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Wednesday, 30 July 2014

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Hostess Brands is dead, long live the Twinkie

Hostess Brands is dead, long live the Twinkie. The fluorescent yellow cream-filled cakes are a cultural touchstone for generations of Americans. As Hostess oozes through the bankruptcy process for the second time in three years, it is now opting for the nuclear option of liquidation. But the Twinkie brand’s half-life should be longer than its maker’s.

The process of determining a brand’s worth is as gooey as the center of a Hostess Cupcake. But according to the marketing research firm Millward Brown, the value of the top 100 has surged by two-thirds since 2006, to $2.4 trillion. Apple’s name and icon, for example, are estimated at about $183 billion and Coca-Cola’s $74 billion.

A Twinkie may have just as much sugar but it’s no Coke. Still, the spongy cake holds a place in the heart of ageing hipsters who won’t soon forget debates over whether it might survive an atom bomb. That novelty will count for something when Hostess puts Twinkie up for sale and rival snack makers like Kellogg or the Mexican Grupo Bimbo, owner of Sara Lee and Entenmann’s, have a think.

Nostalgia has its limits on financial statements, though, as 82-year-old Hostess discovered all too well. Management renegotiated benefits with workers the last trip through bankruptcy, but they remained too generous to afford. Liquidation could make it easier for potential suitors to stock their shelves with Twinkies. The brand could easily replicate the product’s power to last.

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Context News

Hostess Brands, maker of iconic American snack foods like Twinkies and Ding Dongs, said on Nov. 16 it was seeking court permission to liquidate after it failed to get striking workers to agree to wage and benefits cuts. The company on Jan. 11 filed for bankruptcy protection for the second time in three years.

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