Business

Investments let Hostess brands rise again

Gloria Perez, left, and Vilma Landaverde use spatulas to make sure the Hostess Cupcakes remain upright during the flip at the Hostess plant in Emporia, Mo.
Gloria Perez, left, and Vilma Landaverde use spatulas to make sure the Hostess Cupcakes remain upright during the flip at the Hostess plant in Emporia, Mo. TNS

Three years ago, iconic products such as Wonder Bread and Twinkies were dead, killed in a bankruptcy that shut down the once-thriving Hostess bakeries of the Kansas City, Missouri-based company.

Today, at bakeries in Lenexa and Emporia, Kansas, and other spots across the country, the brands are being reborn. Phalanxes of loaves, buns and snack cakes are being baked, packaged and shipped, bound for consumers who never lost appetite for them.

At the newly reopened Flowers Baking Co. plant in Lenexa, 9,000 loaves an hour, two shifts a day, five days a week slide into an oven the size of a tennis court. The Wonder and Home Pride breads, along with bun production, line retail shelves the next day.

Ninety-eight miles southwest of the Lenexa bakery, staggering daily totals — 1.8 million mini-doughnuts, 1.4 million chocolate cupcakes, 1.5 million Twinkies — shoot through production lines 24 hours a day, six days a week in the new Hostess Brands LLC snack cake plant in Emporia. Within minutes, they’re out of the oven and snuggling into plastic sleeves, bags and boxes.

There’s scant sign that low-carb, low-sugar diets are winning the American palate. Even as the new Hostess company makes a foray into producing a healthier whole-grain muffin elsewhere in its system, the sugary old favorites still rule. The Emporia plant is working on a new brownie line for another sweet option.

The paths to resurrection of the old Hostess Brands Inc. lines may be as convoluted as the conveyor systems winding through the big bakeries. But the results are not hard to follow. Some of America’s most recognizable brands are back in business after labor turmoil, debt burdens and a second failed attempt at bankruptcy restructuring led to shuttering 36 bakeries and firing 18,500 workers in November 2012.

In 2013, Flowers Foods, a publicly owned baking company based in Georgia, paid $355 million in court-ordered proceedings to acquire 20 closed Hostess bread and bun bakeries. To date, Flowers has returned three former Hostess sites to production: in Lenexa; Knoxville, Tennessee; and Henderson, Nevada.

Separately, a private investor partnership of Metropoulos and Co. and Apollo Global Management LLC paid about $410 million to buy five of the former Hostess snack cake bakeries. It reopened four. But after amping up production in Emporia, it closed one, leaving bakeries in Columbus, Georgia, and Indianapolis in operation. Emporia’s site came back on line in mid-2013 after being dark for only half a year.

LOAVES AND BUNS

Paul Frankum, president of Flowers Baking Co. of Lenexa, walks the 137,000-square-foot bakery floor like a proud papa, pointing out gizmos and people who make the place hum. Metal stairs and catwalks navigate conveyor lines transporting rivers of dough to pans before proceeding through the baking, cooling, slicing and packaging chain.

“I grew up on a chicken farm. This smells much better,” beamed the 30-year veteran in the Flowers company, who came from Georgia to reopen the plant.

Pulling a just-sliced loaf off the line to offer a taste, he touts the former Hostess brands as well as Flowers products. A “fantastic reintroduction of Wonder Bread,” he said, has vaulted it to a best-seller status among the Nature’s Own, Home Pride and Sunbeam breads and buns made at the plant. (According to Flowers Foods, Nature’s Own is America’s top-selling bread.)

After $10 million in updating, the bakery’s two production lines — one for bread, one for buns — cycle through 525,000 pounds of flour a week, 58,000 pounds of yeast, 65,000 pounds of sugar. Nearly a million pounds of finished product are trucked weekly from the plant.

Frankum credits Amber Mangiaracino, the plant’s director of manufacturing and a grain science major from Kansas State University, for part of the bakery’s successful revival. “We’re lucky to have her,” he said. “She can go places in this industry.”

The Lenexa plant earlier this year geared up with an employment structure different from what it had before the bankruptcy shutdown. The big change: No union affiliations.

In rebirth, the Lenexa plant now has about 100 Flowers Foods employees, all in management, bread production or skilled machinery operation. Another 70 workers in packaging and warehouse operations are supplied by Ambassador, an employee leasing company.

CREME-FILLED CAKES

It’s not possible to see from one end of the Hostess bakery in Emporia to the other, partly because the 290,000-square-foot plant is big and partly because it’s filled with floor-to-ceiling equipment that snakes up, down and around the space.

Wearing the required hair and beard nets, Kevin Sandefur, senior director of operations strategy, points out more than $40 million in upgrades to the plant. That includes work on the six production lines, which usually run two 12-hour shifts a day. One change turned two of the snack cake lines into super-speedy operations. The injection of filling into Twinkies, the application of little white frosting squiggles atop chocolate cupcakes, and the insertion of cakes in plastic sleeves happen in a blink.

The private investor partnership that bought Hostess snack cake assets has kept the corporate headquarters of the new Hostess Brands LLC in Kansas City. CEO Bill Toler and a staff of about 90 manage the company. They make decisions about product mix and production of Twinkies, Hostess Cupcakes, Donettes, Zingers, Snoballs and the newer brownies.

Since reopening the Emporia bakery, originally built in 1964 as a Dolly Madison plant, the company has added a 36,000-square-foot warehouse. It now operates with about 500 on payroll, similar to the plant’s prebankruptcy employment. The new Hostess plant also is nonunion.

Toler declined to cite starting pay or pay ranges at the Emporia plant. He said the company “can’t accurately compare pre- and postbankruptcy pay.” He also said the new Hostess company doesn’t track how many of the employees were rehires from the old Hostess. The plant was well known as a top payer in the community, so even at lower nonunion pay rates, a union official said it was likely to have attracted some workers to return.

One of the equity investors in the new Hostess, Metropoulos, already was known for buying and selling Chef Boyardee, Vlasic and Bumble Bee after turning them around. The other major investor, Apollo Global, had bought and sold Carl’s Jr. and Hardee’s after making improvements. The stock market buzzed this summer with suggestions that the equity team might be heading for an initial public offering of Hostess, valued at about $2.5 billion.

But executives, including C. Dean Metropoulos, said the prospect was premature, and there still were potential growth opportunities for Hostess.

Brownies and whole-wheat muffins figure in the growth plans. CEO Toler pegged brownies as a national $400 million market segment that Hostess should be in. He also said that a “healthier recipe” for whole-wheat products, made in Indianapolis, could become a strong response to consumer demand.

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