Tweak Your Biz » Growth » This Is How To Kill A $2bn Business

This Is How To Kill A $2bn Business



Writing as a journalist of efficiency, sustainability and good practise, the disintegration of Hostess Brands is telling and worth an article.

Q: How does a company as big and as pertinent to America as Hostess fail?

(Possible) A: Not caring about its brand or its future.

Sustainability is about more than just ‘continuing to subsist’. It’s about caring about something enough to want it to continue in health. It’s about renewal, not replacement. ‘Creative destruction’ refers to the process of usurping we see happen all the time: mp3 replacing CD replacing cassette replacing vinyl. Hostess has been stale for a while.

Did 18,500 workers lose their jobs because Hostess and its products became irrelevant? They’ve always been pretty disgusting in objective terms but in the past people were enamored with them. Including the people who ran the company.

Hostess Brands

Who or what is Hostess Brands? (for readers outside the US, I’m guessing)

Hostess Brands is the US foodstuff company responsible for producing Twinkies, Wonder Bread and Ding Dongs. Its products are artificial, unreal consumables that many people today would prefer not to consume, but that were once upon a time the hottest product on the shelf. Wonder Bread was not the best thing since sliced bread. It was sliced bread.

Twinkies, featured in countless Hollywood movies, are known as an item of Americana beyond the States by people who have never even tasted the vanilla-flavoured cream inside, or smelled whatever chemical that smell is.

Snakeskin

The demise of Hostess might be seen as a natural process by some – like a snake shedding its old skin of scales grown during the 1940s, emerging more modern, with less of an appetite for artificial foods. Hisss!

But the truth is, the creative destruction that sees one company die and another replace it, buying up its assets and so forth, is not an ideal or natural outcome. A sustainable business model evolves. There has been progression in the quality of gimmicks and ‘meal cover fakery’, but apart from some seeded loaves and whatnot Hostess has innovated not at all.

What is the lesson here?

Businesses of all sizes can learn how not to fail from the decay of Hostess. Its little fake cakes are rumoured to last for up to 25 years. The mental image of an ageless, unreal product not standing the test of time, is profoundly telling of America.

When we live and work surrounded by everyday tools like smartphones, cloud computing, and GPS tracking, and when even machines with a single purpose such as franking machines and printers are equipped with more tech than home computers were five years ago – how does a multi-billion dollar company fail to evolve?

Let’s start on the surface. Hostess hasn’t done anything smart with its image, logo or products for many years. But, on a deeper level, the values associated with the America that first fell for Wonder Bread and Twinkies and Ding Dongs sugary charm now are very much dated, and ‘of an era’. Just look at the little cowboy on the Twinkie label.

The history of Hostess

Funnily enough, the Twinkie itself was an innovation born during financial hardship, becoming the favourite snack of the Great Depression, according to the now defunct Hostess website.

Wonder Bread was launched with a clever marketing stunt, with helium balloons delivered to children and an informational postcard to give to their mothers. Another innovation: Wonder Bread was the first US bread to be sold ready-sliced.

To come to prominence through being in touch with what people want, to understand what your values are – making a product from offcuts – to running a business into the ground despite billions of dollars of income…

So again we ask:

… How does North America’s #1 selling bread go out of business? Hostess blames the striking bakers’ union but a widely reported story is that senior management and investors had been sucking the company dry for a while.

Both sides agree the strikes came about because workers were being asked to put up with pay cuts of 8%. Meanwhile the CEO was happily accepting a 300% pay rise – $750k to $1,225,000 – and other senior executives enjoyed similar massive pay increases. The last CEO Ted Driscoll left the job, which had been inflated to a salary of $1,500,000, with almost a $2,000,000 severance package. You get the picture.

One story being stage-whispered (ie: not so loudly) online is that the new CEO, Greg Rayburn, had been hired to put the company down like a dog, and share out the profit among senior management. As a liquidation specialist Greg was experienced enough to navigate the ship onto the rocks in such a way that all the cash spilled into the right pockets. To the right people it was worth tripling his salary. This is what many are saying, and I’ve read nothing to disbelieve it.

So what?

As someone who writes about business efficiency this story is the equivalent of someone new wearing a familiar, raggedy old coat. It’s another example of a company that, despite all the sophisticated communications equipment available, still cannot figure out a meaningful purpose or a common goal to unite and stimulate its team. There’s the same old split between workers and management. The unwillingness to embark on bold new ventures.

Many commentators are saying this: Hostess deserves to crumble, but eighteen and a half thousand people do not deserve to lose their jobs.

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Images:  ”Hostess products disappear from shelves / Shutterstock.com



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The Author:

I'm a journalist writing about cleantech, government sustainability policy, and efficient systems for businesses. It's varied but the common links are efficiency and sustainability. I write for ExpertMarket.co.uk and you can speak to me @expertmarket http://www.expertmarket.co.uk

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  • http://about.me/Lindeskog lyceum1776

    Vote with your pocket! This is the beauty of the market place.