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  • A mainstay in pop culture

  • and lunchboxes for more than 80 years...

  • - Twinkie. - Twinkie.

  • - Twinkie. - That's a big Twinkie.

  • Narrator: The Twinkie is an American icon.

  • The vanilla cake stuffed with cream

  • even made it into the National Millennium Time Capsule.

  • Alex Bitter: When you think about kind of

  • the pantheon of food brands,

  • there aren't a ton that kind of

  • rise to the level of Twinkies.

  • Narrator: But two bankruptcies, heavy debt loads,

  • and changing tastes pushed Twinkies off shelves

  • and almost to their death.

  • Andy Jhawar: People were starting to sell

  • boxes of Twinkies on eBay for $1,000 a pop.

  • I mean, just crazy stuff, right?

  • It was like the death of a piece of Americana.

  • Narrator: But just when everyone thought

  • that they were gone for good,

  • Twinkies rose again.

  • So, what happened?

  • Twinkies were invented in Schiller Park, Illinois, in 1930.

  • This guy, James Dewar, managed a bakery plant

  • at the start of the Depression.

  • He wanted to make better use

  • of expensive strawberry shortcake equipment

  • sitting unused when strawberries weren't in season.

  • So he stuck banana cream in a shortcake.

  • Dewar sold the Twinkies in packs of two for 5 cents.

  • When bananas were rationed during World War II,

  • the simple vanilla cream we know today became the filling.

  • In the next two decades,

  • Twinkies and its parent brand, Hostess,

  • dominated the packaged-cake market.

  • Marketed to children in everything from

  • TV commercials to Batman comics,

  • Twinkies rose to the status of a cultural icon.

  • Buffalo Bob: You're getting ready for school.

  • Here. Here's a swell dessert

  • that you can take along with you.

  • A package of two big Hostess Twinkies.

  • Narrator: The Hostess snack cemented itself

  • in kids' lunchboxes across America.

  • Jhawar: It was affordable indulgence for families.

  • It was just so woven into the fabric

  • of the culture of America.

  • Narrator: In 1971, the brand introduced

  • its mascot, Twinkie the Kid.

  • Wizard: It's Twinkie the Kid!

  • Twinkie the Kid: Yahoo!

  • Narrator: The anthropomorphic cowboy Twinkie

  • became popular among kids for sharing his namesake cakes.

  • But growing talk of Twinkies' high sugar content

  • would soon butt heads with the brand's

  • kid-friendly marketing.

  • First, the Federal Trade Commission

  • came down on Hostess for false nutritional claims.

  • The agency concluded that sugar

  • was the main ingredient in Twinkies.

  • And then, in '79, the trial of a San Francisco man

  • charged with murdering the mayor

  • gave rise to the term "Twinkie defense."

  • The defense team argued he had "diminished capacity"

  • thanks to his addiction to Twinkies,

  • and the murder charges were lessened to manslaughter.

  • It was a trial that balked at the wholesome cake brand

  • Hostess was trying to build.

  • Ad: Fresh, wholesome Hostess meets my tough standards.

  • So when I say yes, it's Hostess.

  • Narrator: Then began a string of new owners for Hostess.

  • In the '70s, telephone company ITT

  • ran Twinkies' parent company.

  • In the '80s, dog-food maker Purina acquired Hostess.

  • And a decade later, it landed under its final owner,

  • Interstate Bakeries Corporation.

  • The sale created the largest baking company in the US,

  • with, at its peak, 58 factories,

  • over 10,000 delivery routes,

  • a boost in Twinkies sales,

  • and $3.2 billion in total sales.

  • But in the late '90s, America's changing tastes

  • would soon spell trouble for the sugar-packed Twinkies.

  • With the growing popularity of low-carb, Atkins,

  • and later the South Beach diets,

  • some Americans were becoming more health-conscious.

  • Loaded with calories, sugar,

  • and preservatives most people hadn't heard of,

  • let alone could pronounce,

  • Twinkies became a casualty of the health revolution.

  • Sales fell, and then flattened.

  • In October of '98, because of missed earnings,

  • shares dropped 25% in just one day.

  • But it wasn't just the product that was the problem.

  • Pensions and raw goods got too costly.

  • As other food companies were modernizing manufacturing,

  • Hostess ran inefficient factories,

  • operating at 54% capacity utilization.

  • Jhawar: That's very poor in the manufacturing world.

  • Narrator: The company also relied on

  • a tired delivery system.

  • Jhawar: A DSD model, direct-store-delivery model,

  • has really high costs because you've got trucks,

  • drivers, gas, insurance that you have to pay for.

  • And you're going to every store in America

  • every few days to drop off product.

  • Narrator: Delivery alone ate up 36% of revenue.

  • Hillary Clinton: An important way to capture

  • this moment in time

  • would be by filling a national time capsule.

  • Narrator: In 1999, President Bill Clinton

  • included a Twinkie in the National Millennium Time Capsule.

  • So Twinkies still had a huge fan base,

  • but by then, the damage to Hostess' bottom line

  • had been done.

  • By 2004, with $700 billion in debt,

  • Twinkies' parent company, Interstate,

  • filed for Chapter 11 bankruptcy.

  • Over the next five years, Interstate cut 7,000 employees

  • and shut down eight factories.

  • The company came out of bankruptcy in 2009

  • and rebranded itself Hostess Brands,

  • but it didn't work.

  • Jhawar: But, unfortunately, many of the legacy problems

  • that really hampered the company

  • didn't get solved through that bankruptcy.

  • Narrator: Then the recession took a huge hit

  • on Hostess' bottom line,

  • with year-over-year sales down 20%.

  • To make matters worse,

  • a worker strike and labor dispute soon followed.

  • Jhawar: That fight turned into production stopping,

  • and the management team then threatened

  • to shut the company down,

  • given pressure from its creditors.

  • And that's exactly what happened.

  • Narrator: By January 2012,

  • with nearly a billion dollars in debt,

  • Hostess Brands filed for Chapter 11 bankruptcy again.

  • Broadcaster: The company that makes Twinkies, Wonder Bread,

  • and Ding Dongs announced this morning

  • that it is going out of business.

  • Narrator: In November, Twinkies were pulled from shelves,

  • and headlines across the country

  • reported the death of Twinkies.

  • Jhawar: Customers started honestly

  • losing their minds over it.

  • Bitter: People who would have never cared

  • about Twinkies, in fact, suddenly wanted them.

  • Or thought, "Oh, my God, well,

  • if they're going away forever, I need to stock up.

  • Broadcaster: The rush was on to grab

  • the last of those tasty treats.

  • Broadcaster: People scrambled to get the last Twinkies

  • off those store shelves.

  • Jhawar: It was like the death of a piece of Americana.

  • Narrator: In December 2012,

  • Hostess began laying off all its employees.

  • Things were looking bad for Hostess,

  • but this guy still saw value

  • in the nostalgia attached to the brand.

  • Jhawar: There was a real brand here,

  • and it's hard to kill a good brand.

  • Narrator: Andy is half of the duo

  • credited with saving the Twinkies.

  • Jhawar: If you polled people age 20 and over,

  • there's 95% brand awareness.

  • I mean, it's unbelievable.

  • It's not every day that you can buy a brand like this,

  • that's ubiquitous in consumers' mind

  • and has leading market share,

  • had a billion dollars in revenues,

  • and an 80-year legacy.

  • Narrator: After the second bankruptcy,

  • Andy approached legendary investor Dean Metropoulos

  • about joining him in rescuing Hostess.

  • Dean had turned around...

  • Jhawar: Bumble Bee tuna, Chef Boyardee,

  • Vlasic pickles, Pabst Blue Ribbon.

  • Dean's reputation historically really fit well for this.

  • Narrator: But unlike the first Hostess bankruptcy,

  • in 2012 there was no coming out of it

  • with a simple restructure.

  • Jhawar: That bankruptcy process was unique

  • because it turned into a true liquidation

  • and what's known as a 363 asset sale process.

  • Narrator: Basically, what was left of Hostess

  • was sold for parts.

  • Instead of having to inherit that expensive delivery system,

  • underfunded pension plans, and old union contracts,

  • Andy could cherry-pick what he and Dean actually wanted

  • and forget the rest.

  • So the two showed up to the 363 asset sale

  • ready to fight for Hostess.

  • Jhawar: Not one buyer showed up other than us.

  • Anybody could've showed up and topped our bid,

  • and nobody showed up.

  • It was frankly very surprising to me.

  • Narrator: Andy and Dean purchased Hostess

  • for $410 million.

  • Out of the sale, they got the Hostess brands

  • including Twinkie, recipes, and five factories.

  • Jhawar: That's it. There was no employees,

  • there was no ingredients,

  • there was no inventory.

  • And I have to tell you, it was very odd during diligence,

  • walking through plants where,

  • when you walk in, they're empty

  • and the person who's walking me through the plant

  • has to turn on the lights.

  • Narrator: And, quickly, Andy and Dean

  • got to work fixing the company.

  • First, they tackled that delivery system.

  • Jhawar: The old company did direct store delivery.

  • We were gonna transform it into

  • a distribution-to-warehouse model.

  • Instead of going direct to every grocery store in America,

  • you then go to Walmart's distribution centers

  • or Kroger's distribution centers instead,

  • and then they ship it out to their various stores.

  • Narrator: But in order to move Twinkies

  • through a warehouse,

  • they first had to increase the shelf life.

  • Historically, Twinkies only lasted 25 days.

  • Jhawar: People would put Twinkies

  • in their earthquake shelters

  • because everybody had this perception

  • that Twinkies would last forever.

  • That really, it wasn't the case.

  • Narrator: Andy and Dean invested millions

  • to develop a Twinkie that tasted the same,

  • but lasted longer.

  • Jhawar: We were at first able to get the shelf life

  • to 45 days, and then ultimately

  • to 65 days of shelf life.

  • And so that really helped get the retailers comfortable

  • that they could take it into their warehouses

  • and that the product quality would not be compromised.

  • Narrator: The new recipe and warehouse-delivery model

  • helped cut delivery costs by 20%.

  • It also meant Hostess could affordably deliver Twinkies

  • to drugstores and dollar stores,

  • markets they'd never reached before.

  • Jhawar: Dollar General became one of our top five customers.

  • Narrator: Next up, Andy turned to factory efficiency.

  • Andy and Dean wanted to be able to make

  • $1 billion worth of cake yearly,

  • but with a ninth of the labor and a fifth of the factories.

  • Jhawar: We ended up doing,

  • getting to 85% capacity utilization plus.

  • Narrator: Finally, the duo worked on

  • innovating the product line

  • with smaller pack sizes and mini Twinkies.

  • Jhawar: Those products really didn't get

  • the resonance in the marketplace.

  • And so then we just jumped wholeheartedly

  • into embrace the brand, embrace what you are,

  • which is indulgence.

  • Narrator: The team had to make all these changes

  • in a matter of months.

  • In July 2013, the once dead Twinkies

  • returned