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The Free Market Killed Hostess, And Thatís A Good Thing
OutsideTheBeltway.com ^ | 11/16/12 | DOUG MATACONIS

Posted on 11/19/2012 11:01:40 AM PST by GSWarrior

This morning’s news that Hostess Brands, Inc. was shutting its doors after 82 years of operation (originally under the name International Bakeries Corporation) has elicited a lot of commentary from various sources. Culturally, I’m seeing a lot of people lament the fact that some of their favorite brands of snack food or bread — from Twinkies to Ho-Hos to Wonder Bread to Beefsteak Rye Bread — will no longer be available. Politically, there’s been a definite theme on the right blaming the Baker’s Union for the company’s collapse since they would not agree to a modification of their contract notwithstanding the fact that they had been warned that this would happen, and that even the Teamsters Union warned them that they were risking the fate of the company and everyone’s jobs by being so stubborn. Both of these reactions strike me as being wildly over blown, based largely on common misunderstandings of what actually happens in Bankruptcy Court and the business world, and both miss the point that the death of Hostess Brands is a fairly good example of the free market in action.

(Excerpt) Read more at outsidethebeltway.com ...


TOPICS: Business/Economy; Miscellaneous; Society
KEYWORDS: bankruptcy; freemarket; hostess; unions

1 posted on 11/19/2012 11:01:48 AM PST by GSWarrior
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To: GSWarrior
This analysis is completely off-base.

The market for the company's projects was shrinking, it is true.

When this happens, the normal reaction for a business is to reduce costs and find out ways to improve its sales by investing in other business lines.

However, the unions prevented the company from having the flexibility to cut costs and finance growth.

2 posted on 11/19/2012 11:05:37 AM PST by wideawake
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To: GSWarrior
According to the contract Hostess had with the union prior to filing for bankruptcy, shipments containing both bread and bakery items couldn't be shipped consolidated freight, they had to be made in two separate trucks.

I'd bet the contract was full of little added costs like this.

3 posted on 11/19/2012 11:10:02 AM PST by skeeter
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To: GSWarrior
Boy, just reading the comments on that article is like a “who’s who in Moron-Land”...
4 posted on 11/19/2012 11:12:31 AM PST by RavenATB
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To: wideawake
Not to mention back when I was in St. Louis the Hostess bakery there was being attacked by the EPA and the econuts because -- get this- the odor of baking yeast bread. It smelled like heaven but as I recall there were regulations in play that were going to force the bakery to renovate to insure that no odiferous pleasantries were emitted that could delight the senses.
5 posted on 11/19/2012 11:13:11 AM PST by piasa (Attitude adjustments offered here free of charge)
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To: wideawake

I think the issue is, the locations where the bakeries were enabled them to deliver fresher products to these markets ... don’t know if this was critical in their business model.

I buy chips made in North Carolina all the time in Washington.

So..

There can be a rational argument that the free market killed this company (we will never be able to prove or disprove this) but there is an absolute proven fact that the union kept them from having the flexibility for the Hostess company to have an opportunity to reinvent themselves to save these jobs.


6 posted on 11/19/2012 11:14:21 AM PST by dila813
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To: piasa

I’m with you! I grew up in Milwaukee and driving past the breweries and smelling that heavenly yeasty goodness was the only good part about living there! (We escaped in 1970...)


7 posted on 11/19/2012 11:20:32 AM PST by Diana in Wisconsin (I don't have 'Hobbies.' I'm developing a robust Post-Apocalyptic skill set...)
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To: GSWarrior
Hostess was providing jobs for many people just simply not able to master any job requiring much skill.

You can't pay workers more than they can produce with their efforts.

It will serve the union right if someone moves the brands to Mexico.

8 posted on 11/19/2012 11:20:36 AM PST by SWAMPSNIPER (')
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To: GSWarrior

What would any one expect a union loving socialist to say.


9 posted on 11/19/2012 11:21:37 AM PST by ravenwolf
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To: GSWarrior

Free market? I’m 47 and I’ve never seen a free market. Did it slip in during the night and kill Hostess?


10 posted on 11/19/2012 11:28:14 AM PST by SampleMan (Feral Humans are the refuse of socialism.)
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To: GSWarrior

Hostess went Galt...


11 posted on 11/19/2012 11:29:28 AM PST by TheDon (In 2012, American voters chose European style big gov't.)
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To: GSWarrior
"Both of these reactions strike me as being wildly over blown, based largely on common misunderstandings of what actually happens in Bankruptcy Court and the business world, and both miss the point that the death of Hostess Brands is a fairly good example of the free market in action."

So... good for Hostess? Bad for GM?

12 posted on 11/19/2012 11:29:53 AM PST by Mr. K (some days even my lucky rocketship underpants don't help...)
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To: GSWarrior

There was an article where the president of the union blamed Romney and Bain Capitol for causing the bankruptcy.


13 posted on 11/19/2012 11:35:08 AM PST by SkyDancer (Live your life in such a way that the Westboro church shows up at your funeral)
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To: GSWarrior
The articles conclusions are false: The UNION and its goons killed Hostess, Twinkies and their cup cakes. The union THUGS who support Obozo thought they could roll Hostess and instead, Hostess told Obozo and his thug unionestas to "hit the road". They deserve everything that is coming to them. Once sold the new owners should move the entire operation to a "right to work state" and FIRE every union member that worked for Hostess and hire replacements for all of them.

The union workers had a chance to not only save their jobs, but save the Hostess company as well! Instead the union workers and the greedy union thugs chose to kill their own jobs and the company to boot! How in heavens name they could chose to do this to themselves and to their families in this totally failed and failing economy is beyond all reason and comprehension.

After their unemployment benefits all run out, the banks foreclose on their homes and these union workers lose everything, I hope they and their families enjoy living on the street, in their cars and in homeless shelters because they have no one to blame for the mess they are in but THEMSELVES. As for the union leadership THUG bosses who motivated them to take this delusional course of self destruction... they will still "land on their feet" and will as Hans Gruber so aptly put it; "We will be sitting on a beach, earning 20%."

Lord willing, other union workers will finally wake up, learn the "Hostess lesson" and realize that their union overlord, thug bosses do not care about them or the companies that employ them and pay their salary, but only care about themselves, their wealth and their power.

14 posted on 11/19/2012 11:35:08 AM PST by Jmouse007 (Lord deliver us from evil, in Jesus name, amen.)
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To: GSWarrior

we haven’t had a free market in at least a century


15 posted on 11/19/2012 11:40:56 AM PST by GeronL (http://asspos.blogspot.com)
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To: GeronL

So true.


16 posted on 11/19/2012 11:42:15 AM PST by GSWarrior
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To: Jmouse007

Yes, I hope to see them reopen in a Right to Work State. Let’s call that FREEDOM to work state. Oh no! Hostess took their pensions? Mine, too. Get a real life, you union toadies.


17 posted on 11/19/2012 11:44:52 AM PST by bboop (does not suffer fools gladly)
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To: TheDon
Hostess went Galt...

Hostess went 20th Century Motors... but there is no magical perpetual motion Twinkie hidden in the ruins.

18 posted on 11/19/2012 11:46:47 AM PST by KarlInOhio (Big Bird is a brood parasite: laid in our nest 43 years ago and we are still feeding him.)
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To: dila813

They were on their SECOND trip through bankruptcy court ~ obviously a management, technology and marketing problem.


19 posted on 11/19/2012 11:49:18 AM PST by muawiyah
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To: Diana in Wisconsin

Having live on the island of Oahu - driving past the Dole Pineapple plant was like a blast of thousands fresh baked Pineapple up side down cakes coming out of the oven. My what a wonderful aroma~


20 posted on 11/19/2012 11:51:33 AM PST by Red_Devil 232 (VietVet - USMC All Ready On The Right? All Ready On The Left? All Ready On The Firing Line!)
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To: muawiyah

It’s a sad day for California. All those glaucoma patients with the munchies and no more twinkles...lol


21 posted on 11/19/2012 11:51:54 AM PST by jsanders2001
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To: Jmouse007

http://www.zerohedge.com/news/2012-11-16/hostess-liquidation-curious-cast-characters-twinkie-tumbles This guy names names ~ you don’t ~ bunch of lefty wankers took down this company. They owned it! Just like GM. Which will be going down soon. Some new owners are not reliable.


22 posted on 11/19/2012 11:55:54 AM PST by muawiyah
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To: Mr. K

Same as GM ~ try this article: http://www.zerohedge.com/news/2012-11-16/hostess-liquidation-curious-cast-characters-twinkie-tumbles


23 posted on 11/19/2012 11:57:17 AM PST by muawiyah
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To: jsanders2001
There'll soon be Bimbos in their lives ~ (new owner of the machinery ~ a Mexican company)- The Hostess business model was woefully out of date. The latest rage ~ actually this has been going on 15 to 20 years ~ is the instore bakery machine! Pour in the glop from plastic bags; set the control to the right product number; push the on button.

After the prescribed time the machine tells you it's done and you pull the product and wrap it in bags or place in boxes.

It's much more efficient to truck around glop to machines in the stores than it is to truck around finished product to the stores.

The alternative is to produce products with incredibly long shelf lives ~ they're a little chewier, but they can be sold in gas stations everywhere!

24 posted on 11/19/2012 12:02:25 PM PST by muawiyah
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To: GSWarrior

I’ve been buying their Stoneground Whole Wheat for years, at the “day old” store next town over. The moisture content is a little better than some other brands, so it freezes well, and is fine for five-six days after thawing.

Cost is about one third of fresh, and I really can’t tell the difference once it becomes a sandwich, toast, French toast, etc.


25 posted on 11/19/2012 12:02:41 PM PST by JimRed (Excise the cancer before it kills us; feed &water the Tree of Liberty! TERM LIMITS, NOW & FOREVER!)
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To: dila813
There can be a rational argument that the free market killed this company (we will never be able to prove or disprove this)

We have no free market. This would tend to disprove it, don't you think?

When we have places where bakeries are banned from producing an aroma, when sugar prices are artificially high (2x) by government barriers, when corporations are taxed the highest on Earth, when some companies are given government handouts (Solyndra, etc) and protectionist laws (domestic sugar for instance), when union goons make sure in some states that bread and snacks get different trucks (as an earlier poster noted) and likely make it hard to near impossible to fire bad workers (normal for unions).....

can anyone really pretend we have anything close to a free market??

26 posted on 11/19/2012 12:05:21 PM PST by GeronL (http://asspos.blogspot.com)
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To: wideawake

The analysis was not only off-base, but irrelevant.
He seems to want go all the way toward building a case
that the “free market” should be allowed to work through its ineluctable process of separating the wheat from the chaff, and he makes some high-falutin’ references to creative destruction and Joseph Schumpeter, but he misses the entirely obvious point that its that intransigent union that effectively TOOK THE PLACE OF THE MARKET in the case of Hostess.The union practiced its own not-very-creative destruction in this case, and I wish I could figure out how it’s serving a Higher Agenda here, like one, for example, that’s satisfying the higher authority of the Obama Administration.This is a writer with no sense of irony, which is something we were all supposed to learn about in High School.


27 posted on 11/19/2012 12:10:15 PM PST by supremedoctrine
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To: muawiyah

The Mexican BIMBO Corp are already pimping out Sara Lee and now they might get Hostess.... someday they might even nab Little Debbie....


28 posted on 11/19/2012 12:10:35 PM PST by GeronL (http://asspos.blogspot.com)
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To: GeronL

The point here, is all the others in this market deal with the same thing.

If they were killed by Mexico Bakeries, your arguments would be valid.

If I bought this company, I would move the production. I think I would like to move it to some place like Utah.


29 posted on 11/19/2012 12:45:27 PM PST by dila813
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To: RavenATB
...just reading the comments on that article is like a “who’s who in Moron-Land”...

That's the part that stood out the most to me.

18,500 employees, 33 plants, 12 unions, 40 pension plans, half of 'em multi employer orphan plans, more than 380 individual union contracts, 11 of those unions refuse to strike or honor the Baker's walkout or picket lines, a previous chapter 11 buyout/bailout to save jobs, and the NLRB.

The "free market" had nothing to do with it (free market wasn't in operation here), Hostess was murdered by a few Bakers union boss thugs, and an unknown number of Bakers union rank an file members.

30 posted on 11/19/2012 12:46:01 PM PST by Navy Patriot (Join the Democrats, it's not Fascism when WE do it, and the Constitution and law mean what WE say.)
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To: dila813

Not every companies gets bailouts, not every company gets grants from the government, not every companies gets sweetheart deals from states and cities.

They are not treated the same.


31 posted on 11/19/2012 12:56:08 PM PST by GeronL (http://asspos.blogspot.com)
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To: GSWarrior

Blaming the Baker’s Union for the company’s collapse is a fact nothing else caused it.
Greed will always do you in,helllllloooo Detriot.


32 posted on 11/19/2012 1:00:37 PM PST by Vaduz
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To: GeronL

True, I wouldn’t ever expect a bailout though.


33 posted on 11/19/2012 1:02:41 PM PST by dila813
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To: Navy Patriot
And I wonder what those now-former Hostess bakers will be doing for a living a year or two from now. I can just imagine what those resumes will look like when the career Hostess line workers try to parlay all that “experience and expertise” from 20 or 30 years pushing “Ho Hos” into cardboard boxes. They'll probably be outraged to find out that their qualifications after three decades at Hostess put them last in line for a door-greeter job at WalMart.
34 posted on 11/19/2012 1:05:11 PM PST by RavenATB
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To: Vaduz

Hostess was loaded up with debt by private equity.
In this case, it was DEMOCRAT run private equity, including Dicky Gephardt.

The archaic union rules certainly contributed also.

But notice how there’s NO MENTION in the media of the looting and pillaging done by Ripplewood. Imagine if it had been Bain Capital....


35 posted on 11/19/2012 1:08:04 PM PST by nascarnation (Baraq's economic policy: trickle up poverty)
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To: dila813

I am not an expect on the distribution of bakery products. However, I think these bakery’s were scattered all around the country so that they could ship competitively to all markets. I do not think you could have a bakery in just Texas, Utah, AL and be competitive to WA, ME and IL. Unless that is you are willing to give up 50% of the US market.


36 posted on 11/19/2012 1:13:02 PM PST by woodbutcher1963
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To: Navy Patriot

The owners are doctrinaire extreme Leftwingtards ~ they did it ~ mostly with other people’s money.


37 posted on 11/19/2012 1:14:54 PM PST by muawiyah
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To: GSWarrior
Culturally, I’m seeing a lot of people lament the fact that some of their favorite brands of snack food or bread — from Twinkies to Ho-Hos to Wonder Bread to Beefsteak Rye Bread — will no longer be available.

Grupo Beembo to the rescue!

¡Sí, señor!

38 posted on 11/19/2012 1:15:42 PM PST by cynwoody
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To: GSWarrior

We do not need another view from the left.

If even the teamsters were trying to educate them, you know that they are way off the left cliff.


39 posted on 11/19/2012 1:17:33 PM PST by editor-surveyor (Freepers: Not as smart as I'd hoped they'd be)
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To: nascarnation

The Lewinski’s (MSM] never MENTION anything bad about the stupid democrats.


40 posted on 11/19/2012 1:21:16 PM PST by Vaduz
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To: dila813

I am not an expect on the distribution of bakery products. However, I think these bakery’s were scattered all around the country so that they could ship competitively to all markets. I do not think you could have a bakery in just Texas, Utah, AL and be competitive to WA, ME and IL. Unless that is you are willing to give up 50% of the US market.


41 posted on 11/19/2012 1:26:44 PM PST by woodbutcher1963
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To: SampleMan

“Free market? I’m 47 and I’ve never seen a free market.”

was just what I was going to type. Same age too.

But I’ll add something that will be very unpopular here. The corruption of the free market has been a two way street. Yes the govt holds most of the blame, but some blame can be pointed at the publically traded corps too.


42 posted on 11/19/2012 1:27:37 PM PST by roofgoat
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To: Diana in Wisconsin

I lived in Naples, Italy, the Kimbo coffee facility was near one of the shopping area’s we would go to. I would drive a few laps down wind to soak it in. I miss it.


43 posted on 11/19/2012 1:56:06 PM PST by phormer phrog phlyer
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To: muawiyah
The owners are doctrinaire extreme Leftwingtards ~ they did it ~ mostly with other people’s money.

The company was mismanaged to the left, (like GM), and should have refused union demands (and made the necessary changes) long before the earlier bankruptcies, but the murder was done by the Bakers. All the management did was to enable them, admittedly with OPM. Investors who invest in crony capitalist enterprises are not investing in capitalism, and should be more careful.

44 posted on 11/19/2012 1:57:28 PM PST by Navy Patriot (Join the Democrats, it's not Fascism when WE do it, and the Constitution and law mean what WE say.)
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To: roofgoat

Yes, many large corporations love byzantine regulations. I was about 30 before I realized that. It is a form of monopoly to keep smaller players from becoming competition. If you require a team of lawyers to win a contract, that cuts out most of American businesses.


45 posted on 11/19/2012 4:13:51 PM PST by SampleMan (Feral Humans are the refuse of socialism.)
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To: roofgoat

Corporations have done more harm to the republic than any other entity. Their lobbyist that lamented 50 different state regulations empowered FedGov@#153 quest for regulatory dominance thru OHA EPA etc. Corporations HATE states rights.


46 posted on 11/19/2012 4:26:57 PM PST by central_va ( I won't be reconstructed and I do not give a damn.)
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To: woodbutcher1963

You still have to get raw materials to the factory.

Regardless of where it is.

There is an advantage on some products due to shelf life. This mainly effected the wonder bread etc...

Most of the sweets certainly can be centrally manufactured. No need to have all of these factories.


47 posted on 11/19/2012 5:27:45 PM PST by dila813
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