Twinkies May Survive: Mexican Company Grupo Bimbo Looks To Buy Hostess Brand

By Staff Reporter on November 19, 2012 10:33 AM EST

Twinkies
Twinkies by Hostess Brand (Photo: Creative Commons)

Grupo Bimbo, a Mexican food company, has expressed deep interest in purchasing Hostess Brands following its high profile bankruptcy last week.

Hostess Brands, an 82-year-old food company famous for its Twinkies and Wonderbread, went out of business following a conflict between the company and the union.

Says Bakery, Confectionary, Tobacco Workers and Grain Millers International Union International President Frank Hurt, "Had it not been for the valiant efforts of our members over the last eight years, including accepting significant wage and benefit concessions after the first bankruptcy, this company would have gone out of business long ago. Hostess failed because its six management teams over the last eight years were unable to make it a profitable, successful business enterprise."

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Ultimately, the liquidation of Hostess has caused the loss of 18,500 jobs as well as the closure of 33 plants. Hostess will unwind its business and sell its assets.

A number of companies have openly demonstrated interest in purchasing the company including ConAgra and Flower Foods, the American food company of Nature Valley granola bar fame. According to analysts that spoke with Daily Mail, Mexico's Grupo Bimbo, the world's largest baked goods company, is most likely to take over Hostess.

A $4 billion establishment, Grupo Bimbo is already the part owner of baked good giants Sarah Lee, Entenmann's, and Thomas English Muffins. A number of years ago, Grupo Bimbo reportedly made an $580 million offer to buy Hostess. Now, Hostess is estimated to be only worth $135 million, making the company even more attractive to Grupo Bimbo's bottom line.

While poor management at Hostess Brands ultimately caused the bankruptcy of the brand, the quality of its products are exceptionally high. Demand for Twinkies, the flagship vanilla cream-filled sponge cake, spiked as thousands of families flocked to grocery stores following Hostess' bankruptcy for fear of never tasting a Twinkie again.

According to John Pottow, a bankruptcy specialist and a University of Michigan Law School Professor, Twinkies alone are responsible for $68 million in revenue for the company. Pottow explains, "There's a huge amount of goodwill with the commercial brand name. It's quite conceivable that they can sell the name and recipe for Twinkies to a company that wants to make them."

Beyond poor management and dated business operations, the high cost of sugar prices tied to U.S. trade tariffs further strained Hostess Brand. If Grupo Bimbo were to take over, the company could potentially take food production to Mexico and take advantage of lower priced sugars and raw materials costs.

Unfortunately, even if Grupo Bimbo were to keep Hostess alive, the operational shift to Mexico will mean that the majority of the 18,500 Hostess employees will not get their job back.

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