Hostess Brands announced last week it would file for bankruptcy (the second time in about a decade). It seems almost a classic case of a failing company, with a little blame to go around for everyone:
- Exogenous variables, such as the rising costs of basic commodity ingredients. (Apparently Hostess uses actual flour and sugar, though if you've ever eaten these products, you might be forgiven for not realizing that.)
- Labor: It appears Hostess's unions may have insisted on sticking to outmoded work practices -- like requiring separate delivery systems for bread and cakes? -- C'mon!
- Changing markets: There has been a huge revolution in eating habits in the U.S. Sure, not everyone has turned the corner to organic vegetables and whole grains yet, but the trend is evident, and Hostess failed to keep up with their market. They are the General Motors of the baked goods industry.
Management, however, is mainly at fault. It's management's job to see long term trends, recognize shifts in input costs, shift the product line to meet changing demand, work with persuade unions to adapt, and bring everything together into a smooth-running and profitable whole. Hostess's management, having already been through bankruptcy once, seems to have failed twice to accomplish these things.
If we lionize the "private sector" or "business" for its efficiency, responsiveness, and ability to solve problems; and if we go so far as to propose it as a model for government, we have to be realistic about recognizing the holes in the myth. Businesses can fail; managers can be inept; wrong decisions can be made, even right decisions may not pan out because of unpredictable changes in the economic environment; and hey, government can actually be useful in saving businesses from themselves. But Hostess isn't GM; it's unlikely we'll see Uncle Sam riding to the rescue here.
If you happen to be a fan of WonderBread or Twinkies, never fear, the company plans to continue operating during its restructuring, so you'll still be able to head down to the Seven-Eleven or grocery to pick up a few packages. If you don't mind my asking, what kind of car are you driving for that trip?
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