Hostess Files for Bankruptcy as Twinkie Sales Slow

Hostess CakesHostess Brands Inc. is filing for bankruptcy, in part due to weak sales of their unhealthy baked goods. However, high labor costs and rising commodity prices on sugar and flour have been cited as the main causes of the company’s financial problems. The privately held company is the largest wholesale manufacturer of fresh bakery products in the U.S., and employs about 19,000 people. In addition to being the makers of Twinkies and other snack cakes, the Hostess‘ brands include Wonder Bread, Nature’s Pride and Drake’s breads.

Hostess Brands is estimated to earn $2.5 billion in sales annually and is said to owe roughly $50 million to vendors, but also is facing a pension plan that is underfunded by $2 billion. This is the second time the company has filed for chapter 11, and hopes to renegotiate labor agreements in bankruptcy court.

Overall, bakery snack sales have remained unchanged from last year, however, Twinkie sales have declined by about two percent since last year. Consumers have also been moving away from Wonder Bread products in favor of whole grain breads. Nature’s Pride offers more whole-grain products, however the brand has yet to catch up to competitors in this category.

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