Katy Askew

Could Hostess liquidation see prices spike?

By: Katy Askew - 16 November 2012 12:59

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The word on Twitter has it that Hostess will be forced into liquidation today (16 November).

The company has repeatedly warned that this would be the outcome of a strike organised by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM).

Hostess appealed to striking workers to return to their posts and gave a deadline of 5pm yesterday for normal production to resume. If this did not happen, management insisted it would be forced to pull the plug on the iconic baker.

As just-food awaits word from our sources at the company, the implications of the news are sinking in. Almost 18,000 bakers now seem likely to lose their jobs. But the ramifications could be felt even more deeply than this.

With over-capacity in the US baking sector, Hostess sources have been downbeat on the prospects of finding a buyer, or buyers, who will continue to operate its bakeries. The message being that those 18,000 jobs are unlikely to come back under a different owner.

A significant proportion of capacity will also be taken out of the US baking category. Certainly, stronger competitors will move in to fill the void left by the Nature's Pride and Twinkies maker. The likes of Flowers Foods - a group that has long signalled its intention to participate fully in the  process of consolidation currently under way - will no doubt expand into new geographies and distribution channels to meet demand.

However, the sudden nature of Hosess's liquidation could also raise the possibility of short-term shortages as supply constricts. This, in turn, raises the spectre of higher bread prices: never a welcome prospect, but at a time when the US economy remains sluggish and consumers continue to be squeezed the news of Hostess's collapse comes as a double blow. 

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