Mixed bag for Flowers organic bread business

by Josh Sosland
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Dave's Killer Bread, Flowers Foods
Flowers Foods' Dave’s Killer Bread has exceeded expectations.

THOMASVILLE, GA. — While the overall market for organic bread continued to grow late in 2016, Flowers Foods, Inc. had mixed results in the category, said Allen L. Shiver, president and chief executive officer. While the company’s Dave’s Killer Bread has exceeded expectations, the company’s Alpine Valley Bread business failed to meet its goals.

As previously announced, Flowers Foods net income in the year ended Dec. 31, 2016, was $163,776,000, equal to 78c per share on the common stock, down 13% from $189,191,000, or 89c per share, in the same period a year ago. Sales for the year were $3,926,885,000, up 3.9% from $3,778,505,000.

Adjusted earnings per share were 91c in 2016 and 92c in 2015. In its initial forecast for 2017, Flowers projected earnings per share of 85c to 95c.

Special charges in 2016 totaled $43.9 million. Most of the charges were recorded in the fourth quarter. In 2015, the company recorded charges totaling $10 million.

Overall, Flowers Foods has been gaining share within the organic bread market, Mr. Shiver said.

Allen Shiver, Flowers Foods
Allen Shiver, president and c.e.o. of Flowers Foods

“When we announced the D.K.B. acquisition, we targeted sales of $160 million to $170 million in fiscal 2016,” he said during a Feb. 14 conference call with investment analysts. “I am pleased to report we have delivered above the top end of our range.

“Admittedly, Alpine is off to a slower start. We had targeted $85 million to $95 million in sales for 2016 and fell short of that goal, primarily because we underestimated how long it would take to generate growth outside of the retail bread aisle. We are committed to growing our sales in other areas of the store and we are working to build strong retail relationships that will grow the Alpine brand.”

Dave’s Killer Bread was acquired in September 2015 for about $282.1 million, and Alpine Valley Bread Co. was acquired a month later for $121.9 million.

Alpine Valley Bread, Flowers Foods
Flowers' Alpine Valley Bread business failed to meet its goals.

In the conventional bread market, positives were identified by Mr. Shiver. Soft variety sales, the company’s largest business, were down, “but volumes did show improvement in the fourth quarter as our promotional activity normalized,” he said.

Overall, the bread market remains competitive, Mr. Shiver said. During the first half of the year Flowers dialed back promotional activity, resulting in market share losses for core brands.

“In the third and fourth quarter we brought our promotion more in line with the category and volume trends have improved,” he said.

Also better late in 2016 were overall bread category trends, Mr. Shiver said. Dollar sales rose 0.3% in the fourth quarter while unit sales slipped 0.3%.

Contributing to that disparity was a continued shift away from private label in favor of branded bread, Mr. Shiver said.

“(The quarter) marked the 11th straight decline in store-brand dollar share of the category,” Mr. Shiver said. “Flowers gained 0.3 share points relative to the fourth quarter last year.”

The company did not fare as well in the cake category, which saw a 2.2% gain in dollar sales and 0.9% gain in unit sales.

“Flowers lost 0.6 share points, primarily due to stiff competition against Mrs. Freshley’s in the warehouse channel,” the company said. 
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READER COMMENTS (1)

By larry loving 2/27/2017 5:20:58 PM
distributors are pushing dkb.Alpine is store direct. DKB sales will continue to rise with more items hitting the marketif Flowers add DKB adeam to distributors agreements