Food business blossoming for 1-800-Flowers.com

by Keith Nunes
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Popcorn Factory boxes, 1-800-Flowers.com
1-800-Flowers.com markets its products through several food brands, including The Popcorn Factory.

CARLE PLACE, N.Y. — 1-800-Flowers.com, Inc. may be the company name, but food is quickly becoming a key part of the firm’s game. A competitor in the gifting business, 1-800-Flowers.com has made a significant investment in food that is blossoming into a leadership position in the category.

With fiscal 2015 sales of $1.2 billion, gourmet foods and gift baskets make up 55% of company sales, or $650 million. The company markets its products through such food brands as Harry & David, Fannie May, Cheryl’s, Wolferman’s, The Popcorn Factory, Moose Munch Gourmet Popcorn, Fruit Bouquets and Stockyards.

Joe Pitto, 1-800-Flowers.com
Joe Pititto, senior v.p. of investor relations for the 1-800-Flowers.com

“If you look at what we have evolved into, it is really a multi-brand, omni-channel concept, following our customer who tells us what they want, when they want it (and) where they want it,” said Joe Pititto, senior vice-president of investor relations for the company, on Jan. 18 during a presentation at the Noble Financial Capital Markets Equity Conference. “And that has really taken us from the floral industry where we’ve built a relationship with them (consumers) into the gourmet food gift space where we have now, through a combination of acquisition and birthing brands, created a suite of gifts that can cover much more of their gifting needs.”

The gifting business is seasonal and the investment in food brands has expanded the company’s opportunities. Flowers are popular around Valentine’s Day and Mother’s Day.

Harry & David organic fruit box, 1-800-Flowers.com
The company is featuring more organic fruits through the Harry & David brand.

“ … Gourmet food gifts typically do 50% plus of their business in the Christmas quarter, the year-end quarter,” Mr. Pititto said. “So, now if you look at our business today, gourmet food gifts represent more than 40% — almost 50% — of our total sales during the year. And that is expected to grow as time goes on.”

David Taiclet, president of 1-800-Flowers.com’s Gourmet Food Brands business, spoke with Food Business News during the Winter Fancy Food Show, which was held in San Francisco this past January and highlighted the differences between the food gifting business and the conventional food business. With five manufacturing plants, three assembly plants, which assemble gift baskets, towers and boxes, and three full-time distribution centers, Mr. Taiclet said the key for the gifting business is scale and flexibility.

David Taiclet, 1-800-Flowers.com
David Taiclet, president of 1-800-Flowers.com’s Gourmet Food Brands business

“You have to have the ability to scale quickly,” he said. “Once you offer a product you have to be able to deliver.”

He added that flexibility comes in with regard to ordering trends. The manufacturing and assembly plants must be able to respond quickly and management must be able to shift resources when sales of some products do not meet expectations.

“It’s a constant process and you have to build in the capability to be flexible,” Mr. Taiclet said. “That’s where it contrasts with a traditional C.P.G. company, which is more focused on low-cost production.”

Despite the differences, Mr. Taiclet said the Gourmet Food Brands business unit is affected by the same trends buffeting the rest of the food and beverage industry.

“The success of our food products comes down to ingredients and the taste,” he said. “The packaging comes second and the shape comes third. People want authentic ingredients and unique packaging, but they also expect much more personalized service and a customized approach from us.”

Mr. Pititto said the company is following consumer trends much the same way as the rest of the food industry. The company is featuring more organic fruits through the Harry & David brand and has introduced a line of gluten-free cookies and brownies under the Cheryl’s brand that he described as “doing very well.”

Cheryl's gluten-free cookies and brownies box, 1-800-Flowers.com
The company recently introduced a line of gluten-free cookies and brownies under the Cheryl’s brand.

The company completed its acquisition of the Harry & David business in September 2014. In his presentation, Mr. Pititto said the company is on the lookout for additional acquisitions.

“ … We acquired Harry & David and we are still integrating them,” he said. “So we weren’t going to rush back out and buy other things. It is a very fragmented industry, the food gift space. (There are) a lot of players who are anywhere from $10 million to $100 million, $200 million in revenue; a lot of family-owned business (and) a lot of catalog businesses. We think some of them lend themselves to our platform. So we are looking at those.”

One brand he specifically mentioned is Godiva chocolates.

“Brands are very important we’ve discovered when people are sending gifts,” Mr. Pititto said. “For instance, it is the reason people spend so much money on Godiva, a brand we don’t own and we would love to.

“But Godiva doesn’t win any taste tests. The chocolate loses to See’s and Fannie May and all the others in all the taste tests, but it commands $55 a lb because it is a beautiful gift and the recipient respects the fact that whoever sent it to them spent a lot of money on it. So brands really mean something. It resonates an important part of the package of offering gifts.”

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