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He’s made a career – and fortune – out of saving and bringing back from the dead some of America’s most beloved brands – like Bumble Bee Tuna, Chef Boyardee and Pabst Blue Ribbon beer.

Now Connecticut billionaire C. Dean Metropoulos has turned the trick again with Twinkies, the sugar-packed finger-sized cream-filled yellow snack cake said to have so many preservatives it survived to feed the hungry in the cult movie Zombieland.

Along with Apollo Global senior partner Andy Jhawar, Metropoulos has turned around the once renowed Hostess brand, famous for those packaged cupcakes and snowballs in supermarkets and convenience stores, and are going to get even richer from it.

How did they do it? With the same methodology that resurrected other companies, turning business models on their head and reversing decline with innovation, efficiency, machinery and sleekness.

A cover piece for Forbes magazine described the venture skills. Hostess, headquartered in Kansas, had deteriorated even as its name recognition did not. The company name – bannered by the ubiquitous Twinkie – was a goldmine almost by itself, but the way it operated wasn’t.

It went under in 2012. There’s where Metropoulos came in, with his partner. They paid $410 billion for the cakes company, put in another $250 to create a state-of-the-art assembly line and business that requires only 500 people in one location, replacing 14 that had 9,000 workers.

It produces a million Twinkies a day, 400 million a year, or 80 percent of the company’s output, so irresistible are the cakes even in the age of organic, low-fat, no-fat, no-sugar, no-salt, no-preservatives and, some would argue, no-taste snacks. There was no room anymore for Ding Dongs, Ho-Ho’s and Zingers.

The company had a 150-year history and went under after two bankruptcies and five CEO’s couldn’t save it, ending after a workers strike was the last straw.

“The brand awareness was unbelievable,” Jhawar told Forbes. “It’s not every day you have an opportunity to acquire a brand that is ubiquitous, that had $1 billion in revenue before the bankruptcy and 80–plus years of legacy.”

Two years later, they will rake in the $2 billion profit. “They’ve worked magic with their business concept and have made Hostess one of the most efficient and effective companies in the entire food industry,” said Joseph Gatto, a partner at Perella Weinberg, who brokered the sale to Metropoulos and Apollo.

It helped that despite the disdain from the health food advocates that Twinkies has an obsessive following. “People walk up to me and thank me for bringing back Twinkies,” said Metropoulos, whose salvation of Pabst Blue Ribbon beer made it a favorite among Brooklyn hipsters and gained more fame.

The company started with a single shop in Manhattan in 1849, was later owned by IT & T, and Ralston Purina, who sold it to Interstate Bakeries in 1995, creating the country’s largest purveyor of baked goods. But its time was already almost over as people switched to healthier foods and the cupcakes, sno-balls and even Twinkies were scorned by some as caloric catastrophes.

Huge pensions, massive debt and an inefficient operation and delivery system took down another owner in 2009, just as a worldwide recession set in.

When Jhawar heard of the Hostess liquidation, his first call was to Metropoulos, now a 68–year-old specialist in saving icons and making money.

THE METROPOULOS TOUCH

His father farmed in Greece before moving the family to Watertown, Mass. when he was 10. He earned degrees at Babson, a renowned business school outside Boston, got a Ph. D. in International Finance from Columbia and went off to work for General Telephone and Electronics in Europe to hone his skills.

At age 32 he acquired his first company, a cheese business in his wife’s native Vermont, bought two more and flipped them for profits and said he learned a vital connection between money and food.

“Food brands have a different connection with people, unlike, say, a light bulb company,” said Metropoulos, much like Twinkies honed a following especially on TV in the 1950’s and created lovers who followed the food all their lives.

In 1996, with equity backing, he acquired International Home Foods as a springboard to snap up other classic brands such as Dennison’s Chili, Bumble Bee Tuna and Chef Boyardee.

His two sons, Evan and Daren, joined him in the family business and learned his skills so much they got thrown out of stores for rearranging the family company’s brands into better shelf spots.

They convinced him to tie Chef Boyardee, the canned spaghetti, to professional wrestling and it paid big dividends.

They also persuaded him to buy Pabst Blue Ribbon, a less-than-premium brand with a following almost as rabid as for Twinkies. In the movie Blue Velvet, Dennis Hopper’s character sneered at Heineken when offered and in a profanity-laced retort, declared his choice: “Pabst Blue Ribbon!”

The sons served as co-CEOs. In 2014 the family sold it to Blue Ribbon Intermediate Holdings for an estimated $750 million–tripling their money in three years. That’s the Metropoulos Way.

A PASS ON HOSTESS

Metropoulos was not enamored of buying Hostess, even after discussions with Jhawar. “The way the company had been structured, it would be difficult to transform,” he told Forbes. “I took a look at it and said,’I’m not taking on all this baggage.’ ”

But after it went bankrupt, he saw a chance for it to start over, shorn of pensions, union contracts and debt.

“We didn’t have to take on the factories or the routes,” says Metropoulos. “We didn’t have to take all the historic al drags on the company.”

They estimated the total purchase and upgrading cost at $680 million. Apollo put in $140 million, Metropoulos only $40 million, and got a $500 million debt offering for the rest.

No one else bid. “It was the risk. This was a rare circumstance in history when you see a company go completely off the shelves and have no employees, have empty factories and no working capital,” said Jhawar. “We saw the opposite–this was an opportunity to take a great brand and for the first time be able to reinvent it.”

Almost exactly two years ago, Hostess started over, with recipes, brands and five factories but no workers, no marketing, no delivery routes and no valuable supermarket shelf space. Not even any sugar or cocoa or flour.

They had to devise a plan to produce the same amount of cakes with far fewer people. Metropoulos brought in William Toler, a veteran of his company magic, as CEO.

Metropoulos spent $110 million modernizing the remaining factories–everything from a utomation (massive, new $20 million Auto Bakers) to improving air flow in the bakeries so they’d be more tolerable for workers in the hot summer months.

“You must improve employee conditions, fix the cracks on the floor and those types of things,” says Metropoulos. “It affects the pride, energy and culture of the plant, and that translates into everything.” Next came a $25 million SAP software system to manage inventory and logistics.

Shipping was the biggest challenge because of the short shelf life of the goods, (except for Twinkie’s legendary 25 days) which had eaten up much of previous companies operations in trucking costs.

Metropoulos switched to a centralized warehouse model but that still would keep the cakes inside for too long so he spent millions on Research-and-Development, finally arriving at an acidity level that would prevent staleness and discoloration.

That more than doubled Twinkies’ shelf life to 65 dates and delivery costs dropped dramatically and Hostess got into new venues.

“We now ship to all Wal-Marts, dollar stores, 100,000 convenience stores, plus vending machines and food services,” says Jhawar. “There is no reason why Hostess can’t be sold in any place that sells candy bars.”

THE TWINKIE PACK IS BACK

In July of 2013–less than four months after Metropoulos and Apollo took over operations–the Twinkie was back.

Because of its name, news of its return went viral in a Social Media Age, offering untold value in free advertising beyond word-of-mouth or TV spots and big paid ads in a time when newspaper advertising was shrinking.

Twinkies were on Jimmy Fallon and the Ellen show. During the Today show Al Roker shot a three–minute spot riding shotgun in a Hostess truck and then tossing Twinkies to screaming fans.

“When we saw Al Roker eating Twinkies on national television, we knew we had something special,” says Evan Metropoulos. “The free exposure we got from the media was incredible–they started pitching us stories.”

As they did with Chef Boyardee and pro wrestlers,Evan and Daren Metropoulos tapped celebrity friends like Will Farrell, Snoop Dogg and Howard Stern to hawk Hostess.

They built a giant countdown clock in Times Square. Marketing teams flooded college campuses, throwing parties with Twinkies and Pabst beer, magic for the Internet Generation.

Hostess’ death became a celebrity exhumation. “My suspicion is that if Hostess hadn’t gone out of business, if we had just taken it over while it was still running, we wouldn’t have gotten this reception,” Metropoulos said.

He and Jhawar stand to take in the $2 billion return on a combined $180 million equity investment in two years, the stuff of which business textbooks are built on.

Metropoulos wouldn’t say what’s next or if he’s going to move on to something else and leave Hostess and Twinkie behind in the search for the next great icon saver, but a sale or IPO is under consideration.

In the meantime, Metropoulos has yet another idea for Twinkies, which has had one flavor and formula, thinking of tinkering: he’s mulling Sea Salt Caramel or Red Velvet Twinkies. Too bad the late Hopper wasn’t around as a pitchman.

We’ve had almost 80 businesses, and they’ve all worked out very well,” he told Forbes. “That just fuels my energy to do the next one.”

 

 

 

 

 

The post How Iconic Brand Rebuilder Metropoulos Saved Twinkies Too appeared first on The National Herald.

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