Ding-Dominos Case

To be successful in any business or industry, it requires a combination of knowledge and understanding of whom the customer base is and how to do it better than the competition. Hostess had been in tune with its customers for over eighty-two years while curbing appetites and serving up an array of sweet treats as rich as the company history until late 2012, when the company announced it would seek bankruptcy protection. This decision would directly affect eighteen thousand jobs and would leave millions of Americans scrounging for a sugar fix without the famed Twinkie and Ding-Dongs available on the shelves. There were several major issues that sent Hostess on a crash course for failure, such as lack of management and problem solving on the executive level, as well as union labor disputes. Leadership is vital in athletics, on a hospital floor, and the same goes for business. The leadership at Hostess failed to recognize the healthier social trends of the growing population. Harry Blazer, marketing researcher and food analyst says, “Hostess' snacks don't neatly fit into the U.S.
trend toward a healthier lifestyle that includes a diet rich in whole wheat foods, fruits and vegetables.” According to his research, the demographic is also shifting showing younger adults are more health conscious than their parents were meaning; they are not eating Hostess cakes for snacks (Blazer, 2012). The company executives must have had strategic knowledge that these sugary snacks were in decline and that healthier options were becoming popular in the marketplace. If the senior leadership would have recognized these major changes in the overall demographic, then they could have repositioned themselves within the business by coming out with healthier options for consumers. They certainly were to blame because being in a leadership position makes you responsible for guiding the company towards success or the opposite, in this case. In addition, during the bankruptcy, “A Federal judge agreed to let Hostess executives suck $1.8 million out of the bankrupt company to pay bonuses to CEO’s” (Hartmann, 2013). So, they were rewarded and paid even though they had a hand in running the company in the ground when the workers all lost their jobs and the majority of their pensions. Sounds all too familiar, given senior executives at GM, Ford, and Daimler Chrysler did this just a few years earlier. Union tensions were mounting during the bankruptcy process because the company wanted to cut wages and benefits across the boards, which only resulted in lower worker productivity and moral. The unions also had over 372 different collective-bargaining agreements with many unions and these contracts outlined what every employee’s duties were in a shift (Ghillyer, 2014). Managing a unionized workforce can be confusing even when a single contract is in place, therefore the unions should have merged and come to agreements to protect the workers from losing their jobs. If the unions as well as the management could have reached negotiations instead of being greedy, they could have possibly saved the company. Next, hedge fund companies like Ripplewood Holdings, Silver Point Capital, and Monarch Alternative Capital only joined into assist Hostess for a profit. When debt is purchased in bulk, it is never bought at face value because these companies are looking to score big on their investments. For instance, let’s look how our trusted hedge fund managers handled the housing crisis. History reveals they acted like kids in candy stores knowing they could take advantage of “the system”. I personally do not think their conduct was ethical because they were placing bets on the chance thousands would lose their jobs or not. Lastly, I believe that Hostess Brands could have avoided these issues by paying attention to the main component of the business that enjoys what they do best – the customer.
Hostess failed to recognize the taste buds of the consumer and the aging population that had been grabbing the Twinkies for decades; not to mention the health conscious generation or the rapid epidemic of diabetes in the United States. Hostess was in business because of their famous sweet cake product line that had been successful for many years, but once our government put labels on our food that reveals the calories and ingredients of the products, they should have realized that the public would be changing. Failing to recognize a product life-cycle and other bad signals eventually led to the larger issues with the unions. The company was too far gone by that point because of the product itself could not be
fixed. In conclusion, Hostess brands will have to change who they are and what they are about to remain successful in the food industry. Changes in the microenvironment will continue to affect the business as laws are passed and how our food is evaluated. Currently, healthcare costs are out of control and diabetes spreading faster than Twinkies can be delivered. Richard Branson, famed business mogul and founder of Virgin Records once said, “Do not be embarrassed by your failures, learn from them and start again.”