Hostess Cupcake Case Study Essay

Since they entered the snack food market in 1919, Hostess introduced their classic Hostess CupCake and their famous Twinkies, which were invented in 1930 and became their bestselling snack cake. Less than a century later, Hostess filed for Chapter 11 bankruptcy protection in 2004. Hostess managed to fend off the temptation to sell and emerged from bankruptcy in 2007. However, in an article detailing Hostess’s recent past Steven Bertoni explains, “After over a decade of failing health that saw two bankruptcies and five different CEOs, Hostess finally died on Nov. 6, 2012” (Bertoni, 2015).

Since the time Hostess introduced itself to the world almost 100 years ago, they’ve fluctuated between success and hardships. With their past bankruptcy issues, Hostess is working toward a brighter future by introducing new products and making advancements. In hopes of rejuvenating their struggling brand, Hostess management now plans on selling new products in new categories. They are now implementing a growth grand strategy in order to increase sales.

Steven Mufson of the Washington Post summarized one of the bankruptcy problems as “management’s failure to freshen up a stale product line and keep up with consumers’ changing tastes” (Kelley, 2012). Management failed to plan ahead in the past, but Hostess management has learned from their mistakes and are now encouraging new ideas. When Hostess liquidated, other companies such as Flowers Foods, purchased the rights to their bread products, including Wonder Bread and Nature’s Pride.

Since selling that portion of their company, Hostess is going in a different direction, “This summer, it began selling white and wheat bread under the Hostess name” (Jargon, 2015). Now they are directly affiliating their brand name with the product, a main part of their promotional strategy of their marketing mix. Hostess is also forecasting new consumer trends by looking into indulgent snacks that have a healthier twist. Jargon quoted Hostess CEO Bill Toler saying, “We have a mindful eye into healthier trends and we’ll launch some whole grain muffins this fall, but our primary focus is on being an indulgent snack,”(Jargon, 2015).

In this new day and age, society is looking down upon high-calorie snacks and focusing more on healthier alternatives, which is a newer market that Hostess is considering dabbling in. While staying true to their original idea of Hostess indulgence, they’re working their way into newer markets in hopes of attracting new customers and pleasing returning customers. In terms of distribution, Hostess is trying to stick with strict consistency and giving the customers the products they want where they want them.

In an article on the expansion of Hostess products, Julie Jargon states, “But Hostess Chief Executive Bill Toler said convenience and drugstore customers expressed an interest in having a single brand representing both bread and other baked goods… ” (Jargon, 2015). Many customers were seeking a consistency in the products. Not only did they want their snack cakes to be Hostess brand, but also their bread products at convenience and drug stores. Jargon also paraphrased Toler saying, of the customer, “… hey weren’t getting reliable deliveries through the bread makers’ direct store-distribution systems” (Jargon, 2015).

Hearing this demand, Hostess management implemented the warehouse distribution model and dropped their direct-store distribution model. Under this method, the products are sent to Chicago where they are sorted in a central warehouse before being sent to the retailer’s distribution center (Jargon, 2015). Top management is also looking beyond their traditional borders, Hostess is planning on going global with their snack cakes.

Hostess CEO Bill Toler also tells Jargon that, “International expansion also is a priority, he said. Hostess is entering Mexico and Canada and broadening its reach in Europe and the Caribbean”(Jargon, 2015). Hostess is implementing an alternative distribution strategy in hopes of a revival of their long supported brand. After yet another bankruptcy and the liquidation of their company, Hostess knew they needed to make big changes, starting with production innovations and looking toward what to do next.

The new Hostess is establishing only three bakeries, located in Indianapolis, Columbus, and Emporia. The plan behind this idea is to make these three factories as efficient as possible with streamlined production and a $20 million AutoBake system. This is the fastest and most efficient system to get the job done, requiring only 500 employees to produce over 400 million Twinkies a year. Bertoni compares the new Hostess output to their past, “output that under the old regime required 14 plants and 9,000 employees”(Bertoni, 2015).

The innovation is responsible for Hostess’s competitive advantage, something they didn’t have before. Another change that Hostess wants to develop sometime in the future is having the company go public, “Our plan would be to make it a public company'(Jargon 2015). Top management, in this case the CEO, is developing a strategic goal, that when the time is right, will be implemented. With the new strength behind Hostess’s production innovation and new goals being developed by top management, prospects are looking up for the once failing company.

Hostess is focused on achieving a brighter future after coming out of their second bankruptcy. They plan to fulfill this goal by implementing a new growth strategy and reworking their distribution model with the possibility of going overseas. Also, by making their production more efficient and top management setting new company goals. They have been around for almost a century, and if they keep up their improvement strategies they will continue on their path of success.