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MENAFN - AFP - 16/11/2012

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(MENAFN - AFP) The future of the Twinkie, Wonder Bread and other iconic US food brands was in question with Friday's announcement that owner Hostess Brands Inc. intends to liquidate its assets.

Hostess, which has faced acrimonious labor relations in recent years as well as the slower US economy, said Friday it filed a motion in US Bankruptcy Court seeking permission to close its business and sell its assets, including iconic brands that have fed US households for decades.

The 82-year-old Irving, Texas-based company, one of the country's largest bakers, could lay off most of the 18,500 people who staff its 33 bakeries, 553 distribution centers and 527 bakery outlets nationwide.

Analysts said it was too soon to say who in the industry could emerge as possible buyers of Hostess's well-known brands, including the iconic cream-filled Twinkies, Sno Balls, Ding Dongs, Ho Ho's, Hostess CupCakes, Wonder Bread and Nature's Pride.

The move came after a strike that crippled operations, already under bankruptcy court oversight following a January Chapter 11 filing.

Besides the labor woes, analysts said the weak US economy played a role in the company's travails, leaving consumers with lower disposable incomes.

Also working against Hostess and other food companies: higher commodity costs on everything from cocoa to grain.

"There's been a significant amount of headwinds that have made the operating landscape more challenging over the last few years," said Erin Lash, an analyst at Morningstar.

Lash said it was too soon to say if the brands would find a buyer. She said the snacks segment of the food business, into which many of the Hostess products fall, has been growing in recent years.

But she noted that many potential buyers, such as Kellogg, have been acquisitive of late and are now absorbing recent purchases.

"It's fiercely competitive, but they have iconic brands," said John Staszak, an analyst at Argus Research.

Staszak said today's operating environment means food companies must spar for precious supermarket shelf space.

Hostess put the blame for its demise squarely on union leaders who ignored a threat by Hostess that a national strike would lead the company to shut down.

On Thursday Hostess decided to pull the plug on the business after determining that too few employees had returned to work. Chief executive Greg Rayburn said the company planned to lay off most of its 18,500 workers and sell its assets "to the highest bidders."

"We deeply regret the necessity of today's decision, but we do not have financial resources to weather an extended nationwide strike," said chief executive Gregory Rayburn.

The Bakery, Confectionery, Tobacco Workers and Grain Millers International Union blasted company leaders for mismanagement and called proposed wage and benefit cuts punitive.

Union President Frank Hurt said in a statement that management lacked experience in the baking business and were motivated by trying to win a quick buck rather than manage the company.

"For the past eight years management of the company has been in the hands of Wall Street investors, 'restructuring experts', third-tier managers from other non-baking food companies and currently a 'liquidation specialist'," Hurt said.

A Hostess spokeswoman said the company's plan would be heard Monday at a bankruptcy court in White Plains, New York.


 






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