Shiver says Flowers pursuing improved freshness

by Josh Sosland
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THOMASVILLE, GA. — Stepped-up innovation and finding ways to improve freshness of the company’s baked foods will be priorities for Flowers Foods, Inc. in 2015, said Allen L. Shiver, president and chief executive officer.

In comments during a Feb. 12 conference call, Mr. Shiver was upbeat about prospects in the new year for greater profitability and “improving the quality of our sales.”

“In addition to an exciting assortment of new products that will be introduced throughout 2015, we’re always working to enhance our current products by improving quality, freshness, and consumer appeal,” Mr. Shiver said. “We know that having the right assortment of the freshest products on the shelf is a key driver of market-share growth. To that end, we are investing in technology that will enable us to better anticipate consumer demand and support our network of over 5,700 direct-store delivery territories.”

As previously reported, Flowers Foods, net income in the year ended Jan. 3 was $175,739,000, equal to 82c per share on the common stock, down 24% from $230,894,000, or $1.09 per share, in 2013. Sales were $3,748,973,000, up 0.4% from $3,732,616,000 the prior year. Adjusted for special items in both years, Flowers’ 2014 net income was $192.1 million, or 90c per share, versus $192.3 million, or 91c per share, in 2013.

For 2015, Flowers in its initial guidance is projecting earnings per share in a range of 96c to $1.01 and sales in a range of $3,786 million to $3,861 million.

Other comments by Mr. Shiver during the conference call hinted at the increased focus on quality. For instance, in a review of production capacity additions, he cited among benefits of the newly opened baking plant in Knoxville, Tenn., both reduced transportation costs and improved product freshness.

“Consumers are increasingly more conscious of the foods that they’re eating,” he said. “Flowers was on the forefront of the better-for-you movement, introducing our Nature’s Own brand of soft variety breads, with no artificial preservatives, colors or flavors, in 1977. Since then we have introduced many other varieties with healthier attributes such as higher fiber, reduced sugar and multi-grain breads.

“We will continue to invest in market research to keep Nature’s Own, and all of our brands, relevant with the changing needs of the consumer. The American consumer is changing at a rapid pace and innovative new products are critical to drive growth now and in the future.”

The company’s most recent new product introduction, unveiled in the middle of 2014, was a relaunch of the Cobblestone Bread brand — under the new name Cobblestone Bread Company. The line was renewed with an eye toward millennials and what Mr. Shiver called “their desire to create restaurant-quality sandwiches at home.”

“Although we are still early in the introduction process, we are pleased with the response from retailers and consumers so far and plan to introduce more products under the C.B.C. brand this year,” he said.

Also during the new year the company will introduce new items under the Tastykake brand, Mr. Shiver said.

Asked about the competitive environment in the fourth quarter of 2014 and prospects for 2015, Mr. Shiver was guarded in his response.

“The promotional environment really has not changed from our last call,” he said. “Again, it continues to be a market-by-market situation. Overall, the marketplace remains competitive.”

He went on to say that Flowers, in generating earnings guidance for the new year, made no assumptions that the situation would improve.

“If there is improvement in pricing in the marketplace, there would be some upside there,” Mr. Shiver said.

In November, R. Steve Kinsey, executive vice-president and chief financial officer, was cautious about the prospective competitive environment in 2015 but said the company would benefit from Flowers’ plans tor reduce promotional activity at the end of 2014 and into 2015.

Mr. Shiver made similar remarks.

“Competitors are relying heavily on price promotion to drive volume to their brands,” he said in November. “Last quarter we discussed our intent to realize the more normalized level of promotions by quarter 4 of this year.”

Mr. Kinsey in his comments after the fourth quarter offered a hint about other upcoming news.

“We’re not willing to share today, but at our April Analyst Day we will talk about the next facility that we plan to open in one of our expansion markets,” he said.
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