Will Unions Kill the Twinkie?

By now I’m sure many of you’ve heard that Hostess, the decades-old mega-conglomerate that blessed us with, among other things, Twinkies and Wonder Bread, has filed for bankruptcy.  And it’s possible some of you may have even heard some of the specifics about how Hostess actually declared bankruptcy eight years ago and how they were bailed out back then by a private equity firm. 

And some of you may be aware of how incapable of fixing what ails Hostess that equity firm proved to be, and just what a cautionary tale the looming demise of that once-proud company really is.

But for those of you who don’t, me explain briefly.

A few decades ago, the kind of consolidation that we’ve recently seen in the banking and telecommunications industries hit the baking industry.  And Hostess, one of the firms that over the course of so many years gobbled up one smaller and more vulnerable competitor after another, did so while absorbing more and more union contracts.  Eventually, Hostess, through a series of complicated mergers and acquisitions, had locked itself into a stunning array of contracts, and found itself operating under an equally stunning amount of complex union requirements. 

In fact, at least one reporter found that Hostess is currently engaged in 372 different union contracts, while another found that of the company’s 19,000 employees, roughly 80% of them belong to a dozen separate unions.

As a result, in an industry whose razor-thin margins often mandate absolute peak efficiency and the leanest of operating procedures, Hostess finds it often has to dispatch two trucks to the very same retailer; one to deliver Twinkies, and the other to deliver Wonder Bread. 

What’s more, Hostess now finds itself having to put roughly $100 million annually into some 40 different multi-employer retirement plans, while having to hire enough accountants and HR people to manage those different funds.  And given that each pension fund team likes the idea of all that Hostess money coming in each month, each fund finds no particularly compelling reason to let Hostess do what the equity firm who owns it has been desperately hoping to do, and in fact needs to do; namely, streamline, consolidate and donate to a single-employer retirement fund. 

In fact, it’s just the opposite.  The people running those 40 different retirement funds find they really like the milk of Hostess’ big fat cow, regardless of how sick and feeble she may be.  And as evidenced by their actions, they’d rather see that cow die than try to find a way to nurse her back to health, if doing so meant they’d have to give up something in the process.

Similarly, the union heads that Hostess must deal with find that two drivers going to the same destination to deliver goods from the same company, may not be a good operating procedure, but in the short term it means one more job.  And that for them, is apparently all that matters.

Forget the fact that if the company goes belly up, both the Twinkies and Wonder Bread drivers’ jobs will disappear.  To the twisted thinking of short-sighted union leaders, two jobs today and no jobs tomorrow still somehow averages out to mean one job; the same number that might possibly exist if the union took the long view, partnered with Hostess, allowed it to operate efficiently and worked with the company to phase those two endangered jobs into one solid one. 

That way the union might have to give up a little something today, but it would also go a long way toward keeping a number of its members employed tomorrow and beyond.

But just as in the case of so many of those pension fund managers, it seems those union leaders Hostess deals with really could care less.  They’d apparently rather slam the door shut on their stateroom and pretend that water just outside the door doesn’t exist.  To them, by ignoring the rising water in the hallway they’ll be fine, regardless of what happens to the rest of the Titanic.

Sure, Hostess could and should have done a number of things differently over the years, not the least of which was to realize consumers were shying away from products made with those three white powders the company still loves to use; flour, sugar and salt. 

They could have embraced a little quicker just how strongly a big part of the market was growing averse to vibrant colored, spongy-sweet baked goods that have the shelf-life of house paint. 

And they probably could have tried to update their look and branding efforts to keep pace with Middle America’s growing taste for things natural, whole-grain and organic.

But make no mistake.  The unions are just as much at fault, if not more so.

I’ve made this point a number of times before, and I’ll make it again.  I am not opposed to unions, as a rule.  If unions were focused on the advancement of member skills and the ongoing development of a worker’s ability to stay abreast of changing job demands, I’d be fine with them.  But most union leaders these days don’t seem to see the link between member knowledge, worker skill and long-term job security. 

Most union leaders would rather pretend it’s not really a global economy now and would rather go on believing that member wages, like they did years ago, still exist in a vacuum. 

Most would rather sit across the negotiating table from management (and in some cases ownership) and treat them not like business partners or investors interested in protecting valuable assets, which their workers are, but cartoon-like fat-cats from the long-ago days of sweat shops and child labor. 

But more than anything, as this week’s case of Hostess proves, so many of today’s union bosses (and, it would seem, pension fund managers) still continue to operate under the delusion that two big armfuls of nothing trumps a solid handful of something.

6 Comments to “Will Unions Kill the Twinkie?”

  1. hemo goblin 16 November 2012 at 2:57 am #

    I agree! This is the same mentality that hurt the US car industry and will ultimately kill our USA brands. Unless we find a way to make employees more responsible for the future of the USA, they (including the Unions) will continue to think selfishly!

    • Perry Sainati 16 November 2012 at 11:26 am #

      I didn’t know when I read your comment this morning that Hostess had finally raised the white flag. You’re right, it’s sad when brands like those die — especially with a little foresight, insight and mutual cooperation they could have been saved. Thanks for the comment, and I hope you’ll keep letting me know of your thoughts and opinions.

  2. Tuttaz 16 November 2012 at 6:48 pm #

    Unions win, no jobs are so much better than jobs and giving in to the man. Just wait for the “pres” to jump in and take over Hostess. After all he can blame Bush if it fails to work…right?

    • Perry Sainati 17 November 2012 at 9:09 am #

      Given her attack on obesity, I’m sure Mrs. Obama would have real issue with her husband’s administration doing anything to save the Twinkie. ;-) Thnx for the comment.

  3. Robbie Ringle 2 March 2013 at 11:36 pm #

    Great, informative article! Employers take advantage of their workers so unions are formed. Unions take advantage of their employers so unions sink the company. Is this what has been and is currently happening in the airline industry? It seems like there’s only 4 airlines left now (Delta, Continental/United, Southwest, American/US Airways).

    • Perry Sainati 3 March 2013 at 12:28 pm #

      I think the airline situation was complicated and, perhaps, a matter of faulty business models, as much as anything. But the union situation certainly didn’t help. Thanks for the comment, and please feel free to share this post with anyone you think might appreciate it.


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