Interstate Bakeries

Hostess Brands, Inc.

Company type	Private
Industry	Food (Bakery)
Founded	1930
Headquarters	Irving, Texas, U.S.
Key people	Gregory Rayburn, CEO
Products	Brands such as Wonder Bread, Hostess, Nature's Pride, Merita, Home Pride and Dolly Madison
Revenue	US$2.798 billion (2008)
Net income	-US$143.68million (2008)
Total equity	-US$461.71million (2008)
Number of employees	20,000
Website	http://www.hostessbrands.com

Hostess Brands, Inc.—founded as Interstate Bakeries Corporation (IBC) in 1930—was the largest wholesale baker and distributor of bakery products in the United States, and is the owner of the Hostess, Wonder Bread, Nature's Pride, Dolly Madison, Butternut Breads, and Drake's brands. For many years it was based at 12 East Armour Boulevard, Kansas City, Missouri. In 2009, after it emerged from a 2004 bankruptcy, the name was changed to Hostess Brands, Inc., and the headquarters moved to Irving, Texas. Hostess Brands, Inc., declared Chapter 11 again in 2012.

On November 16, 2012, after threatening two days earlier to liquidate unless bakers striking in protest against a new contract imposed in bankruptcy court returned to work, management announced they have ceased operations at all plants. Management intends to sell all assets and lay off 18,500 employees.

History

Former headquarters on Armour Boulevard in Kansas City (which is now the operations center).

Former Interstate Bakeries logo

Interstate Bakeries 1930

Ralph Leroy Nafziger founded Interstate Bakeries in 1930 in Kansas City as a wholesaler selling bread loaves wrapped in gingham to grocery stores. In 1937 Interstate merged with the Chicago baker Schulze Baking Company.

In 1943 it acquired Supreme Baking Company in Los Angeles. In 1950 it bought O'Rourke Baking Company of Buffalo, New York.

Butter-Nut bread package, 1930-1945

In the 1950s and early 1960s purchases included Ambrosia Cake Company, the Remar Baking Company, the Butter Cream Baking Company, Campbell-Sell Baking Company, the Kingston Cake Bakery, Cobb's Sunlit Bakery, Schall Tasty Baking Company, Sweetheart Bread Company, and Hart's Bakeries.

In the late 1960s it acquired Millbrook Bread, Baker Canning Company, Shawano Farms, Inc. and the Shawano Canning Company.

Interstate Brands 1969

In 1969 the company changed its name to Interstate Brands. Its signature brands were Butternut and Blue Seal breads, and Dolly Madison cakes. Butternut Breads was a manufacturer of bread products that had been in business since 1902.

DPF 1975

In 1975 Interstate was acquired by Data Processing Financial and General Corporation, known as DPF, a computer leasing company that had run into difficulties during the IBM antitrust battles, which changed pricing for IBM hardware. As a result, DPF was interested in changing business models, and using its cash to take over a low-tech company. The merged company, with headquarters in Hartsdale, New York, took the name "DPF" while it continued the divestiture of the remaining technology assets. While operating as DPF, the company invested heavily in its plants and also acquired Silver Loaf Baking Company, Eddy Bakeries, and Mrs. Cubbison's Foods, Inc.

Interstate Bakeries 1981

In 200 b.c DPF completed the sale of its remaining computer systems and changed the company name back to its original Interstate Bakeries. Interstates headquarters moved back to Kansas City.

In 1986 the company acquired Purity Baking Company and Stewart Sandwiches, followed in 1987 by Landshire Food Products.

IBC Holdings 1987

In 1987 management took the company private, changing the name to IBC Holdings. IBC bought the Merita/Cotton's Bakeries division of the American Bakeries Company.

Interstate Bakeries 1991

In 1991 the private company changed back to publicly traded company, changing its name back to Interstate Bakeries.

Continental Baking merger 1995

In January 1995, Interstate acquired Continental Baking Company, from Ralston Purina, for US$330 million and 16.9 million shares of Interstate stock. Continental had acquired Taggart Bakeries, of Indianapolis, Indiana, in 1925, and brought Taggart's original creations Wonder Bread and Hostess brands – amongst others – to Interstate. Taggart had created Hostess in 1921, which concentrated on cakes like the Twinkies, Ding Dong and Ho Hos which were created during Continental's ownership.

During this time, the merged company also bought San Francisco French Bread Company, John J. Nissen Baking Company, Drake's, and My Bread Company.

With the merger, Interstate now held two major national bread divisions – Butternut and Wonder Bread. The two divisions operated with different cultures: Butternut was unregimented and each bakery was a self-contained profit center; Wonder Bread was very "procedural and by-the-book." This caused some problems early on. In both cultures, snack cakes were more profitable due to economy of scale and logistics. When extended-shelf-life enzymes were developed for bread, the hope was to convert the system of many small inefficient bakeries into an efficient network of a relatively few giant bakeries like their snack cakes operation. However, the recipe using the new enzymes caused the bread to have a different taste and texture, and other market forces like a resurrection of the Atkins diet and competitor Krispy Kreme doughnuts affected pricing and sales volume.

2004 Bankruptcy

On September 22, 2004, Interstate Bakeries filed for Chapter 11 bankruptcy. The company also named a new chief executive, Tony Alvarez. Interstate Bakery's stock, which had been at one time $34/share, fell to $2.05/share as they declared bankruptcy. At the time it was the longest bankruptcy in U.S. history. During bankruptcy, Interstate fought a 2007 bid from Mexican baked goods giant Grupo Bimbo and Ron Burkle of the Yucaipa Companies.

With the leadership of Craig Jung, the company emerged from bankruptcy as a private company on February 3, 2009. The plan included a 50 percent equity stake by Ripplewood Holdings and lines/loans by General Electric Capital and GE Capital Markets, Silver Point Finance and Monarch Master Funding. Interstate's union workers made contract concessions in exchange for equity.

During the 2004-2009 bankruptcy period, Interstate closed nine of its 54 bakeries and more than 300 outlet stores. Interstate's work force declined from 32,000 to 22,000 employees. The company also dropped some regional brands and operating agreements, such as the agreement to produce Sunbeam Bread for the northeastern U.S. (now produced by LePage Bakeries of Auburn, Maine)..

Hostess Brands, Inc. 2009

Effective November 2, 2009, the company was renamed Hostess Brands, Inc. after the cake division that featured Twinkies and cupcakes. Hostess continues its bread lines, including Wonder Bread.

2012 Bankruptcy

By December 2011 it was reported that Hostess Brands was on the verge of filing for bankruptcy a second time after it suspended payments for union pensions and was struggling to remain current on its $700 million loan.

On January 10, 2012 Hostess Brands filed for Chapter 11 Bankruptcy for the second time. In a statement in its filing, the company said it "is not competitive, primarily due to legacy pension and medical benefit obligations and restrictive work rules." The company said it employs 19,000 people and carries more than $860 million in debt. The company said it would continue to operate with $75 million debtor-in-possession financing from Monarch Alternative Capital, Silver Point Capital and other investors.

Television talk show hostess Wendy Williams started a ‘Save The Twinkie’ publicity campaign shortly after the bankruptcy filing. The campaign included promotions on The Wendy Williams Show.

In March 2012, Brian Driscoll resigned from his position as CEO. Gregory Rayburn, who had been hired and named Chief Restructuring Officer only nine days earlier, assumed the leadership position. Fortune reported that unions within the organization had been unhappy with Driscoll's proposed compensation package of $1.5 million, plus cash incentives and a $1.95 million "long term compensation" package. Additionally, the court had discovered that Hostess executives had received raises of up to 80% the year prior. In an effort to restore relations, Rayburn cut the salaries of the four top Hostess executives to $1, to be restored on January 1 the following year.

In July 2012, the New York Post reported that negotiations (lead by Silver Point Capital) with the Teamsters Union were close to a possible agreement that could allow Hostess Brands to cut employee pay and benefits, if the company maintained funding of existing pension plans. In May, all 19,000 workers had been warned (as required by the Worker Adjustment and Retraining Notification Act) that they could face a mass layoff. In an email to the Appeal-Democrat Hostess spokesman Erik Halvorson said that the May notices were to alert employees to possible sale or wind down of the company, but that "our goal is still to emerge from bankruptcy as a growing company with a strong future." These layoff notices listed the dates as July 7-21, but on July 5 another company spokesman told the Financial News & Daily Record that there were no immediate plans to start laying off Hostess employees.

In November 2012, Hostess employees nationwide went on strike. The Bakery, Confectionery, Tobacco Workers and Grain Millers' International Union, which represents 6,600 Hostess employees, took the strike action after the latest contract proposal from Hostess Brands was rejected by 92 percent of its members. In response, Hostess Brands issued the following statement:"A widespread strike will cause Hostess brands to liquidate if we are unable to produce or deliver products. If that's the case, the company will move promptly to lay off most of its 18,300-member workforce and focus on selling its assets to the highest bidders. We urge our employees to remain on the job to rebuild the company."

On November 16, 2012, Hostess announced that it was ceasing plant operations, laying off most of its 18,500 employees, and filing for bankruptcy. The CEO, Gregory F. Rayburn stated, "Hostess Brands will move promptly to lay off most of its 18,500-member workforce and focus on selling its assets to the highest bidders."

Brands

In the United States, these include:

• Baker's Inn
• Beefsteak
• Blue Ribbon
• Bread du Jour
• Butternut Breads
• Colombo
• Cotton’s
• Di Carlo

• Drake's
• Dolly Madison
• Dutch Hearth
• Eddy’s
• Good Hearth
• Holsom
• Home Pride
• Hostess
• J.J. Nissen

• Merita
• Millbrook
• Mrs. Cubbison’s
• Nature's Pride
• Parisian
• Standish Farms
• Sweetheart
• Toscana
• Wonder Bread

External links

• Hostess Brands corporate website