Two surprise names — Walmart and Kroger — have reportedly turned up among the bidders for Hostess Brands Inc., the bankrupt maker of Wonder Bread and Twinkies.
According to Bloomberg News, more than two dozen bidders, including Walmart and Kroger, are bidding for Hostess, which moved to liquidate last month after failing to reach an agreement with its unions. According to Bloomberg, a person familiar with the case said some bidders are looking to acquire "all the assets, some are for just the cakes or breads businesses, and others are interested in individual Hostess plants."
Items for sale include Hostess, Drakes and Dolly Madison, which make cake products such as Twinkies, CupCakes, Ding Dongs, Ho Ho's, Sno Balls and Donettes. Bread brands to be sold include Wonder, Nature's Pride, Merita, Home Pride, Butternut, and Beefsteak.
Some reports said it would be unusual for a retailer to step in because they wouldn't likely sell the brands in competing stores. Even with their own stores overseas, they'd also be less likely to fully benefit from foreign sales. But other reports said an exclusive on a brand like Twinkies could prove to be a traffic draw and differentiator for a chain.
Walmart could outsource production to some of the partners it already has private label arrangements with. In doing so, they'd avoid buying Hostess' plants and some of the inherent problems that led to the liquidation.
"Outsourcing to someone else to make this stuff makes sense," Colin McGranahan, a Sanford Bernstein analyst, told Forbes. "I would guess Wal-Mart would not be the actual manufacturer. And that sounds like that was the real problem with the business anyways."
Kroger, where store brands represented approximately 26 percent of grocery department sales dollars in the third quarter, already owns nine factories as well as 37 food-processing plants.
Hostess is also said to be attracting other food suppliers as well as financial buyers. The buyer reportedly wouldn't have to absorb any of the union or pension funds liabilities. Interest in the properties is said to be stoked by nostalgic Americans rushing out to stores after hearing the plants were shutting down.
Do you think buying Hostess Brands would be a smart move for Walmart or Kroger?