A recent New York Times (NYT) article talked about the revival of the Twinkie by big companies helping corporate raiders profit millions while giving back many jobs to local Hostess plant employees. The New York television sitcom, “The Today Show” had fans lining up at Rockefeller Plaza in Manhattan. The Today Show host, Al Roker, pulled up in a big red delivery truck, throwing out Twinkies to everybody. It was a frenzy — one man shoved cream-filled treats into his mouth, another woman tucked Twinkies into the neckline of her dress. To go along with that, a life-size Twinkie mascot was handing out hundreds of Twinkies to children and posing for photos. The story almost seems surreal when you think about how much money was made by bringing back the Twinkie. The NYT article talked about jobs, money, profits, and greedy corporate finance people. Of course, the article was not about the wisdom of reintroducing the Twinkie and the associated health problems we have in America. Perhaps the article should have been about how people often put aside their health in order to obtain wealth. What the article didn’t talk about was the wisdom of whether it was actually a good thing to bring back products like Twinkies in the first place! Nearly half of America is obese and diabetic, in part because of products like these.

The Rich History of Twinkies (see article)

Twinkies became an American icon that would make its way into just about every child’s lunch pail as well as every kitchen cupboard. Many of us remember Twinkies and Ding Dongs. Products like the Twinkie have been wildly successful due to the marketing, taste, and extension of the shelf life to 65 days. For many of us, we can remember as kids carrying our favorite lunch box with a sandwich, milk, and a Twinkie. It was the highlight of lunch. The fact that companies like Hostess market heavily to children is a fact of reality and makes economic sense, no matter if you agree ethically or not. Snack cakes have always produced some of the highest profit margins in the food industry, and Hostess cakes are particularly well-known for Twinkies and Ding-Dongs. Anybody into taking care of their health must be shaking their heads, but Twinkies were universally accepted back in those days and practically no one even gave a second thought to how these snack cakes affected health.

A Twinkie is an American snack cake that is marketed with all the right words – “The Golden Sponge Cake with Creamy Filling.”

In 1848, Robert B. Ward founded a small bakery in Manhattan. His family would go on to create a cream-filled, yellow sponge cake empire. Twinkies were invented by James Dewar in the 1930’s in a Chicago suburb called Schiller Park. James Dewar basically saw a bunch of machines that were used to make a strawberry shortcake were sitting idle because strawberries were only seasonal in the 1930’s (imagine not being able to buy strawberries year- around!). Dewar originally used bananas to make a cream filling in a short cake and the Twinkie was born. The Vanilla cream came into play because bananas were rationed during World War II. Twinkies were sold throughout America right up to the late 2000’s. Twinkies are now not only sold in America, but can be found and purchased bought in countries like China, Canada, England Mexico, and Egypt.

The Story of Revival

In the late 2012, Hostess filed for bankruptcy and its snack cakes like Twinkie and Ding Dongs were no longer sold in stores. Hostess claimed that since people were moving to healthier foods, the company needed to shut its doors. In 2012, the Hostess company filed for bankruptcy under the private equity firm Ripplewood Holdings. Months later, with Ripplewood having lost control and the company’s creditors in charge, Hostess was shut down and its workers sent home for good.

Then, in the summer of 2013, there was a feeding frenzy for Twinkies. The iconic snack cake returned to shelves just months after Hostess had shuttered its bakeries and laid off thousands of workers. The return was billed on as “the sweetest comeback in the history of ever.”

Nowhere was it “sweeter” a.k.a. very profitable, than at the investment firms Apollo Global Management and Metropoulos & Company. These organizations spent $186 million dollars to buy some of Hostess’s snack cake bakeries and brands in early 2013.

Less than four years later, they sold the company in a deal that valued Hostess at $2.3 billion. Apollo and Metropoulos have now reaped a return totaling 13 times their original cash investment. This is a classic corporate raider scheme where a big business buys a flailing company, then downsizes it to make it profitable again, and then sells it for a big profit. Good or bad, this is the way much business is done these days. Deals like Hostess have helped make the men and women running the six largest publicly traded private equity firms the highest-earning executives of any major American industry. Hostess, a defunct snack brand that was quickly returned to profitability, is a textbook example of the success of this approach.

Stephen A. Schwarzman, a co-founder of Blackstone (the company that now owns Hostess brands), took home nearly $800 million from the Hostess deal. He and other private equity executives receive more money annually than the leaders of Facebook and Apple, just to put it into perspective. Even the new owners of the Hostess company handed out Twinkies at their wedding! It’s not hard to imagine that these people don’t put health as a priority.

Without investment from Apollo and Metropoulos, Hostess brands and all those jobs might have vanished forever after the bankruptcy. The way these firms see it, they created a new company and new jobs with higher pay and generous bonuses.

But the new Hostess employs only 1,200 people, a fraction of the roughly 8,000 workers who lost their jobs at Hostess’s snack cake business during the 2012 bankruptcy. And some Hostess employees who got their jobs back lost them again. Under Apollo and Metropoulos, Hostess shut down one of the plants they reopened in Illinois.

Hostess Abused its Own Factory Workers

Not only were Americans turning to healthier snacks and eating less junk food, but Hostess had its own internal challenges. It is obvious that the big corporation that bought Hostess cares little about the health of the American people, but also of people that worked there.

Just take this excerpt from an article:

“Bakeries are hot places,” Mr. Spina said. “But Schiller Park could really be a hot son- of- a- bitch.”

In this article, former employees recalled grueling shifts when temperatures inside the plant neared 110 degrees Fahrenheit. The workers were given Gatorade to rehydrate. Even though this article is mainly about the wisdom of eating Twinkies, giving people Gatorade to rehydrate to a population that is presumably already insulin-resistant comes with its own challenges. And Gatorade is loaded with Brominated Vegetable Oil (BVA) which affects thyroid function.

Another article excerpt:

Veronica Pacheco, who lives in Schiller Park and joined the Hostess bakery when it reopened in 2013, described “freezing” wintertime conditions that were equally arduous. She said she wore scarves and heavy gloves under her work garments.

Ms. Arnold, the Hostess spokeswoman, noted that prospective employees answered a questionnaire about whether they were willing to work in “extreme seasonal temperatures.” The company said it spent about $100,000 upgrading the heating and air-conditioning system but stopped short of a total overhaul.

The next post will go into what’s actually in a Twinkie.