Rowyn (rowyn) wrote,
Rowyn
rowyn

Hostess

I need to say one thing at the start, because the silliest rumor on Twitter is "There will be no more Twinkies!" Which is ridiculous: whether Hostess liquidates or not, there will be more Twinkies. Hostess has a number of problems, none of which are "people don't eat Twinkies any more". If Hostess goes into liquidation bankruptcy, then some other bakery will buy the Twinkie brand name and recipe and start making Twinkies. Very likely, some one will buy the Hostess brandname itself and produce Hostess cupcakes and many if not all of their most popular snack cakes. They may not be quite the same, and there may be a delay in production, but they'll go on.

That aside, the Wall Street Journal had an interesting opinion piece by Holman Jenkins on the problems at Hostess, suggesting that the core problem is union vs union. It appears Hostess's distribution costs are excessively high for their product: Jenkins argues this is due to the costs of Teamsters contracts and union rules. The bakers' union, therefore, is betting that their members will be better off under whatever entity buys Hostess out of liquidation -- which won't have the unusually high distribution costs and therefore will be able to pay the bakers a market wage instead of the below-market ones that are all Hostess can afford.

I have not done any research into the situation on my own, but this struck me as pretty interesting and the most rational explanation I'd heard for what's going on, so I figured I'd share.
Tags: economics
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