Flowers believes in Hostess brand's staying power
Aug. 15, 2013
by Eric Schroeder
THOMASVILLE, GA. — The Hostess bread brands may have been off the market since last November, but Flowers Foods, Inc. is confident the brand’s staying power gives the company a national white wheat bread brand that is capable of accelerating growth, especially in new markets.
Citing the company’s own research, Allen Shiver, president of Flowers Foods, said during an Aug. 13 conference call with analysts that the Wonder brand has a 96% aided brand awareness in core markets.
“From a customer standpoint, food retailers are well aware of the power of the Wonder brand, which drove good margins for them and also once had the highest household penetration of any brand in the white bread segment,” Mr. Shiver said. “The other bread brands we acquired — Merita, Home Pride, Butternut and Nature’s Pride — have strength in selected regional markets. We plan to reintroduce the brands in a way that will enhance consumer choices, strengthen the overall category for retail customers, build our distributors’ business and of course, positively impact the Flowers Foods bottom line.
“Our plans to reintroduce the new brands across markets served by our D.S.D. system are being finalized for this fall. We have good indication that our retail customers are excited about supporting our reintroduction of the brands. Adding Wonder and the other acquired brands to the Flowers Foods portfolio gives us the opportunity to strengthen and consolidate our brand lineup.
“From a national brand standpoint, we will continue to position Nature’s Own as a healthy soft variety bread and premium specialty brand. Nature’s Own is the No. 1 selling loaf bread in the country and we continue to see it driving growth in our core and in our new markets.
“With the addition of Wonder, we now have a national white bread brand that will help accelerate our growth especially in new markets.”
Although Wonder has the potential to be a national brand of white bread, Mr. Shiver cautioned that Flowers will be careful in how it rolls the brand out.
“In the white bread segment especially, consumers are very loyal to the white bread brands that they grew up with, and we have a lot of examples of that from Bunny in Louisiana to Dandy bread in Miami,” he said. “A lot of good examples for regional white bread brands are important.
“And so I will say that if there is a brand of regional white bread that we need in an individual market, we potentially could market both — the Wonder and the regional brand. But we will be careful how we roll out our brand strategy on a market-by-market basis.”
As part of its purchase of the Hostess bread brands, Flowers acquired 20 bakeries. Mr. Shiver said the company is currently able to meet consumer demand through its existing bakeries, but is confident that consumer demand will increase as the Hostess brands are reintroduced. In the event additional production capacity is needed, the Hostess bakeries will be reopened, he said.
Asked to elaborate on how Flowers plans to move into new markets without reopening some of the acquired Hostess plants, Mr. Shiver responded, “I think if you looked to the past of how we’ve expanded territory, we have entered new markets and we have been transporting product from probably a distance further than we would like at the point that we have built our business in new markets and we can support reopening of plant or of building a new bakery. That’s what we have done in the past.
“So that model has worked really well, and as we look at the acquired bakeries that we have recently picked up, we will approach it the same way. We will probably enter new markets and be transporting products from our current bakeries further than we would like and there is a point that we are established in the marketplace and our sales support the reopening of the bakery, we will look at those one at a time.
“So I will give you the impression we will continue to enter new markets and as we do that, we will build our sales volume from existing clients and when sales volumes are acceptable, then we will reopen the bakeries in those markets.”