About three years ago, company executives concluded they had found a formula that would revolutionize their processes and save big on costs. It was a way to double shelf life without losing taste or quality. But in rolling out newly long-lived Ho-Hos and Wonder Bread, they ran into a series of setbacks that hurt sales, ate into profits and turned off some customers. In an era when much of business is obsessed with cutting costs, the case shows how a plan that seems sure to yield coveted savings can have unintended consequences.

[...]

The shelf-life program began when company food technicians decided to deconstruct a crumb cake that seemed to stay fresh forever. Examining its recipe, the researchers found the cake included an ideal amount of a gum whose role was to keep it extra-moist. With great caution, they decided to try adding more of that ingredient to Zingers, a Dolly Madison cake. "One of the scariest things in the food business is to change your recipe," says Mr. Dirkes.

The new Zingers tasted fine. So the company added more gum to Hostess Twinkies and the rest of its line of snack cakes. Suddenly the cakes, which used to last on store shelves for as few as seven days, could stay there at least two weeks.

The implications were huge: Interstate could reduce waste. That meant it should be able to close some plants. And it could cut the frequency of deliveries.

A big question was whether the technology could be applied to bread, which makes up more than half of the company's sales. It had always had a shelf life of only about three days, far less than cakes.

Bread proved far more complicated. The gum didn't mix well with it. An early attempt to create a longer-lived loaf burned out the motor of a bread-dough mixer.

The company sought the help of Innovative Cereal Systems, an Oregon company that specializes in mixing freshness-enhancing enzymes for bakeries. Enzymes bind water molecules to the bread, making it softer and slowing the process of going stale.

Innovative Cereal was convinced it had the right formula for extending the life of bread -- a recipe that didn't include the gum inside Zingers. But Interstate wasn't its only client. The whole bakery industry was seeking to prolong shelf life. Sara Lee Corp., another large bread maker, was also working with Innovative Cereal.

Interstate experimented with the Innovative Cereal formula and determined that it worked in Wonder Bread, the nation's top-selling brand. In 2001, Interstate began shipping Wonder loaves that could stay soft and fresh for seven days, more than twice as long as before.

[...]

Mitchell Pinheiro, a food analyst with Janney Montgomery Scott, says he was touring an Atlanta supermarket in June 2003 when he noticed that Interstate's Merita bread looked gummy and doughy. "It was so heavy that the sides weren't able to support the weight," Mr. Pinheiro says. He questioned a delivery driver, who, he recalls, thought the bread never should have made it to store shelves.

Quality was especially a problem in the company's Southeast division. Sales there were off 25% by April 2003, according to David C. Nelson, a food-industry analyst at Credit Suisse First Boston.

Consumers started complaining on Twinkies.org, a Web site not affiliated with Interstate. "I've been eating Merita bread for decades," but "the taste seems to have changed," an anonymous consumer wrote in a posting in 2003. Wrote another: "Whatever has happened or is happening we do not like it and have gone to another brand."