Don’t blame labor unions for the downfall of Twinkie maker Hostess Brands. That’s the argument Newsweek‘s Daniel Gross makes in the magazine’s latest issue.
Hostess Brands is a story of what happens when businesses—be they large companies or small firms—focus too much on financial engineering to the detriment of innovation. Hostess, Dolly Madison, Ho Hos, Sno Balls, Twinkies, Wonder Bread—all have a Proustian effect on consumers of a certain age.
But the product line didn’t keep up with a change in the zeitgeist. “Now we are in midst of a food revolution focused on local, organic, artisanal, and authentic—the very antithesis of Twinkies,” says Marion Nestle, a nutrition expert at New York University.
For many U.S. consumer brands, producing overseas, with local labor and for local tastes, has been a way to change their cost structure, to grow, and to cash in on the rapidly expanding consumer markets of China and India. Yet here again, Hostess was stuck with a 1950s worldview. Even though its products are loaded with preservatives, which means they can endure arduous travel to distant markets, Hostess does very little exporting.
The unwillingness or inability to update its business strategy and products for a changing world was more damaging to Hostess than the brief strike this month.
Gross is correct that innovation plays a critical role in helping a company survive and thrive. Want to know who tends to fight innovation? Unions. Perhaps Mr. Gross needs a little more Sowell.
