Why the Turnaround Failed
Why the Turnaround Failed
We're witnessing the last rasping breaths of Hostess Brands, the national baking company in which I briefly held a senior position. For years, the company has been one of the living dead, just like the hordes in Zombieland, a movie that celebrated Twinkies' iconic status. Now the end is certain, and it's sad because it didn't have to happen. You see, long ago Hostess lost touch with its greatest asset, its people.
In 2010 I joined the Hostess turnaround team as SVP and General Manager of the Atlantic Business Unit. My mission was to start delivering bottom-line profit through a route delivery organization nearly one thousand strong, from central Virginia to Florida. As I had done many times as a soft drink bottler, I launched the sales transformation by getting close to customers through our employees. I conducted countless depot meetings and ride-alongs.
Here's an epiphany conversation with one of our route salesmen; I'll call him John. John was in his fifties. Like many of our employees, he had been with Hostess a long time. The setting is a springtime Tuesday morning in a suburb of Charlotte, N.C. It's after daybreak, and John is nearly halfway through his day. I'm doing what I love most, getting to the bottom of how to grow the top line. We're in the back aisle of a Food Lion supermarket.
"John," I said, "I see the competition has a real advantage over us early in the shopping pattern, where shoppers buy their deli meats. Why do they have a big bread display here in perfect position, and we're nowhere to be found?"
"Mr. Hill, I've tried that in this particular store, I really have," John says. "But you have to understand how our bread turns across the days of the week when we're on ad vs. off ad. I have an agreement with the manager that when we're on ad, I can set up a temporary rack in this aisle for the (heavy shopping days) weekend. But like we are right now, full price on a Tuesday? I'd get killed with returns. That bread would just sit and go stale."
"John, what would it take for you to have more confidence in managing your bread displays?" I asked.
"Well, the biggest thing is data," said John. "It's hard to guess right on the sell-through of all our sku's, because there's just so much information. If our handheld (device) somehow summarized what was going on, I could probably figure out how to sell more and still keep my returns low."
I thanked John for his input as we toured the rest of the store. What I didn't share was that despite the ready availability of better handheld technology, our strategic plan was taking us in a different direction. The company's limited resources were forcing us to prioritize new brand introductions over technology investments.
That scene repeated itself many times in my nine months at Hostess. Long-term employees, wanting to grow their income and hopeful the company would survive, were passionate about sharing the kind of street-level insights that can only come from servicing fifteen to twenty stores a day against tough competition. I grew to respect their work ethic and dogged persistence, despite the challenges of an outrageously obsolete infrastructure and a dysfunctional supply chain.
I'm not going to take sides in the labor dispute that's currently making headlines, because I've seen the history of good faith. In 2009, Ripplewood, the current private equity owners, made a huge bet on a company just out of a tumultuous bankruptcy. Employees had done their part by agreeing to significant wage concessions.
What has gotten lost in the news cycle is that more than a decade ago management lost touch with what made a company with an embarrassment of riches of iconic brands successful. These brands didn't magically establish and maintain themselves. People in your community built them. Then hubris set in, and indifference eroded the company's competitiveness. Fast-forward a dozen years, and a new management team had few options, each of which were too little, too late.
The moral of the story? Stay close to your street-level employees. They have an invaluable perspective of what's going on, and they have ideas for addressing your current challenges. To tap that expertise, have the discipline to regularly get in their workplace and listen. When was the last time you and your leadership team were "in the back aisle of a Food Lion," seeing the market through your employee's eyes?
The plot is drawing to a close for Hostess, but we can all learn from this classic tale of decline. If you're there early enough in the morning, you can still see the sons and daughters of those heroic brand builders servicing your local grocery or convenience store. Hurry, because they won't be doing it much longer.