Anita Kong's Blog

Hostees Brands Inc., the producer of Twinkies, Wonder Bread, and Ding Dongs, decided to liquidate its business after it failed to reach an agreement with striking workers. The company simply did not have enough workers to keep up with operations.

What lead to this?

The company growth strategy’s main focus was on operations and optimizing to reduce costs. However, a key factor that was neglected was its product lines, which over time the unresolved issue contributes to the company’s current position today. In order to lower margins, the company financed itself with debt piled on top of debt, resulting in $670 million owed in 5 years.

Hostees’ dilemma can be attributed to the company’s failure to adapt its business model to market trends. There is an increasing focus for healthy lifestyles, which result in a change in diet as people substitute away from junk food. The company failed to adapt when there was an opportunity for it to create products with a higher margin that could compete in the market.

It is crucial that a company is flexible to change and aware of market trends in order to sustain its business.  Hostee’s case is a prime example of the effect of not doing so.

References:

http://www.theprovince.com/business/fp/Twinkies+maker+Hostess+going+business+putting+almost+work/7561754/story.html#axzz2CfMNvjLs

http://www.forbes.com/sites/adamhartung/2012/11/18/hostess-twinkie-defense-is-a-management-failure/