Capital Ideas Blog

Twinkie a lesson in adaptation

By Pradeep K. Chintagunta
November 20, 2012

From: Blog


This post originally appeared on the Kilts Center Faculty Blog.

With Hostess Brands tantalizingly close to liquidation, we may have finally discovered the one sure way to fell the indestructible Twinkie. Loyal consumers received news of the product’s imminent demise with a mixture of sadness and nostalgia. The company and its products have been a part of our culture for many decades.

Not only did Twinkies sweeten our palates with gooey vanilla cream, it also showed up as Sgt. Al Powell’s snack of choice in movies “Die Hard” and “Wall-E” as well as the TV show “Family Guy.” For others, however, the end to this purveyor of sugary products (although the company also manufactures Wonder Bread) could not have come soon enough. The story of the Hostess Company is not unique. Many other iconic brands such as Kodak, Polaroid and Blockbuster have succumbed to changing consumer preferences.

Kodak and Polaroid failed to adapt to the rapid adoption of digital imaging. Blockbuster’s business was decimated by new technologies and alternative delivery systems popularized by Netflix, Redbox, video-on-demand and online streaming. Each of these companies faced a trade-off between cannibalizing the existing, albeit declining, business (the film business in Kodak’s case) and the benefit of adopting newer technology. They stuck with the old technology until it was too late.

By contrast, IBM dealt with the move away from “big iron” mainframe computers by reinventing itself as a technology services company. Nintendo came back from the “mostly dead” (to borrow a phrase from Billy Crystal’s Miracle Max in the Princess Bride) with the well differentiated Wii.

For Hostess brands, the change in the marketplace was the declining preference for potentially unhealthy foods. Clearly, transforming the Twinkie into a healthy fare was not the way to go, given the strong associations with the brand. Rather, the Hostess Company could have reinvented its portfolio by also introducing products that would more likely be palatable to changing consumer tastes.

By investing in such products, Hostess could have gradually lowered its dependence on the less healthy products in its portfolio while increasing the chances that the company as a whole would survive. McDonald’s demonstrated this strategy by offering broader set of products such as salads and oatmeal. This is the value of the marketing mindset—a keen ability to perceive the world through the eyes of the consumer.

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