Nation roundup for June 24
Hostess: Twinkies to return to shelves July 15
NEW YORK (AP) — Hostess is betting on a sweet comeback for Twinkies when they return to shelves next month.
The company that went bankrupt after an acrimonious fight with its unionized workers last year is back up and running under new owners and a leaner structure. It says it plans to have Twinkies and other snack cakes back on shelves starting July 15.
Based on the outpouring of nostalgia sparked by its demise, Hostess is expecting a blockbuster return next month for Twinkies and other sugary treats, such as CupCakes and Donettes. The company says the cakes will taste the same but that the boxes will now bear the tag line “The Sweetest Comeback In The History Of Ever.”
“A lot of impostor products have come to the market while Hostess has been off the shelves,” says Daren Metropoulos, a principal of the investment firm Metropoulos & Co., which teamed up with Apollo Global Management to buy a variety of Hostess snacks.
Hostess Brands Inc. was struggling for years before it filed for Chapter 11 bankruptcy reorganization in early 2012. Workers blamed the troubles on years of mismanagement, as well as a failure of executives to invest in brands to keep up with changing tastes. The company said it was weighed down by higher pension and medical costs than its competitors, whose employees weren’t unionized.
To steer it through its bankruptcy reorganization, Hostess hired restructuring expert Greg Rayburn as its CEO. But Rayburn ultimately failed to reach a contract agreement with its second largest union. In November, he blamed striking workers for crippling the company’s ability to maintain normal production and announced that Hostess would liquidate.
The shuttering triggered a rush on Hostess snack cakes, with stores selling out of the most popular brands within hours.
About 15,000 unionized workers lost their jobs in the aftermath.
In unwinding its business, Hostess sold off its brands in chunks to different buyers. Its major bread brands including Wonder were sold to Flowers Foods, which makes Tastykakes. McKee Foods, which makes Little Debbie snack cakes, snapped up Drake’s Cake, which includes Devil Dogs and Yodels.
Metropoulos & Co. and Apollo bought Twinkies and other Hostess cakes for $410 million.
Apollo Global Management, founded by Leon Black, is known for buying troubled brands then selling them for a profit; its investments include fast-food chains Carl’s Jr. and Hardee’s. Metropoulos & Co., which has revamped then sold off brands including Chef Boyardee and Bumble Bee, also owns Pabst Brewing Co.
That could mean some cross-promotional marketing is in store.
“There is certainly a natural association with the two,” Metropoulos said. “There could be some opportunities for them to seen together.”
The trimmed-down Hostess Brands LLC has a far less costly operating structure than the predecessor company. Some of the previous workers were hired back, but they’re no longer unionized.
Hostess will also now deliver to warehouses that supply retailers, rather than delivering directly to stores, said Rich Seban, the president of Hostess who previously served as chief operating officer. That will greatly expand its reach, letting it deliver to dollar stores and nearly all convenience stores in the U.S.
Previously, he said Hostess was only able to reach about a third of the country’s 150,000 convenience stores.
Production was also consolidated, from 11 bakery plants to four — one each in Georgia, Kansas, Illinois and Indiana. The headquarters were moved from Texas to Kansas City, Mo., where Hostess was previously based and still had some accounting offices.
In the months since they vanished from shelves, the cakes have been getting a few touchups as well. For the CupCakes, the company is now using dark cocoa instead of milk chocolate to give them a richer, darker appearance.
Seban stressed that the changes were to improve the cakes, not to cut costs. Prices for the cakes will remain the same; a box of 10 Twinkies will cost $3.99.
Looking ahead, Seban sees Hostess expanding its product lineup. He noted that Hostess cakes are known for three basic textures: the spongy cake, the creamy filling and the thicker icing. But he said different textures — such as crunchy — could be introduced, as well as different flavors.
“We can have some fun with that mixture,” he said.
He also said there are many trendy health attributes the company could tap into, such as gluten-free, added fiber, low sugar and low sodium.
During bankruptcy proceedings, Hostess had said that its overall sales had been declining, although the company didn’t give a breakout on the performance of individual brands. But Seban is confident Twinkies will have staying power beyond its re-launch.
As for the literal shelf-life, Seban is quick to refute the snack cake’s fabled indestructibility.
“Forty-five days — that’s it,” he said. “They don’t last forever.”
U.S. gas prices down 4 cents over past 2 weeks
CAMARILLO, Calif. (AP) — The average U.S. price of a gallon of gasoline has dropped 4 cents over the past two weeks.
The Lundberg Survey of fuel prices released Sunday says the price of a gallon of regular is $3.60. Midgrade costs an average of $3.78 a gallon, and premium is $3.92.
Diesel remained unchanged at $3.90 gallon.
Of the cities surveyed in the Lower 48 states, Tucson, Ariz., has the nation’s lowest average price for gas at $3.24. Chicago has the highest at $4.23.
In California, the lowest average price was $3.85 in Sacramento. The highest was in Los Angeles at $4.07. The average statewide for a gallon of regular was $4.01, an increase of 9 cents.
Starbucks hiking prices despite lower bean costs
NEW YORK (AP) — Starbucks wants a little extra change for that latte.
The Seattle-based coffee company says it’s hiking prices on average by 1 percent nationally starting on Tuesday. But it says the price for many drinks, such as medium and large brewed coffees and Frappuccinos, won’t change in most its 11,000 U.S. cafes.
For a small brewed coffee, the price will increase by 10 cents at most. Other drinks could increase by more than that.
“Less than a third of beverages will see a small increase in most stores,” said Lisa Passe, a Starbucks spokeswoman. She noted that the increases will vary by region and may apply to different drinks.
Depending on the market, Starbucks Corp. notes it’s the first price hike most customers will see in about two years.
The price hike comes despite falling coffee costs that have boosted the company’s profits. In the last quarter, Starbucks cited lower coffee costs for a stronger operating margin, which represents the money it pockets from sales after subtracting what it pays to keep stores running.
And those lower coffee costs are expected to continue padding its bottom line.
Earlier this month, a Janney Montgomery Scott analyst issued a note to investors saying Starbucks is likely to benefit from lower coffee costs for the next few years. Based on the price of a coffee contract at the time, Mark Kalinowski estimated that Starbucks would pay about half the $1.4 billion it did for coffee in 2012.
But Starbucks notes that coffee represents just one of its many costs and historically has accounted for less than 10 percent of overall store expenses.
Passe said other expenses include rent, labor, marketing, equipment and other ingredients such as milk and sugar.
‘Monsters’ beats zombies, Superman at box office
LOS ANGELES (AP) — Turns out zombies and Superman are no match for monsters.
Disney’s “Monsters University” is the weekend box-office winner, according to studio estimates released Sunday. The animated family film, which reunites stars Billy Crystal and John Goodman and their characters from the 2001 hit “Monsters, Inc.,” debuted in first place with $82 million, beating out swarming zombies in “World War Z” and Superman himself in “Man of Steel.”
“The diversity of this weekend is part of what makes this business so great,” said Dave Hollis, Disney’s head of distribution. “It’s a really extraordinary weekend for the industry.”
Especially for “Monsters University,” Pixar’s 14th consecutive film to open in first place. Such expectations of excellence put a “healthy pressure” on filmmakers, Hollis said: “To deliver that kind of quality consistently is a differentiator in the marketplace.”
Still, the film exceeded studio expectations with its domestic totals, he said.
Paramount’s Brad Pitt zombie romp overcame critical advance publicity to open in second place with $66 million. Media reports months ahead of the film’s opening chronicled its problems, including a revamped ending that delayed its release.
Rewrites and reshoots sent the film over budget. It ended up reportedly costing more than $200 million to make, but early reviews were positive.
“What ‘World War Z’ proves is that all the negative backstory that can be thrown at a movie doesn’t matter if the movie’s good,” said Paul Dergarabedian of box-office tracker Hollywood.com. “I don’t think the audience cares one lick if they had to reshoot the ending if they like the ending and like the movie.”
The success of the film means it could be a franchise in the making. Paramount’s president of domestic distribution, Don Harris, called the opening “spectacular.”
“It’s the biggest live-action original opening since ‘Avatar,’” he said. “(It’s) Brad Pitt’s biggest opening ever, and in terms of Paramount’s recent history, it ranks behind ‘Iron Man’ and ‘Transformers’ as the third largest potential franchise opening in the history of the company.”
Warner Bros. “Man of Steel” was third at the box office, adding another $41.2 million to its coffers and bringing its domestic ticket sales over $210 million in just the second week of release.
The Sony comedy “This Is the End,” which stars Seth Rogen, James Franco and Jonah Hill as versions of themselves trapped in a mansion during the apocalypse, finished in fourth place.
Summit Entertainment’s magic-heist thriller “Now You See Me” held onto fifth place in its fourth week in theaters.
Estimated ticket sales for Friday through Sunday at U.S. and Canadian theaters, according to Hollywood.com. Where available, latest international numbers are also included. Final domestic figures will be released on Monday.
1. “Monsters University,” $82 million ($54.5 million international).
2. “World War Z,” $66 million ($45.8 million international).
3. “Man of Steel,” $41.2 million ($89 million international).
4. “This Is the End,” $13 million.
5. “Now You See Me,” $7.87 million ($6.6 million international).
6. “Fast & Furious 6,” $4.7 million ($11.2 million international).
7. “The Internship,” $3.43 million ($3.2 million international).
8. “The Purge,” $3.41 million ($1.1 million international).
9. “Star Trek: Into Darkness,” $3 million ($4.9 million international).
10. “Iron Man 3,” $2.2 million ($400,000 international).
Estimated weekend ticket sales at international theaters (excluding the U.S. and Canada) for films distributed overseas by Hollywood studios, according to Rentrak:
1. “Man of Steel,” $89 million.
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