Valuable realism keys Shiver remarks on Hostess
April 2, 2013
Among the elements leading to the abrupt and highly disruptive closing of Hostess Brands, Inc. in November, unrealistic expectations surely rank high. Over a long period of time, equity investors, bondholders, top executives, and workers all paid a heavy, painful price because of their overly optimistic assessments of what was economically possible at Hostess.
With this history in mind, a March 20 presentation by Allen L. Shiver, president of Flowers Foods, Inc., took on added importance. While certainly directed at Wall Street analysts, Mr. Shiver’s comments about Flowers’ plans for its acquisition of the Hostess bread business had a much larger audience.
Of key interest, Mr. Shiver said the fact that Flowers may soon own baking plants in several markets where the company does not currently operate should not be interpreted to mean it will instantly resume operations at the plants or even begin selling product in all these markets. Instead the company will pursue a “methodical” expansion into new markets from existing Flowers plants and will reopen Hostess plants or build new capacity as dictated by demand. Without offering a timetable, he made it clear Hostess baking plants do have a future at Hostess.
They “fit with our growth strategy,” Mr. Shiver said. For 18,000 Hostess Brands employees who have lost their jobs and are hopeful that they will be working again, the importance of realistic expectations has never been greater. While it was a difficult message for those looking to resume work as soon as possible, Mr. Shiver’s words about the company’s long-term strategy were critically important to understand.