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Twinkie maker Hostess reaches the end of the line

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.
By CANDICE CHOI and TOM MURPHY Modified: November 16, 2012 at 8:54 pm •  Published: November 17, 2012
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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.

Some of Hostess beloved brands such as Ding Dongs and Ho Ho's likely will be snapped up by buyers and find a second life, but for now the company says its snack cakes should be on shelves for another week or so. The news stoked an outpouring of nostalgia around kitchen tables, water coolers and online as people relived childhood memories of their favorite Hostess goodies.

Grocery stores in the Oklahoma City metro area already on Friday already were reporting rapidly dwindling supplies of Twinkies and other favorites off the shelves.

It's a sober end for a storied name. Hostess, whose roster of brands dates as far back as 1888, hadn't invested heavily in marketing or innovation in recent years as it struggled with debt and management changes.

As larger competitors inundated supermarket shelves with an array of new snacks and variations on popular brands, Hostess cakes seemed caught in a bygone time. The company took small stabs at keeping up with Americans' movement toward healthier foods, such as the introduction of its 100-calorie packs of cupcakes.

But the efforts did little to change its image as a purveyor of empty calories with a seemingly unlimited shelf life: Twinkies, for instance, have 150 calories and 4.5 grams of fat. A Ding Dong chocolate cake with filling has 368 calories and 19.4 grams of fat.

CEO Gregory Rayburn, who was hired as a restructuring expert, said Friday that sales volume was flat to slightly down in recent years. He said the company booked about $2.5 billion in revenue a year, with Twinkies alone generating $68 million so far this year.

Hostess' problems ran far deeper than changing tastes, however. In January, the company filed for Chapter 11 bankruptcy protection for the second time in less than a decade. Its predecessor company, Interstate Bakeries, filed for bankruptcy protection in 2004 and changed its name to Hostess after emerging in 2009.

Hostess, based in Irving, Texas, said it was saddled with costs related to its unionized workforce. The company had been contributing $100 million a year in pension costs for workers; the new contract offer would've slashed that to $25 million a year, in addition to wage cuts and a 17 percent reduction in health benefits.

Management missteps were another problem. Hostess came under fire this spring after it was revealed that nearly a dozen executives received pay hikes of up to 80 percent last year even as the company was struggling. Although some of those executives later agree to reduced salaries, others — including former CEO Brian Driscoll — had left the company by the time the pay hikes came to light.

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