Shiver: Flowers bread and cake production utilization higher than normal

by Eric Schroeder
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THOMASVILLE, GA. — Investing in existing brands, improving product quality and enhancing brands has been an operational strategy at Flowers Foods, Inc. for many years, and it is that strategy that positioned the Thomasville-based company to take on significant new volume in its existing bakeries when Hostess Brands exited the market, said Allen Shiver, president of Flowers Foods.

“With the volume we’ve added, it isn’t surprising that our production utilization for both bread and cake is higher than normal,” Mr. Shiver said during an Aug. 13 conference call with analysts to discuss second-quarter results. “Since November, we have reopened some idle capacity in Brattleboro (Vt.) and other bakeries to help address the need. We also commissioned a new bread line in the quarter at our Oxford, Pa., bakery that was part of our Tasty acquisition.

“In keeping with our strategy to constantly improve processes and use new technologies, the Oxford bread line includes several innovative new technologies that make it among the most efficient in the country. The Oxford start-up was smooth, and the new line is well-positioned to serve our expansion markets in that region.”

In addition to the start-up of the new bread line in Oxford, Mr. Shiver said the integration of Lepage Bakeries and the Sara Lee brand in California “continues to be on track.”

“As expected, Lepage is a great complement to Flowers, and now their New England markets offer Nature’s Own and Tastykake as well as Lepage’s Country Kitchen and Barowsky's organic brands,” he said. “The Lepage integration is going well and is on schedule.

“You will remember that in February 2013, we acquired the Sara Lee brand for California and started our phased roll-out of that new business. In mid-June we completed the last phase and now offer fresh bread and rolls available throughout the state. Our team in California continues to do a great job building our business on the West coast.

“Before the Sara Lee California acquisition, our brands had a 2.4 dollar share in California. With the roll-out, Flowers’ brands now have a 12.5 dollar share of the California market according to the I.R.I. reports in mid-July. This is in line with what we told you to expect. As we continue to gain consumer acceptance for our brands in California, we will achieve steady growth for years to come. We are also working to establish our own production capacity for California as evidenced by our July acquisition of a high-speed bun bakery in Modesto, Calif.”

Although Flowers has a multi-million dollar supply agreement with Grupo Bimbo S.A.B. de C.V. to source from the existing facility in California, establishing its own production for supplying California is an important focus for Flowers, Mr. Shiver said, adding the acquisition of the Modesto plant “is one step in that direction.”

“Our overall production solution for California is — continues to be — underdeveloped,” he said. “But we are very confident in our future growth from a sales standpoint. We are also very confident that we will have the right production solution in place relatively soon.”

Mr. Shiver acknowledged Flowers is aware of the timeline with Grupo Bimbo and the supply agreement, but at this point has some “loose ends to put together and some questions to be answered before we can really detail the timeline.”

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