Flowers Foods sees growth ahead in new markets

by Josh Sosland
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BOSTON — Flowers Foods, Inc. has only begun tap the potential to build its presence in new geographic markets it has entered in recent years, said George E. Deese, chairman and chief executive officer.

Mr. Deese spoke Sept. 5 at the Barclays Back to School Conference in Boston. His presentation, offered together with Steve Kinsey, executive vice-president and chief financial officer, focused on Flowers Foods’ growth strategy.

Since 2005, Flowers has built out its geographic footprint to reach 70% of the U.S. population from only 38% in 2005, Mr. Deese said. The company’s most recent acquisition of Lepage Bakeries earlier this year gives Flowers coverage throughout the eastern Seaboard, “from Key West in Florida to the northern tip of Maine,” Mr. Deese said.

Overall, Flowers currently holds a 10% market share of brands in the United States and 2.5% of store brands, Mr. Deese said.

“Our market share is strongest in our core territories throughout the South, where we have some 25% share of branded and another 6% of store brands,” he said.

Mr. Deese used the market share in the South as a “bar” or target toward which to aspire in other markets.

“We have significant room to grow our share by leveraging the power of our brands and the effectiveness of our distribution system,” he said.

Market share in many of the geographies Flowers has entered in recent years is modest, but Mr. Deese expressed confidence growth would come.

“We’ve proven we can do that as we leverage the power of our brands and operating strategies,” he said.

Elements in those strategies include acquisitions and new products. Flowers’ Nature’s Own also has been an engine for growth at Flowers. The brand itself has grown double digits with great consistency since it was introduced in the late 1970s, Mr. Deese said.

“Nature’s Own is approaching the $1 billion mark at retail value, and the growth continues,” he said. “Our strategy has been to acquire independent bakers as we grow. Typically these bakers have a strong regional white bread brand, and we’ll layer on top of that Nature’s Own to the acquired distribution system.”

Mr. Deese expressed great enthusiasm for recent acquired Lepage Bakeries, based in Auburn, Maine. In addition to generating $170 million in annual sales, bringing an additional 18 million consumers into the Flowers market and operating three “very efficient bakeries,” Mr. Deese said the business has “a strong heritage in baking and operating strategies.”

“They have the latest in technologies,” he continued. “They offer fine quality products, and they have an experienced team. Their operating margin is among the highest in the industry. In other words, Lepage is best in class in the baking industry, and we’re proud they’re with us. And we’re excited about that the growth that we will continue to have in New England and as we stretch from our Tasty Baking home base of Philadelphia through the Northeast.”

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