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Hostess Philly bakery not on Tasty owner's 'Buy' list

Flowers wants Wonder, Bimbo wants Twinkies, and US still has too many sliced-bread bakeries, says Janney's Jon Feeney

Hostess Philly bakery not on Tasty owner's 'Buy' list

FILE - A Hostess Twinkies sign is shown at the Utah Hostess plant in Ogden, Utah, in this Nov. 15, 2012 file photo. Hostess, the maker of Twinkies, Ding Dongs and Wonder Bread, announced Friday Nov. 16, 2012 it is winding down operations and has filed a motion with the U.S. Bankruptcy Court seeking permission to close its business and sell its assets, including its iconic brands and facilities. (AP Photo/Rick Bowmer)
FILE - A Hostess Twinkies sign is shown at the Utah Hostess plant in Ogden, Utah, in this Nov. 15, 2012 file photo. Hostess, the maker of Twinkies, Ding Dongs and Wonder Bread, announced Friday Nov. 16, 2012 it is winding down operations and has filed a motion with the U.S. Bankruptcy Court seeking permission to close its business and sell its assets, including its iconic brands and facilities. (AP Photo/Rick Bowmer)

UPDATE: Philadelphia is not among the 20 Hostess Brands industrial bread bakeries Flowers Foods has offered to buy, spokesman Keith Hancock tells me. His company is going ahead with plans to add bread lines at an Oxford, Chester County plant that Flowers acquired in its purchase of Tasty Baking Co. last year.

EARLIER: Workers at bankrupt Hostess Brands' former Blue Grass Road plant in Northeast Philadelphia -- a onetime Acme Markets bakery that turned out Wonder Bread, Acme sandwich rolls, and boxed doughnuts, Ho-Ho's and other snacks -- are hoping a $360 million offer to buy Hostess plants from Tastykakes owner Flowers Foods could result in updating and reopening the lines that once supported 300 bakers and dozens of drivers.

"It's very personal. I worked there 22 years, with the folks affected by this Hostess catastrophe," Hank McKay, vice president of Local 6 of the Bakery workers' union, told me. Production stopped on Nov. 9, when workers at the plant and other Hostess centers walked out on management's 'final" contract offer that included a roughly one-third pay cut (from the current average $17 an hour) over four years, plus higher medical payments and a continued pension freeze. 

Squeezed by ill-timed acquisition debts, disappointing sales and rising costs, Hostess failed to update its plants to match other unionized bakeries owned by rival Bimbo near Norristown (Stroehmann bread), Hazleton (Entenmann's cakes), Reading, Easton, Stroehmann Carlisle and Williamsport, McKay said. Bimbo said last week it plans a new plant in Macungie Township in the Lehigh Valley.

Will the possible purchase by Flowers of 20 Hostess plants and 38 distribution centers result in improvements to the antiquated Philadelphia plant, and its reopening? "I'm trying to find that out," McKay said. "Everybody's been interested in that plant, but they haven't invested," so far.

But even Hostess Brands' shutdown and sale may not be enough to "rationalize" the overbuilt sliced-bread baking and trucking industry, warns Jonathan Feeney, analyst at Janney Capital Markets in Philadelphia, in a report to clients today.

"The industry badly needs to improve its capacity issue," Feeney notes. Georgia-based bread and snack cake maker Flowers Foods' offer to buy the Hostess sites and brands. But Flowers is already building a Philadelphia-area bread line - at a Tasty plant in Oxford, Chester County - while Bimbo said last week it's building a new bakery in Macungie township, Lehigh Valley.

Besides Blue Grass Rd., Hostess ran distribution centers in King of Prussia, Wilmington and the Shore. Locally, Flowers owns the former Tasty Baking Co., its Tastykake plant in South Philly and its Oxford, Chester County bakery.

The Hostess sale is not a done deal -- other bidders are welcome to offer more -- but in practical terms Flowers faces just "one significant threat' to its plans for white-bread domination -- Bimbo's Horsham-based U.S. arm, Feeney writes. And Bimbo is "likely more focused on Hostess's snack cake business," which includes Twinkies and Ring Dings as well as Ho-Hos.

Flowers has boosted sales by about $16 million a month in the roughly $1 billion a month U.S. bread business since Hostess started shutting bakeries in its bankruptcy liquidation last year; Feeney had expected a little better. He says Flowers' share price has already risen about as much as it should (to around $25 a share), given both the boost Flowers and other rivals got from Hostess' bankruptcy, and the tough competition still ahead as sliced-bread and junk-food sales continue to flat-line.

Joseph N. DiStefano
About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
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