Will the Twinkle return to Twinkies? After several weeks of heavy taxing (in more ways than one) discussions regarding the perception and direction of the country, it is time to look at some lighter matters. Thing is, in our rapidly changing world, few topics ever stay light for long. They either morph into something more, possibly life changing, or dwindle away into inconsequentiality.Take the Hostess Brands situation, for instance. Bermuda residents will remember, for many quite fondly, the little packages of Hostess Cupcakes that were (and still are) sold for many years in Bermuda. Lined up side by side, packaged in two’s, Ding Dong cupcakes with chocolate frosting, HoHos (you could unwind the jelly roll shape to get at the whipped creme in the middle), and my favourite Sno Balls, tinted a radical pink colour and rolled in coconut. Then, there were the absolute best, if you were lucky to get — several packages of Twinkies. Almost no one could resist these creme-filled sweet spongy delights.Caloric count for two of these melt-in-your-mouth treats is about 300 calories including almost ten teaspoons of sugar. Who cared about caloric content back then, or even now? We just loved these confectionery treats, and thanks to the feat of modern packaging, they were never stale, always fresh! A real feat given the predisposition to mouldy-in-an-hour-food accidents in Bermuda.On mid-November 2012, after one of Hostess’ employee unions (Bakery, Confectionery, Tobacco and Grain Millers Union) went out on strike, effectively paralysing production and when final mediation with this union was unresolved, Hostess Brands announced that they would file bankruptcy. Further, 15,000 (of the estimated 18,500) employees were notified that they would be fired immediately. Following fast on this very sad news, Twinkie junkies piled into stores and decimated supplies.What happened to Hostess Brands? There have been numerous columns written, with experts weighing in on the demise of another great American tradition, almost an institution. Their extensive comments are illuminating.According to Wikipedia, the first Hostess cupcakes were sold in 1919 — two for five cents. 400 Million were sold in 1988, and 600 million in 2011.Twinkies became part of the American staple diet, along with pizza, coke, French fries, and hamburgers. Twinkies were considered such a part of the American food landscape that excess consumption of them (by Twinkie junkies) was even blamed for a defendant’s depression in more than one litigation case.However, as years passed, declining sales indicated that Hostess Brands might have become complacent in not adapting their business model to changing American tastes and diets. Of course, diehard Twinkie fans would have objected to any revamp of this traditional product, for sure. New snack-pack rivals made more varied, more health conscious, and interesting products with competitive pricing, but were unburdened by the increasing labour cost of unionised workers. Hostess Brands stated, “it was not competitive, primarily due to legacy pension plans, medical benefit obligations and restrictive work rules.” Source: Wikipedia.The original company, formally named Interstate Bakeries Corporation, went through a number of name changes, and purchases, at one point taken to private ownership then changing back to a public company. The Company acquired additional bakeries, including Continental (and its acquisition Taggert Bakeries, the original creator of Wonder Bread and Hostess Brands). Their first bankruptcy filing was in 2004, taking more than five long years resolve at which point in 2009, the company was renamed Hostess Brands, Inc.High debt, shortage of cash, and continued slowing sales forced the company to suspend multi-employer pension contributions. The unions were not overly receptive to this benefit constraint, while voicing objections to the proposed compensation package for the outgoing Chief Executive Officer. Thus, the financial problems remained unabated and less than three years later on November 29, 2012, the liquidation plan for all assets of Hostess Brands was finalised in federal bankruptcy court.Currently, most, if not all of the assets of the company have been split up and sold. The new owner of the Hostess Cupcake brand has announced that they will resume manufacturing and selling Hostess Brands, appearing on store shelves July 15, 2013. They will be producing fewer products with far fewer employees.Does this sound familiar? As the story unfolds, it reflects what happened with many great manufacturers. Declining sales = declining revenue = overburdened balance sheet = self-fulfilling prophecy.Well, perhaps you understand where this can go, and what your interpretation can be, I leave it up to you.My father used to say (as a very small businessperson), “If you cannot control your overhead costs, they will kill you and your business.”Lesson in these layoffs for the future. Who was to blame? Management blamed crippling labour costs; unions blamed management for excess compensation. No matter the finger pointing, it was certain, that costs far outweighed revenue — and without concessions on both sides, in the final analysis, no faction could pull the company back from the brink. One blogger, Outside the Beltway, suggested that “the Free Market itself Killed Hostess. That what happened to this company is what takes place with any company that fails to survive, and that this is an essential part of the free market system. Reaping the rewards of creative destruction (Schumpeter) reminds us that capitalism’s pain and gain are inextricably linked.” Source: Doug Mataconis, OTB.Personally, I am a sentimentalist and a capitalist, preferring a collaborative effort on the interests of all parties involved, no matter the company or government, to solve problems before they become unsolvable and inevitable. Some money is always better than none, provided that the solutions are equitable for everyone.Sources: Wikipedia, Hostess Brands Information, New York Times, Outside the Beltway. http://business.financialpost.com/2012/1½1/,Martha Harris Myron JP CPA PFS CFP TEP is a Bermudian, and a cross border financial planning specialist / journalist. Her articles are published domestically and internationally, focusing on the challenging financial environment for local and international residents and their families living and working in Bermuda with connections across the pond in the North Atlantic Quadrangle: United States, Canada, United Kingdom and Europe. Inquiries to martha.myron@gmail.com www.marthamyron.com