Will Wonder Bread Survive?

Implications: Interstate Bakeries and its unions are locked in a negotiating stalemate  over employee jobs and compensation.Specifically, IBC's management is looking for job cuts and lower costs from the unions to make the company more cost competitive.The unions obviously are seeking to minimize impact on its members and disagree with IBC's strategic plan to reorganize the company.The results will likely determine if IBC can survive and exit bankruptcy.

Analysis:

Interstate Bakeries reorganization plan is in severe jeopardy based on their inability to gain concessions from its key unions.A significant cost saving program is required to save Wonder bread & Hostess cupcakes from being sold at thrift sale prices.Competitors Sara Lee,George Weston,Flowers and Bimbo Bakeries (Oroweat) have been stealing share from Wonder bread the last few years and this will likely continue.

Many things have gone wrong for IBC the last few years and there's plenty of blame to go around for all parties.Management was too slow to innovate and provide volume building new products.IBC' cost structure both in manufacturing and route systems is the high cost supplier within the industry.The bakery business has too many suppliers and is in serious need of consolidation.Raw material costs continue to increase hurting already thin (or in IBC's case) or non existing margins.

The next 60 days are crucial for IBC's long term survival.No agreement with the union will likely mean possible sell off its brands and assets. A weak agreement that drives some cost savings will likely mean a continued slow death.Only with radical changes and large cost cuts will they be able to save IBC's brands from being sold at thrift outlet pricing.