Milling & Baking News - October 10, 2017 - 11

Management headcount to be cut
15% in Flowers Foods restructuring
Continued from Page 1

deliver innovation and maximize reCentennial. We began Project Centen- turn on marketing investments. Our
nial last year with an evaluation of our sales and supply chain functions
brands, our product mix and, also, our will be separated to better clarify
responsibilities and accountability."
organizational structure."
Mr. Kinsey said the Flowers decenPart of the cost reduction efforts include the VSIP, first announced in July. tralized regional operating model has
The program just recently closed and, been simplified and streamlined while
together with other initiatives, will re- the finance function will be focused on
sult in a net overall headcount reduc- delivering shareholder value "through
tion of approximately 450 associates, insights and advice grounded in data
including a 15% reduction in manage- and analytics."
In addition to discussing staffing
ment positions, Mr. Kinsey said.
"For team members who are di- cuts, Mr. Kinsey offered details in his
rectly impacted by these actions, we presentation of other cost savings
are committed to recognizing their Flowers is pursuing - purchased
contributions, treating them fairly and goods and services and supply chain
making their transitions as smooth as optimization. He described a "mindset
possible," he said. "As the
new structure goes into
'The category is evolving, and
place, we will remove
we intend to evolve right along
roles that were associated
with our previous regionwith it.'
al model, and we will add
- Allen L. Shiver,
positions that bring new
Flowers Foods, Inc.
talent and expertise to
the Flowers team that we
need to thrive in an evolving retail and consumer landscape. change" at the company, examining
For example, as we announced earlier like never before seeking opportunities
this week we have brought on Harish large and small for cost savings.
"In the near term, we're going afRamani, who has experience leading
I.T. transformation as our new c.i.o. ter savings with our purchased goods
So, we are very excited about what he and services program," he said. "After
brings to our management team and a thorough benchmarking, we've relook forward to the accomplishments duced discretionary spend with thirdas we continue to work on adding new party suppliers using a mix of price,
technologies and capabilities to the I.T. specification and consumption. This is
function. As we previously announced a complex project. We have more than
under the new structure, there will be 4,000 vendors, and we're addressing
business units responsible for maxi- roughly 50 expense categories, most
mizing the long-term earnings power with meaningful savings opportuniof our brands and business lines. We ties. We've made substantial progress
have created an enhanced marketing this year updating policies and negofunction to drive consumer insights, tiating agreements. We are on track

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with our $45 million run rate P.G.&S.
savings target that we provided you
earlier this year for 2018. In addition
to the near-term savings, we're adding new roles and capabilities in our
new centralized procurement team in
Thomasville to leverage our scale and
continue to focus on driving value."
While P.G.&S. is focused on external
spending, Flowers' efforts in supply
chain optimization are inward looking, Mr. Kinsey said. The program
seeks to "reduce operational complexity and improve ongoing productivity," he said.
"Under S.C.O., we've put a formal
continuous improvement process in
place at our bakeries to drive efficiencies, and we're reconfiguring our manufacturing network as we fine-tune
our supply chain model," he said.
The decision to close the WinstonSalem, N.C., snack cake
plant was an outcome of
this initiative, he said.
Between staffing changes, supply chain and purchased goods and services,
Flowers has upped its targeted savings to between
$70 million and $80 million per year by the end of
2018. Up to $30 million of gross savings will be captured in fiscal 2017,
Mr. Kinsey said.
A new strategy and ventures function will focus on strategic priorities
and explore mergers and acquisitions as well as strategic partnerships,
Mr. Kinsey said.
"We are anticipating a smooth transition and believe we have a strong
management program in place to assure our team understands the magnitude of the changes and most importantly remains focused on day-to-day
business," Mr. Kinsey said.
The transition will continue through
2018, and 2019 will be the first year
Flowers reports financial results based
on the new operating model.
Fundamental to how Flowers
will utilize savings generated by
cost cutting is the belief that investment in Flowers brands will pay off,
Mr. Shiver said.
"Put simply, consumers will pay
a premium for products with a very
meaningful point of difference," he
said. "Currently, Flowers spends
about 1% of revenue on R.&D. and
marketing. Our margins, however,
are above average compared to peers
with a similar level of investment.
This comparison reinforces a key
point - consumers see a value in
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Milling & Baking News - October 10, 2017

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