Milling & Baking News Corporate Profiles - October 2011 - (Page 88)

Company Overview Flowers Foods, Inc. The acquisition of Tasty Baking is part of larger expansion efforts I n a difficult market environment, Flowers Foods, Inc., Thomasville, Ga., is looking to expand dramatically. In April, Flowers announced plans to acquire Philadelphia-based Tasty Baking Co. for $175 million in cash. The takeover followed by only a few weeks the unveiling of the company’s most ambitious growth plan ever in fresh baking, to expand geographically to the point Flowers products will reach three quarters of the U.S. population within a five-year period. “We believe Tasty gives Flowers Foods a national platform to grow our fresh cake business,” Allen L. Shiver, Flowers president and chief operating officer, said in September. “Just as important, we will leverage our Nature’s Own brand across the mid-Atlantic and into the northeastern portion of the United States. By serving this important area with Nature’s Own breads and rolls, we will reach 61% of the U.S. population with our diverse line of bakery products delivered by our D.S.D. (direct-store delivery) network, moving toward our 5-year target of serving 75% of the U.S. population through D.S.D. The integration of Tasty Baking is well under way and right on schedule, as expected.” While still profitable, Flowers has not escaped the difficult market environment without bumps and bruises. Flowers net income in the three months ended July 16 was $28,210,000, down 16% from $33,756,000 during the second quarter a year earlier. Flowers Foods shares have declined about 20% from the company’s 52-week high. “We are upbeat about the outlook for the overall bread market, but we are cautious in our expectations of how quickly things will turn around,” Mr. Shiver said. “Bakers are fortunate that bread is viewed as an essential and can be consumed at all meals. Bread’s longevity and its flexibility have helped it withstand everything from tough economies to diet fads. “What we’re witnessing is continued financial pressure on the consumer, which has resulted in a behavior change. Consumers are making fewer trips to the supermarket, are more cost-conscious than in the past, are tending to use the entire loaf, and are making fewer impulse purchases. We’ve also seen that coupon usage is up significantly across all grocery categories as consumers look for ways to reduce their total food bill.” Adding to Mr. Shiver’s optimism is the strength of Flowers’ core brands, particularly Nature’s Own. “Currently, Nature’s Own is No. 1 in household penetration, purchase frequency, repeat sales, and customer loyalty as measured by IRI Allen L. Shiver panel data,” he said. “And while only available to about 53% of the U.S. population, Nature’s Own is the No. 1 soft variety brand in the country, and Nature’s Own Honey Wheat and 100% Whole Wheat soft variety breads are the No. 2 and No. 4 UPCs, respectively.“ Curbing the optimism has been a highly volatile market environment. “Over the past year, it’s not been unusual for us to see more price swings in a day than we would see all year 15 or 20 years ago,” Mr. Shiver said. “And costs for our key ingredients — wheat, sugar, cocoa, etc. — are up precipitously. Higher prices and erratic price swings create uncertainty and stress on management to do everything in our power to level these costs out as best as we can. CP F ast acts Flowers acquired Tasty Baking for $175 million in a cash transaction. The acquisition will expand Flowers geographic footprint to 61% of the U.S. population. In a weak, highly competitive bread market, earnings came under some pressure. 88 \ October 2011 Milling & Baking News • Food Business News • Baking & Snack • Meat & Poultry Corporate Proﬁles

Table of Contents for the Digital Edition of Milling & Baking News Corporate Profiles - October 2011

Milling & Baking News Corporate Profiles - October 2011