems you mention as being the cause behind Hostess Brands debt, I think your article itself highlights the other key issue which this organization is failing to address. Namely, the rise in consumption/popularity of 'healthy' foods.

    Consider, for example, how Coka-Cola has been diversing their brand portfolio to include water and fruit beverages. Even though they are primarily a junk-food producer, they are still looking for ways to incorporate some healthy food brands to ensure they have viable revenue streams to offset declining purchases of junk food.

    So, instead of simply rallying the battle cry 'Go big or go home', Hotess should instead be looking at how they can update their product lines to make them more appealing and relevant to today's consumers' tastes.

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  2. Interestingly, today's local newspaper on the front page discussed how much of the healthy snacks and food on children's plates at school are thrown into the trash uneaten. According to the article, the meat and mashed potatoes are eaten, but the green beans and applesause are left untouched.

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  3. The problems of Hostess go far too deep to be discussed in a comment, but let me point out that the company has been drowning in debt, and even going through Chapter 11 did not fix the problem. The overleveraging of companies is one reason why were ****ed in this country, and until we address that problem, we aren't going to get going in the right direction.

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  4. The data also shows just how high our obesity rates are in this country. We need to get up off our couches and get moving again! Feel the burn, baby!

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  5. I haven't seen anything that says Hostess is struggling with declining sales due too WMD's they make. They do make a number of healthy products in their bread business. None in their cake business. Probably should do more to extend their reach into healthy food brands, but the problem is on the cost side of their business. It is in antiquated work rules, inefficient factories, debt from equity levered through consolidations and loans for all the equity management leeches, etc. The company says it is trouble because of union pension cost and work rules. That might be a factor, but blaming the workforce for problems supposedly sharp managers, high priced executives and high priced lawyers didn't fix last time is kind of ludicrous. I think they are in trouble and will always be in trouble because they have a unsustainable business model. Baking bread is their largest segment. It requires lots of labor to manufacture and distribute fresh loaves everyday. They have to have a bakery within range of most major sales areas. Hostess has lots of old bakeries and outdated equipment, work rules, and methods. When their predecessor Interstate began consolidating 30-40 years ago, it might have been a good idea. But it has reached it's limit in terms of efficiency. Time to review the business model as well as the work rules. Time to upgrade facilities and distribution channels. Bread and baked goods are commodities with limits to how much consumers will spend, therefore you have to manage the cost of manufacturing, distribution, sales and marketing closely in order to stay in business. Take that from an ex-Frito Lay guy. Frito Lay has been masterful at managing continuous improvement in all those areas while at same time helping consumers maintain their unhealthy eating needs.

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  6. An excellent thread of comments. Thank you. I think we are all in agreement, Hostess has not changed with the time, organization or products, they did not adapt, spine of my last post: http://bit.ly/zmSaPH Again,thank you.

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  7. Other recent events for consideration: Grammar schools have been cutting snacks from the classroom. Parents used to be able to send a snack to school for young children. Due to the increase of allergies, this is no longer allowed.

    Two: Gluten free is very much on the rise. Wonder how that factors into the numbers.

    Three: Regarding Hostess, Kellogg just acquired Pringles from P&G. I see some of the Hostess brands complimentary to the Kellogg portfolio.

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  8. Hostess attempted to update it's product portfolio (when they were first reported as "troubled") with "SmartBakes" better-for-you line
    http://www.brandeating.com/2011/01/news-hostess-new-smartbakes-streusel.html

    but maybe they didn't do so well, their product website appears to only feature portion-control products as a nod to health along with corporate commitment statements
    http://www.hostessbrands.com/Commitment/Health.aspx

    Using the snack line to brand the company implies to me bread was no longer leading for them. and during the 60s and 70s Hostess was like TastyKake (for NON-Philadelphians! ) and Little Debbie Snacks. but this category in general doesn't seem to have found a profitable "re-imaged" niche in the new millenium. I think they have the age-old dichotomy of high-brand recognition steeped in nostalgia which just isn't translating into product performance at the retail shelf for sales.

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  9. Twinkies rock. But I haven't had one in years. No more need be said.

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