It’s hard to imagine Twinkies, Sno-Balls, and other Hostess products dying. After all, preservatives have given them a shelf life that rivals that of fine wine. But last fall it seemed as if the spongy, sickly-sweet confections would disappear from the face of the earth. In November, as management and labor feuded over how to reduce the liabilities of Interstate Bakeries, the bankrupt parent company of Hostess, the company announced it would cease operations and consider liquidating. Fearful customers rushed out to hoard Twinkies.
But last month, the Metropouloses, a family of entrepreneurs with a long track record of turning around wounded and orphaned brands, were given approval by a bankruptcy court to acquire control of Hostess. Once the deal closes, they’ll aim to do for Twinkies what they have done with Pabst Blue Ribbon—reposition the brand to a new generation of customers while retaining die-hard fans.
Over the last few decades Greek immigrant Dean Metropoulos has bought, restructured, revived, and sold a series of packaged food brands, including Chef Boyardee, Vlasic Pickles, Bumblebee Tuna, Aunt Jemima, Duncan Hines, and Log Cabin. His success has made him a billionaire; he ranks No. 377 on the Forbes 400. His two millennial sons, Daren (29) and Evan (32), grew up in Stowe, Vermont, and Greenwich, Connecticut, and are now principals with their father in Metropoulos & Co. The two are co-CEOs of Pabst Brewing Company, and they are helping to lead the reinvention of Hostess.
While they have been involved with many well-known brands, the Metropouloses (Metropouli?) have a relatively low media profile. Their firm doesn’t have a corporate website. And they’re not big on the private-equity conference circuit.
But they’ve as scored a big hit with Pabst, which they acquired in May 2010 for $250 million. PBR was already on the upswing when Metropoulos & Co. acquired it. The long-neglected brand had been adopted by hipsters and was growing smartly in a U.S. beer market that had long since gone flat. After the acquisition, they repaired relationships with distributors, fixed the pricing, brought the company’s information technology systems into the 21st century, and focused on smart, inexpensive guerrilla and field marketing: employing people with tattoos to go to music festivals and events.
“Pabst has become a lifestyle brand, much like Monster Energy and Red Bull,” said Daren Metropoulos. “There is a trend-setting community, 21 and over, that prides themselves on being trendsetters. They revolted against horses being jammed down their throats and 30-second commercials.” PBR, Evan noted, is now sold at retailers like Whole Foods alongside craft brands.
There’s more to the company than PBR—it owns dozens of smaller, regional brands, many of which are growing rapidly. “We’ve seen the same organic growth in Rainier in the Pacific Northwest, Bohemian in Maryland, and Lone Star in Texas,” said Evan Metropoulos. And they haven’t shied away from enlisting celebrities in high-profile marketing campaigns: Snoop Dogg has become associated with Colt 45, and Will Ferrell has starred in Old Milwaukee commercials.
Now the family hopes to perform the same routine with Hostess. In January, Metropoulos & Co. expressed its intent to bid on the bankrupt company, and it made common cause with the deep-pocketed private equity firm Apollo Global Management. The $410 million sale was approved by the bankruptcy court in late March.
The frantic action among long-term customers in the wake of the Hostess bankruptcy filing—hoarding, panic buying, active secondary market sales—justified an aggressive bid. “It wasn’t a computer chip company whose technology was obsolete,” said Evan Metropoulos. Rather, the product lines were trapped in a parent company with a poor financial structure. And it had stark-raving fans. “The brand and the company encouraged a type of consumer obsession. We saw concrete evidence that this was a cult brand,” Evan continued. Besides, unlike many perfectly good food companies the Metropouloses had owned, Hostess was a fun brand. “Vlasic Pickles is a great brand, but not necessarily a fun brand.”
So now what? They’re not tinkering with the recipe. They’ve learned that “you can never alienate core consumers that have made these brands successful for decades,” said Daren Metropoulos. The new owners plan to keep five plants and to maintain the corporate headquarters in Texas. But while Twinkies and Ho-Hos may seem irredeemably retro in this age of gluten-free-organic-free-range-no-sodium-low-sugar-artisanal-desserts, there is room for some innovation. Like other snack food companies, “we’re obviously sensitive to the demand for health-conscious options,” said Daren Metropoulos. Look for the introduction of smaller portions of the classic snacks in 100-calorie packs, the better to attract moms. As for the increasingly aggressive nutrition police (see under: Bloomberg, Michael), they do have something of a point. “Everybody knows that a Mediterranean-type of diet and lifestyle is great,” said Evan Metropoulos. “But I don’t think a Twinkie once in a while is going to kill anybody.”
And of course, should Americans suddenly wake up and extract their sweet tooth, a vast international market awaits. One of the stunning facts about Interstate Bakeries, the prior owner of Hostess, was that it had made virtually no effort to introduce its iconic American brands to foreign audiences. The Metropouloses have found that the global market can be fertile ground for production innovation. In China, for example, Pabst sells a 16-ounce bottle of beer for $44 The brainchild of the company’s Chinese distributor, Blue Ribbon 1844 is intended for high-end night clubs.
Before they can take Twinkies to Shanghai, the new owners have to bring them back to Illinois and Alabama. And that’s going to take some time. Most companies continue to operate through bankruptcy. But not Hostess. As workers went on strike and the company threatened to liquidate, Hostess was essentially crippled. The factories went silent. The website shut down. The distribution chain ground to a halt.
The machinery is now being engaged. And the Metropouloses have pledged they will do everything in their power to get Twinkies back on the shelves by this summer. The first day of summer is June 22—about 10 weeks away.