Brands Are Golden, Even After Bankruptcy

In December 2012, after its second bankruptcy filing, brought on mostly by labor issues and a mounting pension fund of $944.2 million, consumers clamored to get their hands on a Twinkie for the very last time. That spongy Twinkie’s sweetness has been around since 1930 and it’s a pop-culture icon. As the rock star of junk foods, it weighs in at 150 calories, 4.5 grams of fat, 20 milligrams of cholesterol, and 18 grams of sugar. And, for Hostess, it’s paying off…again.

The Twinkie brand, in particular, is proving to be golden by helping Hostess pay back some of its debts with an agreement reached last month. Private equity firms Apollo Global Management and Metropoulos & Co. have agreed to pay $410 million to purchase the Twinkie brand, along with Ho Hos, Ding Dongs, Donettes snack cakes and some other assets. What is really interesting here is that the majority of the $410 million is being invested in intangible value…the brand names and the familiar childhood memories they conjure up.

And, this is not uncommon. Buyers have made multi-million-dollar bets on brand that can continue to resonate with consumers even after the parent company has liquidated. In 2009, a consortium of buyers paid $88 million for the Polaroid brand name and Barnes & Noble spent $13.9 million to buy the rights to the Borders name.

In 2010, the Pabst Blue Ribbon brand sold for $250 million to one of the same companies involved in the Hostess deal. They have a successful track record of turning around injured or abandoned brands. And, while the “PBR” brand took on a life of its own with hipsters, Metropoulos recognized its rising value in the mid 2000’s. As for Twinkies, the challenge will be to appeal to a new generation of junk food junkies while retaining its beloved fan base.

What’s the lesson here? The next time your CFO wants to know why your company needs to invest in “its brand image,” (a.k.a. keeping your brand in front of customers) the answer is: to strengthen the balance sheet. Now, that’s golden.