In the End, Only the Twinkie Survives

Interstate Bakeries Corp. said Tuesday it will lay off 1,300 workers and quit the bread market in Southern California.

This decision will see the closure of four bakeries, 17 distribution centers, and 19 outlets, as well as the elimination of 325 routes, effective October 29.

The Kansas City-based maker of Twinkies and Wonder Bread will lay off about 1,300 employees, or about 5% of the workforce, in the process.

The affected factories are located in Glendale, Pomona, San Diego, and Los Angeles.

Interstate says it will still maintain 840 workers at two other Los Angeles plants, which produce a variety of snack cakes and doughnuts, including Twinkies, Ding Dongs, and Snowballs.

“Because of its impact on employees and their families, exiting a market is probably the most difficult decision a company can make. At the same time, our primary consideration has to be the company’s long-term survival and financial health,” said Craig Jung, chief executive officer, in a statement.

Jung cited “unprofitable” bread operations in Southern California, worsened in part by lower-cost, non-union competitors; an irrational competitive pricing environment; and changing market and customer demands.

He added that this is compounded by a high fixed-cost structure, excessive workers’ compensation costs, and a confrontational relationship with one of the company’s major unions.

Article Continues Below

The company is in contract talks to seek concessions on health benefits and more flexible work rules.

In the statement, the company blamed its collective bargaining agreements as “prohibitively restrictive in how it can operate its business.” The company also currently contributes to more than 40 multi-employer pension plans as required under various collective bargaining agreements, many of which it says are under-funded.

Regardless of potential union contract changes, a company spokeswoman said the layoffs and closure decisions are final.

Interstate Bakeries filed for bankruptcy protection in 2004. Since then, the company has reduced staff by 22%, closed 10 bakeries, and lost $620 million.

Interstate Bakeries, the nation’s largest wholesale baker, features brand names such as Wonder, Hostess, Baker’s Inn, and Drake’s.

In August, the company reported a Q2 loss of $112.8 million.

Elaine Rigoli has nearly 15 years of experience managing content and community for various B2B and consumer websites. Elaine has written thousands of business and technology articles and has been quoted in The Wall Street Journal and eWeek, among other publications.

Topics

Leave a Comment

Your email address will not be published. Required fields are marked *