Wednesday, November 21, 2012

Long Live the Twinkie

The potential death of the Twinkie has captured the imagination of the American media.  Like the snack cake itself the company is well beyond its expiration date.  Despite some hyperventilating this situation again proves Mark Twain’s famous saying:  “Rumors of my death are greatly exaggerated.”  It’s the type of story that seems tailor made for today’s media culture – no matter what your perspective there’s good guys and there are bad guys and the loser is nostalgia.
Since its founding in 1930 the company has undergone more than 25 mergers and acquisitions, the first in 1937.  This activity indicates that from its inception the company has undergone significant and near constant change in its corporate structure and ownership as a variety of individuals, companies and conglomerates have attempted to maximize profits from the various breads and snacks they make and sell.  Despite America’s nostalgia for their products, this has never been a family run affair.
The company’s history of acquisitions, mergers and the various labor issues is captures the ethos of American Business depending on the time in history.  In the 1950’s and 60’s when the U.S. was growing rapidly the company expanded greatly, buying up 9 different bakeries.  Reaganomics materialized in the 1980’s with the company going private and being run by a high-tech business entity that was trying to run a diverse portfolio.  The 1990’s saw the company go public (again), riding the stock market and economic boom of the time.  The 2000’s found the company in labor battles and the longest bankruptcy in history at that time.  The current bankruptcy proceedings are the most bitter – mirroring today’s business and political cultures.
 
Liberals point to the hedge funds and are irate that management has run the company into the ground while pocketing all of the cash along the way.  Conservatives point to the intransigence of the unions and the strikes that have left them no choice but to liquidate the company and fire all 18,500 workers. 
Both sides are right.  Hedge funds have taken profits out of the company – but that’s what they are designed to do.  A hedge fund is obligated to maximize their investors return.  If they’ve done so by pulling out returns to the point that the company can’t operate and goes under then the original capital is lost and the Fund will have not done their job well and their investors will ultimately lose their funding and not invest in that hedge fund again.  Unions have gone on strike against the company to get better wages and benefits.  That’s their job – to obtain the maximum compensation and working conditions for their membership.  If they’ve done so to the point that the company dissolves, then ultimately the Union will lose membership.
 
Let the company dissolve.  The fact that online sales of the snacks went crazy with the potential dissolution shows that there’s still a strong consumer base.  The company has $2.5 billion in sales.  History has shown that these products have survived under dozens of mergers and acquisitions – this is no different.  American-style capitalism will survive and the snack foods will live.  Ding Dong – the witch isn’t dead and neither is the Twinkie.

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