Twinkies disappeared from local store shelves and flooded eBay Monday as Hostess Brands Inc. prepared to enter mediation with its second-largest union.
Hostess initially tried to liquidate and sell off its assets in bankruptcy court, complaining that a recent strike and labor demands made its business unprofitable.
Last week, the company shut 33 plants, including a facility at 1111 S. Sheridan Road, which had 180 workers and produced bread and buns under the Wonder Bread name. The action overall affects 18,500 employees nationwide, 565 distribution centers, 5,500 delivery routes and 570 bakery outlets.
The bankruptcy judge hearing the case said Monday that the parties haven’t gone through the critical step of mediation and asked the lawyer for the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which has been on strike since Nov. 9, to ask his client, who wasn’t present, if the union would agree to participate.
The judge noted that the bakery union, which represents about 30 percent of Hostess workers, went on strike after rejecting the company’s latest contract offer, even though it never filed an objection to it.
“Many people, myself included, have serious questions as to the logic behind this strike,” said Judge Robert Drain, who heard the case in the U.S. Bankruptcy Court in the Southern District of New York in White Plains, N.Y. “Not to have gone through that step leaves a huge question mark in this case.”
Hostess and the union agreed to mediation talks, which are expected to begin the process on Tuesday.
Meanwhile, the last boxes of Hostess products such as Twinkies, Ho Hos and Ding Dongs were snatched up by fans or those hoping the iconic snack cakes would become collectibles.
In Tulsa, the Reasor’s grocery store chain and QuikTrip convenience stores said many Hostess products, which also include donuts, cupcakes and bread, had sold out.
Reasor’s inventory showed 400 recent sales for boxes of Twinkies, across its 17 area stories. They were being replaced with similar products, a spokesman said.
“Little Debbie’s and Bluebird, for example, make Twinkie-style snack cakes,” said Les Weese, director of center store for Reasor’s. “And, everybody makes a chocolate cupcake.”
Bread products from Hostess never have been a big percentage of the grocery chain’s sales, he said.
QuikTrip also reported being out of many Hostess items. The strike, however, forced the Tulsa-based business to move quickly to replace Hostess as a major supplier of buns.
“We had a contingency plan ready,” said spokesman Mike Thornbrugh. “Actually, this bankruptcy by Hostess may turn out to be an opportunity for us.”
While local shelves didn’t hold many boxes of Twinkies, cyberspace was packed with the cakes.
“I heard someone was asking $1,000 a box, which is completely crazy,” Reasor’s Weese said. “There might be some value in having one of the last boxes produced by Hostess, even if someone else buys the company and the product comes back, but you probably wouldn’t see that kind of price in your lifetime.”
A quick check of eBay listings Monday evening showed $10 to $25 to be a common asking price for a box of 10 cakes. One seller was asking $9,800, but pledged to donate the money to charity.
As to whether Hostess can reach an agreement with the union and survive, company CEO Gregory Rayburn said that the two parties will have to agree to contract terms within 24 hours of the Tuesday since it is costing $1 million a day in overhead costs to wind down operations. But even if a contract agreement is reached, it is not clear if all 33 Hostess plants will go back to being operational.
“We didn’t think we had a runway, but the judge just created a 24-hour runway,” for the two parties to come to an agreement, Rayburn said.
Hostess, weighed down by debt, management turmoil, rising labor costs and the changing tastes of America, decided on Friday that it no longer could make it through a conventional Chapter 11 bankruptcy restructuring. Instead, the company, which is based in Irving, Texas, asked the court for permission to sell assets and go out of business.
It’s not the sequence of events that the maker of Twinkies envisioned when it filed for bankruptcy in January, its second Chapter 11 filing in less than a decade. The company, who said that it was saddled with costs related to its unionized workforce, had hoped to emerge with stronger financials. It brought on Rayburn as a restructuring expert and was working to renegotiate its contract with labor unions.
But Rayburn wasn’t able to reach a deal with the bakery union. The company, which had been contributing $100 million a year in pension costs for workers, offered workers a new contract that would’ve slashed that to $25 million a year, in addition to wage cuts and a 17 percent reduction in health benefits. But the bakery union decided to strike.
By that time, the company had reached a contract agreement with its largest union, the International Brotherhood of Teamsters, which urged the bakery union to hold a secret ballot on whether to continue striking. Although many bakery workers decided to cross picket lines this week, Hostess said it wasn’t enough to keep operations at normal levels.
Rayburn said that Hostess was already operating on razor thin margins and that the strike was the final blow. Even if Hostess goes out of business, its popular brands will likely find a second life after being snapped up by buyers. The company says several potential buyers have expressed interest in the brands. Although Hostess’ sales have been declining in recent years, the company still does about $2.5 billion in business each year. Twinkies along brought in $68 million so far this year.
Tulsa World Business Editor John Stancavage contributed to this story by The Associated Press.