Flowers Foods is a rising star in baked goods. The company is one of the largest wholesale bakeries in the US. Flowers Foods bakes, markets, and distributes fresh breads, buns, rolls, corn and flour tortillas, and sweet bakery goodies to retail food and foodservice customers in the western, southern, and northeastern US. The company's brand names include Cobblestone Mill, Nature's Own, and Tastykake. Flowers Foods makes snack cakes, pastries, donuts, and frozen bread products for retail, vending, and co-pack customers nationwide. It also rolls out hamburger buns for national fast-food chains. Flowers Foods has agreed to buy several bread brands, including Wonder, and about 20 bakeries from Hostess Brands.
Flowers Foods' direct store delivery (DSD) operation is the largest of its two business segments, accounting for more than 80% of sales. The warehouse delivery segment contributes the rest. The DSD segment operates 32 bakeries that produce a variety of fresh baked goods, including breads, buns, rolls, tortillas, and snack cakes. The warehouse segment operates 10 bakeries that make snack cakes, breads, and rolls, which are shipped fresh and frozen to retail, foodservice, vending, and other customers' warehouses.
Sales and Marketing
As a leading U.S. baker, the company's products are available to consumers through traditional supermarkets and their in-store deli/bakeries, foodservice distributors, convenience stores, mass merchandisers, club stores, wholesalers, casual dining and quick-serve restaurants, schools, hospitals, dollar stores, and vending machines.
Flowers Foods' direct-store-delivery system is comprised of approximately 4,000 independent distributors who own the rights to distribute certain brands of the company's fresh packaged bakery foods in their geographic territories. Also, Flowers Foods has about 560 company-owned distributors and distributorships available for sale. The warehouse segment's fresh snack cakes and frozen breads and rolls are sold nationally direct to customers' warehouses by frozen and non-frozen contract carriers. Wal-Mart is the company's largest customer, representing more than 20% of its 2011 sales.
Flowers Foods rang up nearly $2.8 billion in sales in 2011, an 8% increase vs. 2010. Net income fell by 10% over the same period. The acquisition of Tasty Baking halfway through 2011 gave a boost to branded retail sales (the company's largest business segment), despite competitive pricing and heavy promotional activity. The double-digit rise in store branded retail was primarily due to increases in store branded cake sales as some of the firm's customers introduced store branded cake programs in mid-2010. The strong performance in 2011 came on the heels of a 1% decline in sales in the previous annual comparison. Flowers Foods blamed the weakened economy, increased competition, and a spike in promotional activity within the baking industry for the stale sales.
Acquisitive Flowers Foods purchases other businesses to grow and enter new markets. Indeed, the company has completed more than 100 acquisitions during the past 40 years. Most recently, Flowers Foods in 2013 agreed to buy the Wonder, Nature's Pride, Merita, Home Pride, and Butternut bread brands, as well as 20 bakeries, and nearly 40 depots from liquidating Hostess Brands for $360 million. The pending purchase will further the bread maker's long-term growth strategy to supply more of the US population with fresh breads, buns, and rolls. Previously, the company acquired Tastykake and Leo's Foods, Inc. (tortillas). Flowers' growth strategy includes expanding its distribution system and developing new products. In 2011 the company introduced a half a dozen new products under its Nature's Own Brand.
Mergers and Acquisitions
From its stronghold in the Southeast, Flowers Foods has been expanding its retail and wholesale reach, moving north and west. To that end, in late 2012 Flowers Foods acquired the Sara Lee and Earthgrains assets in California and Oklahoma City, respectively, from a unit of Grupo Bimbo in an effort to reach 75% of the US population through its DSD system by 2016.
Flowers Foods acquired Tastykake pastry maker Tasty Baking in mid-2011. The purchase of Tasty Baking neatly filled the gap in Flowers Foods' geographic coverage, thanks to Tastykake's longtime following in the Northeast. Tasty Baking became a wholly owned subsidiary and part of the direct-store-delivery (DSD) segment of Flowers Foods.
Flowers Foods extended the DSD reach of the Tastykake and Nature's Own brands through its purchase of Maine-based Lepage Bakeries for $370 million in mid-2012. Lepage Bakeries comprises three bakeries with production capacity to bolster Flowers Foods' presence in the mid-Atlantic and Northeast. Lepage Bakeries' selection of breads, buns, and rolls also complements Flowers Foods' range of regional brands by adding the Country Kitchen and Barowsky's labels. – less