Aug. 21, 2014
CBS MoneyWatch - The new Twinkie is getting creamed by the competition.
Just 13 months after returning the snack cake to grocery stores, Hostess Brands admits that business is soft. Now, the company is closing one of its four bakeries left in the country. The bakery on the chopping block is in Schiller Park, Illinois, where Twinkies were invented in 1930 by bakery manager James Dewar.
Twinkies' future seemed bleak in late 2012, when a then-bankrupt Hostess said it would close its doors for good. A nationwide strike by its unionized employees appeared to be the final straw, and executives shuttered factories and laid off about 18,000 workers.
But a few months later, Hostess was purchased by Apollo Global Management and Metropoulos & Co. in a $410 million deal. The new owners reopened four of the company's 11 bakeries in Georgia, Kansas, Indiana and Illinois, and hired a much smaller workforce of mostly non-union workers.
Twinkies returned in a widely publicized relaunch in July 2013. But the world was already a different place. A number of knockoffs were already on store shelves, including Golden Sponge Cake, Little Debbie Cloud Cakes, Golden Creme Cakes from Walmart (WMT) and Nice! sponge cakes at Walgreens (WAG), The Chicago Tribune reports.
And those competitors' cakes were often 5 to 50 percent less expensive -- no small consideration in an economy struggling to get back on its feet. At the same time, consumers were becoming more conscious about the sugar and calories in their diets.
Now, Hostess says it needs to upgrade its technology and its manufacturing capabilities to be able to beat back the competition. "While the old Hostess company was in bankruptcy, many competitors took over the shelves and are tenaciously defending their business and thus we must be highly efficient and technologically advanced to compete," CEO Bill Toler told The Tribune.
That led to the decision announced Wednesday to close the bakery in Schiller Park. The factory has been pumping out Twinkies for 84 years, and also makes Sno Balls and Ho Hos.