The Two Big Trends That Pushed Hostess Toward Bankruptcy

Organic food sales

[credit provider=”National Business Journal “]

Hostess is preparing to file for Chapter 11 for the second time since 2004.The first time around, it blamed America’s low-carb diet trends for leading it to bankruptcy, reports the Wall Street Journal. Its top-selling products, Twinkies and Wonder Bread, were blockbuster items for decades, but ever since the early 2000s, health food companies have started to take over more grocery store sales, and chains like Whole Foods have acquired more market share.

Now Hostess is saying the skyrocketing costs of flour and sugar, as well as labour, are playing a big part in its financial situation, reports the Journal. Commodities prices are a big problem for other food companies, but it’s unclear whether Hostess will be able to weather the storm, since it has $860 million in debt. 

It’s also facing some of the same problems it did back in 2004. Since then Americans have become even more health conscious, which is why Hostess decided to launch a line of natural bread, called Nature’s Pride — but it hasn’t done all that well, since there are tons of other healthy options out there.

What differentiates Hostess is its All-American brands. It’s not a health food company, so it shouldn’t try to be one. Its best bet — if it survives this second Chapter 11 — is to convince investors that America still need its staples, just like they need McDonald’s and Krispie Kreme doughnuts, and that Hostess should be the one to preserve the brand.

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