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Bloomberg's Giammona on Hostess Brands Plan for an IPO (Audio) · Bloomberg Intelligence

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  Speaker 1: Bloomberg business flash. You're listening to taking stock with pin
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  Speaker 1: Box and Kathleen Hayes on Bloomberg Radio. Do you remember
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  Speaker 1: what was it about three years ago when the shocking
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  Speaker 1: news crossed the Bloomberg that the hostess Twinkie might be
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  Speaker 1: on its way out of existence, Well, maybe not out
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  Speaker 1: of the way of existence. But it was facing uh bankruptcy,
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  Speaker 1: it was facing restructuring, and this iconic brand, in fact,
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  Speaker 1: was very close to extinction before it was purchased by
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  Speaker 1: Apollo Global Management and investor Dean Metropolis. And now we're
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  Speaker 1: seeing Twinkies Baker Hostess to go public in a deal
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  Speaker 1: with a very important investor. We're very happy to welcome
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  Speaker 1: to the show Craig Gemona. He is a Bloomberg consumer
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  Speaker 1: reporter and he wrote a terrific story about Twinkies today,
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  Speaker 1: So remind us what happened to Twinkies. It looked like
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  Speaker 1: it was on the verge of extinction, but it just
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  Speaker 1: didn't seem possible. Even if they're filled with sugar and
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  Speaker 1: not good with you. So many people grew up with them.
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  Speaker 1: What happened, that's right, Well, they felt they've gott into
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  Speaker 1: trouble twice in the last ten years. I think once
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  Speaker 1: in two thousand nine, they emerged from bankruptcy only to
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  Speaker 1: file again. You know about three years later they were
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  Speaker 1: actually Twinkies were office else for about seven months. You know,
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  Speaker 1: there was sort of the Facebook pages happened where Twinkies purchased,
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  Speaker 1: like you said, and brought back to the market, and
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  Speaker 1: now they're here and saying, basically, we've done pretty well
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  Speaker 1: with it. They did what a private equity guys do.
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  Speaker 1: They trimmed up the company, the workforces way down, they
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  Speaker 1: consolidated the factories, and they're saying basically that they're back,
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  Speaker 1: new and improved and they're ready to go public. Well,
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  Speaker 1: you just mentioned something about the cuts that were implemented
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  Speaker 1: as a result of the acquisition. Uh, this was also
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  Speaker 1: a union issue, if I'm not mistaken, that's right. So
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  Speaker 1: I think it's something I was looking at the presentation.
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  Speaker 1: They discussed it this afternoon, something like eight thousand workers
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  Speaker 1: down to twelve hundred, most of those union jobs. So
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  Speaker 1: they cut out the costs. Again, that's the private equity
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  Speaker 1: guys do. They said, you know, very fascinating point. They
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  Speaker 1: increased the shelf life of their products from twenty five
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  Speaker 1: to sixty five days, so Twinkies now can apparently last
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  Speaker 1: longer than they could prior. And it's actually a myth
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  Speaker 1: that Twinkies can you know, sustain nuclear attacks or whatever
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  Speaker 1: the stories have been. But basically these guys are saying,
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  Speaker 1: you know, we're doubling down on indulgence. We're not worried
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  Speaker 1: about the headwinds. Millennials don't want sugar process sugar. We
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  Speaker 1: think the Twinkies are an iconic brand and we're gonna
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  Speaker 1: put it at the forefront of this new public company.
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  Speaker 1: So the snowball survived too, and the cupcakes. That's right.
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  Speaker 1: And you know, that's the funny thing that they're not
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  Speaker 1: talking about gluten free organic. They're basically saying that, uh,
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  Speaker 1: like you you remember it from childhood. There's nostalgia around
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  Speaker 1: this brand, and maybe younger consumers like a good, authentic
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  Speaker 1: American story. It's an iconic brand with a lot of
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  Speaker 1: brand equity, and you know, we think we can sell
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  Speaker 1: more of this stuff. Great. Looking at a little bit
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  Speaker 1: of the details of the acquisition and Mr Metropolis, he's
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  Speaker 1: got a hand in a variety of different businesses. For example,
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  Speaker 1: I believe he owns the Paps Brewing he did he sold,
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  Speaker 1: so it's interesting. Paps is a great example. You know,
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  Speaker 1: he did with perhaps what I think they want to
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  Speaker 1: do with Twinkies, right with Paps. Uh, he took it,
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  Speaker 1: he sort of gave it. They gave it some hipster credentials.
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  Speaker 1: They ran with that, and you know, perhaps more than
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  Speaker 1: doubled over the last decade of sales. It's it's well,
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  Speaker 1: really well known, so maybe there's a chance to do
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  Speaker 1: that with Twinkies. This sugar question and the remains it doesn't.
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  Speaker 1: It is a time when people are realizing that excess
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  Speaker 1: sugar consumption can kind of make a train doing a diabetic,
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  Speaker 1: make it gain weight, all kinds of things. Uh so,
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  Speaker 1: what are the odds of overcoming that? I mean, I
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  Speaker 1: don't need a lot of sugar, I figured, but eve
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  Speaker 1: a little bit of sugar. Not it's not so bad.
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  Speaker 1: It's just when people constantly consume, is there is there
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  Speaker 1: a niche or for them? Do you think? I'm not sure.
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  Speaker 1: I mean, people eat differently now than they did in
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  Speaker 1: the fifties, sixties, seventies, and you know there's no question
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  Speaker 1: that right now sugar is the health boogeyman. Probably number one.
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  Speaker 1: People know what's good reason that's right, And the FDA
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  Speaker 1: want is gonna is trying to make the companies call
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  Speaker 1: out added sugar on the label. So everything sort of
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  Speaker 1: that we know about health trends and eating trends would
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  Speaker 1: point against headwinds for a company that is, like I said,
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  Speaker 1: doubling down on sweetendulgers. They want to sell baked sugar,
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  Speaker 1: process sugar, these kind of products. You know, there's brand
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  Speaker 1: strength there, but no question that consumers have moved away
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  Speaker 1: from this type of thing. Any talk about valuation for Hostess,
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  Speaker 1: you know they were taught it's reasonable, is what I
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  Speaker 1: heard so far. I mean, we haven't really gotten the
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  Speaker 1: number out there. A lot of people obviously trying to
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  Speaker 1: figure that out. I think it will be on the
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  Speaker 1: smaller side. It's not gonna be a blockbuster, I p o.
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  Speaker 1: But because of the names involved, I think a lot
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  Speaker 1: of attention to it. Again. You know, Metropolis has had
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  Speaker 1: some success turned around paths and now here they are
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  Speaker 1: involved with Pinnacle Foods, and I believe that Bill Taller,
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  Speaker 1: who is the chief executive of Hostess, is originally from
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  Speaker 1: Pinnacle Foods. That's right. So a lot of things I
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  Speaker 1: heard today is about these guys know how to execute.
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  Speaker 1: There's good gross margins and and bread and baked goods
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  Speaker 1: like that if they can execute so and like I said,
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  Speaker 1: when you're looking at the financials that they put out
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  Speaker 1: there today, sort of a bare bones, but they have
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  Speaker 1: really cut the fat out of what Hostess used to be,
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  Speaker 1: but not the sugar just right, So Craig, go real
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  Speaker 1: quickly here, your food and reporter, what's on your horizon?
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  Speaker 1: One of the one of the next big stories you're following. Obviously,
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  Speaker 1: the Hershei Mondoles thing was got a lot of people
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  Speaker 1: talking last week. Her She quickly came out and said that, um,
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  Speaker 1: you know, they rejected the deal, but every one had
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  Speaker 1: kind of been waiting for food deals to perk back
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  Speaker 1: up again. Was a huge year with Kraft, Heins and
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  Speaker 1: you know Buffet getting together with those guys to do
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  Speaker 1: that deal. There's a lot of consolidation because of what
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  Speaker 1: you're talking about. These uh CpG companies have had a
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  Speaker 1: hard time with changing consumer taste, so was off to
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  Speaker 1: a slow start. We got the Mondols Hershey news now this,
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  Speaker 1: so there's a sign maybe that food deal making is
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  Speaker 1: going to pick up here. Thanks for spending time with us.
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  Speaker 1: Craigmona is food and restaurant reporter for Bloomberg News. Talking
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  Speaker 1: about Hostess and it's impending initial public offering. Talking about
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  Speaker 1: Hersheet that shares it down about a tens of a percent. Today,
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