Beleaguered US baker Hostess Brands has announced plans to close five bakeries and cut more staff as part of a restructuring initiative.
Hostess revealed its intentions in a 150-page profitability strategy document which was presented to the US Bankruptcy Court in New York last week.
“Due to among other things, significant overcapacity in the baking industry, the debtors’ baking facilities currently operate at only 65% of baking capacity,” said Hostess.
“Additionally, as a result of the debtors’ inability to invest in information technology and automated baking systems, the debtors’ plants fall far short of industry benchmarks for efficiency. As part of the revised turnaround plan, the debtors have identified a number of initiatives to reduce excess baking capacity and improve efficiency."
These initiatives include outsourcing low volume and seasonal products to other bakeries and automating certain product lines. The firm will also invest in new IT capabilities to streamline the bakery process and efficiency-boosting packaging equipment.
Hostess also plans to close or consolidate several depots to maximise the efficiency of its distribution network.
The company currently runs 36 bakeries and 560 distribution depots in the US. Hostess has just over half the number of bakeries it had in the mid 1990's.
Also outlined in the strategy are plans to close unprofitable retail stores and a switch of focus to the sale of discounted products approaching their sell-by date. The firm will also launch three new wheat bread products in addition to four whole grain and Kids brands introduced earlier this year.
Hostess will also attempt to make a 10% operation efficiency saving through redundancies, attrition, outsourcing and office closures. However, the company will increase the number of middle management position and restore its marketing and R&D budgets to competitive levels.
