Hostess mission statement

HOSP 4060

Final Exam

Essay One 4 points

Provide basic background information about this company. Critique the mission

and vision statements of this company using the tools and techniques presented in

this class. Conversely, if they do not have either of these tools, suggest a sample

mission and sample vision statement for this company then critique each. Include an

analysis of their current goals.

Hostess began in Manhattan as the Ward Baking Company in 1849. It grew

regionally and changed its name to Continental Bakeries in 1925 and bought Wonder

Bread. In 1930 the iconic Twinkie was created. The company changed hands several

times, and in 1995 Hostess was sold to Interstate Bakeries and became the largest bakery

in the United States, with $3.2 billion in sales, 58 factories, 1,250 outlet stores and 10,500

delivery routes. Eventually consumer tastes changed toward more health conscious

snacks, the price of flour and sugar rose, and costs for things such as pensions for

unionized workers lead Hostess to file for bankruptcy in 2004. The company emerged

from bankruptcy in 2009, with a new owner but with many of its old problems – high

pension expenses, inefficient manufacturing, shipping and delivery systems, and still high

debt. Despite union concessions to save the company money, Hostess filed again for

bankruptcy in 2012. It was in liquidation when Andy Jhawar and C. Dean Metropoulos

purchased the company and began to rebuild and reinvent the Hostess brand.

Because of the liquidation, many of the problems that plagued the company

previously were gone – pension costs, union contracts, debt, outdated factories and

unprofitable routes. Mr. Jhawar and Mr. Metropoulos had a brand and saw opportunity.

They re-built the Hostess brand from the ground up. They modernized the factories,

invested in software to manage inventory and logistics, and invested in research and

development to lengthen the shelf life of the Hostess products. They developed a

marketing plan to announce the comeback of Twinkies and demand skyrocketed. Future

plans for Hostess include targeting new markets, creating updated versions of the Hostess

classic products with new flavors, and perhaps there is a sale or an IPO possible for the

company.

Mission and Vision statements for Hostess brands were not available but they

may be something like this:

Vision Statement: Hostess brands will continue to grow and change to provide future

generations the snack products they desire.

Mission Statement: Our mission is to offer value to all our stakeholders – our investors,

employees and consumers – by producing quality bakery and snack products in a cost-

effective manner that is safe for our employees and the environment. We are proud to

have served generations of consumers the products they desire and our goal is to change

and update our products to match the changing needs and desires of our customers

nationwide.

The vision statement above addresses the company’s desire to stay competitive in

the industry by continuing to change their products as their customers’ tastes change. It

also inspires by mentioning serving future generations, a valuable reminder that they

have done so for past generations.

The mission statement addresses customers, products, market, concern for

employee safety and desire to provide value for all stakeholders and mentions a desire to

be environmentally conscious in regard to their production methods. It does mention

self-concept – that they are proud to have served generations of consumers. The concern

for survival is seen in that their goal is to adapt their products to serve the changing needs

and desire of their customers. Perhaps more information on technology could included as

well as more on the company philosophy

Essay Two 4 points

Using Porter’s four quadrant theory, identify and explain this company’s position in

the marketplace, include analysis of competitors for the other three quadrants.

Include in your analysis a discussion of the five forces model and its impact on this

company and industry segment. Note: Visuals can be beneficial to communicate

your analysis.

Competitive Advantage

Scope of

Operations

In the above Porter’s 4-quadrant chart, Hostess brands have a broader target

range, perhaps because of their brand recognition nation-wide and age of the company.

They can be found in most every grocery store, pharmacy, gas station and convenience

store. The Little Debbie brand, whose products mimic Hostess products, are less

expensive than the Hostess products in general and are found in more low-end stores such

as Dollar General, although they are found in grocery stores, usually priced below similar

Hostess brands. The Sara Lee brand is known for higher quality, higher priced items,

including their baked goods. Weight Watchers snack and baked goods are relatively

new to the market. Weight Watchers differentiates its items by marketing to followers of

COST UNIQUENESS

BROAD

TARGET

Hostess Sara

Lee

NARROW

TARGET

Little

Debbie

Weight

Watchers

the Weight Watchers diet plan, by lowering the fat and calories and assigning a point

value to their products in conjunction with their point-based diet plan.

Porter’s 5 Forces Model, in addition to industry rivalry, considers the bargaining

power of buyers, the threat of substitutes, the bargaining power of suppliers and the threat

of entry of new companies.

In this situation the threat of entry of new competitors is relatively low. This is

because a large amount of capital is required to enter the market, existing firms have

patents, trademarks and strong existing brand reputation and recognition (such as with

Hostess). There can also be strong customer loyalty (think of the “panic” that resulted

when Hostess products such as Twinkies, would no longer be available). There has been

some differentiation of products recently, with Weight Watchers offering diet-friendly

products and companies like Quaker offering granola bars to appeal to the more health

conscious consumers.

The bargaining power of suppliers is high. In the baked goods industry, flour and

sugar are top priorities. The suppliers have the upper hand against bakeries, there are few

substitutes (such as perhaps artificial sweetener) because they know flour and sugar are

necessities and high quality is important to produce a product the consumer will want to

buy.

The bargaining power of buyers is relatively high, because there are many choices

of baked goods in the market at different prices points. If buyers are price sensitive and

there are many substitutes, then the buyers will exert bargaining power on the industry.

One thing that will lower the bargaining power of the buyer is simple brand or product

loyalty. If a customer likes Hostess Twinkies and doesn’t like the taste of the similar and

lower priced Little Debbie product, that customer will stay loyal to the Hostess product.

The threat of substitutes is high for Hostess Brands. Consumers can easily switch

from Hostess to another similar brand with little or no cost and may even spend less. The

only thing that tempers this threat is the loyalty customers may feel toward Hostess.

Rivalry among existing competitors is high because firms are aggressively

competing for market share, and many are doing this by offering products that are

healthier. There are many competitors in the field and the industry growth is slow. The

products can be easily substituted and are not differentiated to a great degree. To remain

competitive, Hostess should offer lower calorie or healthier products. Again, what helps

them with rivalry among existing competitors is the loyalty of customers to the brand.

Essay Three 4 points

Create a brief problem statement for this company. Next, conduct a SWOT analysis

for them including as many of the PESTEL external factors and internal factors as

possible in your assessment. Based on your SWOT analysis suggest three strategies

they could pursue to more firmly establish their competitive position. Be sure to

define the strategy and provide an appropriate example for this particular

company.

Problem Statement: Hostess Brands profits depend to a great degree on brand

recognition from the past. The company has made strides to modernize the company and

has corrected some of its mistakes from the past. It has streamlined its technology,

changed its recipes for a longer shelf life, dropped its expensive delivery routes, switched

to a warehousing system, and has not hired union workers since the new owners took

control. All of these steps were necessary to maximize profits, but the company is not

doing enough to keep pace with the competition with what the new generation of

consumers is looking for in the market.

SWOT Analysis

Internal Environment

Strengths Weakness

Management  New owner “start from scratch”

 Provided funds to modernize equipment

 Owner experienced in turn- around of food companies

 Probably not planning to stay with the company

long-term

Brand Image  Very well known brand

 High customer loyalty

 Domestic market

 Image will fade with each generation

Finance and

Investment  Investment in equipment to

streamline production

 Investment in warehousing system

 Investment in R & D to prolong shelf life

 No investment in R & D of new products.

 Future profitability in question

External Environment

Opportunities Threats

Economy  In a cost-conscious economy, market product

in low-budget stores

 Make not be able to lower production costs enough in a

sinking economy to offer

lower prices.

 As population grows, demand for food will grow. May lead

to higher costs and tighter

profile margins.

Sociocultural  Create new product line for more health-

 Competition may have already saturated the market

conscious consumers

 Market to new target demographics

with health-conscious snack

choices.

 Opposition to change. Consumers may not be able to

relate Hostess brand to a

healthy snack choice

Technology  Use technology/social media to increase

marketing efforts

 Some loyal customers of past generation may not use social

media to a great degree

Ecology  Promote company as a “green” company –

discontinued ecologically

detrimental delivery

routes.

 May be limited in how much company can do to be

environmentally friendly.

Legal  Comply with all safety and health standards for

production and delivery

of product

 Maintain union-free workforce to avoid

previous issues

detrimental to company

 Unions may try to infiltrate the workforce again.

Essay Four 4 points

Discuss this company’s current financial stability (include financial ratios and stock

information, if applicable, to demonstrate your assessment). In other words, are

they financially stable and how do you know? Note: Visuals can be beneficial to

communicate your analysis.

In 2012 Hostess was in Chapter 11 bankruptcy proceedings for the second time,

operating at a loss of $1.06 billion, with sales of $2.47 billion and liabilities of $2.5

billion. Pension expenses for unionized employees were over $930 million. Hostess was

in the process of liquidation, when Andy Jhawar and C. Dean Metropoulos decided to re-

build the Hostess brand and bid $410 million for the cake plans, the recipes and five

factories. Not included in the sale were all the problems that had help to bankrupt the

company – the pension costs, the union contracts, the expensive delivery routes and the

huge debt. Mr. Jhawar’s company Apollo put in $140 million in equity and Mr.

Metropoulos put in $40 million. A $500 million debt offering covered the rest.

The new owners predicted earnings before interest, taxes, depreciation and

amortization (EBITDA) in the first year would be $100 million; however, EBITDA

reached $178 million at the end of the first year of operations. Estimates show potential

EBITDA in its second year of operation under the new leadership to be over $200

million.

In 2015, the estimated value of Hostess is $2.5 billion. If Mr. Jhawar and Mr.

Metropoulos decided to sell the company at this price, they will realize a $2 billion profit.

$ 2,500,000,000 estimated August 2015 value

- 180,000,000 equity investment in 2013 purchase

2,320,000,000

- 500,000,000 repayment of 2013 loan debt

$ 1,820,000,000 potential profit from 2015 sale

Based on the estimated value of the company in 2015, the finances of the

redesigned Hostess are very stable. Consumers are still buying Hostess brands in great

numbers, even though the cost of Hostess products is greater than the competition.

Essay Five 4 points

If you were a strategic consultant presenting the above analysis to the company,

what advice would you offer? Incorporate (and credit) the theories of some of the

experts presented in class as part of your recommendations. Draw from the Expert

Presentations and/or the Position Papers to select theories applicable to your

analysis.

In all the research I did on Hostess brands and the turnaround that was

orchestrated by Mr. Jhawar and Mr. Metropoulos, I found very little business strategy in

regard to employees. So my advice I would offer to Hostess Brands starts with attention

to employees:

1. Happy employees lead to happy customers. Herb Kelleher of Southwest Airlines

recognized the value of employees who felt like they were part of the culture of the

company, and were empowered to solve problems and make suggestions for success.

This can lead to employees who are motivated to work to develop new/better products for

customers, which in turn will lead to higher profits.

And as Bruce Poon Tip believes, a business model is based on freedom – freedom

of employees to contribute suggestions for the success of the brand.

2. Invent new markets and products to satisfy the future needs of customers.

Gary Hamel writes about core competencies and future success of a corporation.

A few companies have proven themselves skilled at inventing new markets, quickly

entering emerging markets, and dramatically shifting patterns of customer choice in

established markets. The critical task for management is to create an organization capable

of developing products that customers need to fit the lifestyles of the future.

As the owners are considering selling the company in 2015 or perhaps

considering an IPO, they are also considering updating Hostess classics by offering new

flavors, such as red velvet and sea salt/caramel. They are also considering targeting the

fast-growing Hispanic market.

3. Continue co-branding and promotions. Hostess is a sponsor of a summer promotion

celebrating the “Minions” movie in theatres. They have created a “Twinkie Minion

Selfie” sweepstakes and limited-edition Twinkie Minion decorating kits with both classic

flavor and limited edition banana flavor Twinkies. Promotions of this sort should be

ongoing based on current popular culture. Combine these promotions with opportunities

for social media exposure.

4. Develop related products to keep the Hostess name relevant in the marketplace. For

example, Hostess has just introduced The Twinkies Cookbook, Twinkies 85th Anniversary

Edition. Related product development should be ongoing.

WORKS CITED

Bertoni, Steven. “The Twinkie Miracle”. Forbes. May 5, 2015. Web. August 10, 2015.

Kosman, Josh. “Owners to Collect Massive Profit From Buying Hostess”. The New

York Post, August 1, 2015. Web. August 10, 2015.

Shedlock, Mike. “Miracle Twinkies Comeback”. Mishi’s Global Economic Trend

Analysis. May 2, 2015. Web. August 10, 2015.

Applied Sciences

Architecture and Design

Biology

Business & Finance

Chemistry

Computer Science

Geography

Geology

Education

Engineering

English

Environmental science

Spanish

Government

History

Human Resource Management

Information Systems

Law

Literature

Mathematics

Nursing

Physics

Political Science

Psychology

Reading

Science

Social Science

Home

Blog

Archive

Contact

google+twitterfacebook

Copyright © 2019 HomeworkMarket.com