Milling & Baking News Corporate Profiles - 2017 - 84

Company Overview

with our purchased goods and services program," he said during the N.Y.S.E. presentation. "After a thorough benchmarking, we've
reduced discretionary spend with third-party
suppliers using a mix of price, specification
and consumption. This is a complex project.
We have more than 4,000 vendors, and we're
addressing roughly 50 expense categories,
most with meaningful savings opportunities.
We've made substantial progress this year updating policies and negotiating agreements.
We are on track with our $45 million run rate
P.G.&S. savings target that we provided you
earlier this year for 2018. In addition to the

'Our priority to reinvigorate our core
business is all about focusing on our
core brands and improving execution
in the marketplace.'
- Allen L. Shiver,
Flowers Foods, Inc.

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 finetune our supply chain model," he said.
Among major changes at Flowers will be its
approach toward the company's brands.
"Our priority to reinvigorate our core business
is all about focusing on our core brands and
improving execution in the marketplace," Mr.
Shiver said in an early September presentation.
Commenting very briefly on each of the four

84 \ October 2017

core brands, Mr. Shiver said Nature's Own is
the top selling loaf bread in the United States,
Wonder has 98% consumer awareness, Dave's
Killer Bread is the leading organic bread in
the nation and Tastykake is drawing increased
Flowers' support through marketing partnerships and new varieties.
In focusing on the four brands, three of
which are new to the company in the last six
years, Flowers is adjusting its longtime playbooks. The company has made more than 100
acquisitions over the last half century, and for
many years touted the success it achieved by
continuing to market the small local or regional brands that came with acquisitions, supplemented by Flowers' Nature's Own brand. During the N.Y.S.E. presentation, Mr. Shiver said
many of the non-core brands will continue to
play an important role at Flowers.
"Our established brands, they provide
scale to our operations, they strengthen our
product assortment, and they contribute consistent cash flows," he said. "Store brands,
some of our regional name brands in our commodity food service business, fit squarely in
this role."
With cost savings from Project Centennial
targeted at increasing EBITDA margins by 250
basis points, Mr. Kinsey suggested the upside
for marketing spending was considerable.
"Today we spend less than 1% in sales on
marketing," Mr. Kinsey said. "Traditional
C.P.G. companies are probably north of 5% or
higher. We're not looking to become a bleeding
edge company, but we are expecting to have a
significant increase next year."
In addition to enhancing efficiency and
strengthening the company's core business,
Flowers also is focused on expanding into adjacencies.
The changes at Flowers are taking place
during a challenging time for the company. In
the 28 weeks ended July 15, Flowers Foods
net income was $105.2 million, or 50c per
share, down 5% from $110.5 million, or 52c,
in the first half of 2016. Sales were $2,114.3
million, down 1.2% from $2,139.4 million. CP

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Flowers Foods, Inc.
D.S.D. segment
in millions
% change from
Fiscal 2016
year ago
Net sales
+3.3%
$3,284.2
Operating
income
$260.5

-13.8%

Flowers Foods, Inc.
warehouse segment
in millions
% change from
Fiscal 2016
year ago
Net sales
+7.3%
$642.7
Operating
income
$58.5

+5.8%

Flowers Foods, Inc.
product mix
52 weeks ended Dec. 31,2016
Mixes
1%

Fresh breads,
buns, rolls,
tortillas
76%
6%
17%

Frozen
breads, rolls

Fresh snack
cakes, pastries

Flowers Foods, Inc.
sales channels
52 weeks ended Dec. 31,2016
Mass
merchandiser
/discount

Supermarket
/drug stores
37%

30%

All other
23%
5%
5%
Convenience
Foodservice
store

Corporate Profiles

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