People who don’t eat snack cakes are mourning the news that Hostess is going out of business. I saw several Facebook and Twitter posts that lamented the loss of Twinkies, even though the writers admitted that they hadn’t eaten one in years. Meanwhile, people who do eat snack cakes are probably unconcerned by the news. There’s a good chance they buy a brand that is less expensive than Hostess.
I did a random price check on Hostess and Little Debbie snack cakes on my way home today. Hostess cakes cost $1.69 per package while Little Debbie cakes cost 75¢ or 99¢. A sales clerk at the store told me that they are always running out of Little Debbie double-decker oatmeal creme pies. However, the Hostess driver always has to pull a lot of outdated product off the shelf.
The news should not come as a surprise. Hostess filed for bankruptcy in 2004. I wrote a blog post in 2005 about the economics of snack cakes. In 2009, I wrote again about the low cost of Little Debbie cakes, relative to Hostess. Little Debbie is well-aware that pricing contributes to their success. It’s on their website:
Little Debbie® products on average sell for half that of other leading brands. That’s due to manufacturing efficiencies the company has developed over decades of baking experience.
There’s no need to stockpile Twinkies or Ho-Ho’s. Those famous brand names will be sold to the highest bidder, along with the other Hostess assets. The company announced:
In addition to dozens of baking and distribution facilities around the country, Hostess Brands will sell its popular brands, including Hostess®, Drakes® and Dolly Madison®, which make iconic cake products such as Twinkies®, CupCakes, Ding Dongs®, Ho Ho’s®, Sno Balls® and Donettes®. Bread brands to be sold include Wonder®, Nature’s Pride ®, Merita®, Home Pride®, Butternut®, and Beefsteak®, among others.