Bankruptcy filing as Wonder Bread’s hurtin’ for dough

By Jennifer Heldt Powell
Thursday, September 23, 2004

The company that put the Wonder into bread is dangerously short on dough.

Interstate Bakeries Corp. yesterday filed for Chapter 11 bankruptcy, as the maker of Twinkies, Devil Dogs and America's most famous white bread crumbled under rising costs and a move toward healthier offerings.

"They had marketing problems," said Ken Schwartz, a professor at Boston College's Carol School of Management. "There's been a sales slump, no doubt . . . but there also seems to be some problems with management."

The Kansas company also announced the departure of its chief, James Elsesser, while applying for protection from creditors. Interstate will be taken over by turnaround expert Antonio Alvarez, who was named chief executive.

The bankruptcy follows a failed year-long turnaround attempt at the nation's largest wholesale baker. The company faces $1.3 billion in debt.

Company officials said its problems include a high fixed-cost structure, stiff competition and rising costs for employee health care and pensions, along with higher costs for ingredients and energy.

On the plus side: Interstate's timeless snack brands beloved by kids and tolerated by moms from coast to coast.

Despite the company's financial ills, fans of the cream-filled sweets and those not on the Atkins diet will still find their favorite products on the shelf.

"In Chapter 11, you try to work out a reorganization plan that will allow the firm to become competitive again," Schwartz said. "They may have to reposition their product line to be more attractive to a more health-conscious population."



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