November 21, 2012

While we were focused on not having America go over the Fiscal Cliff, the makers of Twinkies have gone over! Hostess Brands, the 85-year-old maker of iconic treats such as Twinkies, Ding Dongs and America’s good-old-white bread, Wonder Bread, are going out of business.

Now, someone will certainly buy the brands and re-launch them, since the only real value in many companies today is their brand. Regrettably, this is a common journey for many of America’s most iconic brands (think Harry & David).

A private-equity firm engineers a buyout that loads up the company with debt. They pay themselves a ton of money while they “restructure” by cutting employee wages and benefits. If this doesn’t make enough money for the owners, they declare Chapter 11, so they can take more fees out of the company and get rid of those ugly pension liabilities. Well, having gone through Chapter 11 in 2004, 18,000 Hostess workers finally said enough is enough. Their strike forced the company into liquidation. Blame it on unions, management, private-equity firms, there is plenty of finger-pointing to go around. It is regrettable that so many firms that launched the historic brands of our youth are facing a similar journey.

A belief in fairness, shared sacrifice, a respect for workers and management, a commitment to a common goal, these values all seems as dead as a Twinkie. So, whatever you do, protect your brand and keep building your brand equity. It may be the only thing you have of value in your company.

One comment

  1. Lots of fingerpointing but one report I found said wages offered were at the $11-12 range. Begs the question about what constitutes a living wage.

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