Just as the black market for Hostess products is getting hot on Web sites such as Ebay and Amazon, Hostess Brands Inc. and the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union agreed Nov. 19 to try and resolve their differences through private mediation. The news is a break from the company’s Nov. 16 announcement it would close and liquidate its assets in bankruptcy court after the union, which represents about 30 percent of Hostess workers, refused to end its strike.
When Hostess reached an agreement including pay and benefit cuts with its largest union, the International Brotherhood of Teamsters, employees belonging to the BCTGM went on strike. The rejected cuts, which had been approved by the bankruptcy court, included wage decreases of 27 percent and benefits losses of about 32 percent.
Since Hostess’ announcement it would immediately cease operations in its 33 plants across the United States, a black market of its products has emerged. Stores have not been able to keep Twinkies, Ding Dongs, Ho Hos and other Hostess treats on shelves, as consumers have attempted to stock up on their favorite goodies, preparing for what has been termed the Twinkie-pocalypse. Some, however, have purchased excess baked goods in order to resell them online at wildly inflated prices.
Ebay sellers are listing boxes of Twinkies and Donettes as high as $21 million—granted they haven’t found buyers yet. Other Ebay listings offer Hostess products for $3 million and state 50 percent of proceeds will be donated to charity. Many Ebay sellers are auctioning their Twinkies to the highest bidder, however, and some bidding wars have ensued. More often, buyers are purchasing boxes of snack cakes for $20 to $30 each. Likewise, on Amazon.com Twinkies are selling from $15 to $50 a box, and individual twin-packs can be found for $8 to $10 each.
When Hostess approached Judge Robert Drain with its liquidation proposition, however, the bankruptcy court judge had other ideas.
“Many people, myself included, have serious questions as to the logic behind this strike,” Drain said as he heard the case in the U.S. Bankruptcy Court in the Southern District of New York. “Not to have gone through (mediation) leaves a huge question mark in this case.”
The U.S. Trustee who oversees bankruptcy cases also expressed in court documents its opposition to Hostess’ liquidation plan because of bonuses the company planned to pay to certain executives.
Mediation talks are now scheduled for Nov. 20, and the liquidation hearing will resume Nov. 21 if an agreement cannot be reached. If the company can be saved, it could rescue some 18,000 American workers from the unemployment line.
Even if Hostess does ultimately go out of business, Twinkies, Ding Dongs and the like may live on. Several manufacturers, including ConAgra and Flowers Food, have expressed interest in purchasing some of Hostess’ brands, as has Little Debbie baker McKee Foods. Another contender for the products is Mexico’s Grupo Bimbo, the world’s largest bread baking company and part owner of Sara Lee, Entenmann’s and Thomas English Muffins. According to Forbe’s, Grupo Bimbo offered to buy Hostess for $580 million several years ago. Hostess value may now be as low as $135 million.
