Shiver details Flowers growth

by Josh Sosland
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NEW YORK — Company projections that Flowers Foods Inc. successfully will expand its geographic coverage in the years ahead are underpinned by the fresh experience of recent years in new markets.

In comments on Flowers operations, Allen L. Shiver, president of Flowers, offered the example of the company’s surging growth in the mid-Atlantic states as well as its rapid success in Southern California as evidence of the company’s ability to do well in new geographies.

Mr. Shiver also offered insights into the new product environment for baking, pointing out the surge in sales of sandwich thins/rounds does not appear to be cannibalizing sales of traditional baked foods.

He spoke March 22 at an analysts’ meeting hosted by Flowers at the New York Stock Exchange.

Discussing the company’s history of geographic growth, he noted overall the company’s reach expanded to 53% of the U.S. population in 2011 from 38% in 2004.

Describing the basic Flowers playbook for entering new markets, Mr. Shiver said the company usually goes into a new geography with a few direct store delivery routes, gaining a foothold with national retailers “that already know our company.”

“From there, it’s a steady build,” he said.

With a baking plant in Lynchburg, Va., Flowers was able to begin serving a population of 8 million in Maryland, northern Virginia and Washington.

“We broke the market with 43 key accounts and only 6 routes,” he said. “By 2010 we had 1,200 key accounts and 108 routes.”

He said Flowers market share in this region has reached 5.4%, 15% in the soft variety loaf category.

“We consider this market as part of our core territory,” he said, describing the expansion as one of the most successful ever for the company.

Offering a more recent example, Southern California, Mr. Shiver said Holsum Bakery of Arizona had only a “small presence (there) in select markets” when Flowers acquired the business in 2008.

“With a population of 23 million and with urban centers that include Los Angeles and San Diego, we believe this area has tremendous potential for our Nature’s Own brand,” Mr. Shiver said.

From the modest base in 2008, Flowers currently is serving 700 supermarkets, adding 120 independent routes.

“The momentum in the marketplace continues to build,” he said noting the company’s market share has grown to 225 basis points in late 2010 from 30 in late 2008.

“In both northern Virginia and Southern California, our expansion was slow and steady,” he said. “We take the time necessary to serve our retail and food service customers.”

Turning to product innovation, Mr. Shiver cited for the investment analysts a variety of ways the company stays abreast of consumer trends.

“We closely monitor the consumer’s pulse,” he said.

Offering a quick overview of key trends in 2011, Mr. Shiver presented five:
1. Well being -- a continued focus on healthy eating, healthy ingredients;
2. Simplification — Reduced spending, eating more simply and cooking at home;
3. Experience – the search for new food experiences, rise of ethnic foods and a focus on taste.;
4. Social responsibility — New awareness of how purchasing decisions affect the environment; and
5. Empowerment — consumers who are knowledgeable, demanding skeptical and want to be heard.

“New products spur sales growth in core markets,” Mr. Shiver said. “Our goal is for new products to contribute 5% to annual sales.”

Flowers achieved the goal in 2010 and has had a number of new product successes in recent years, he said.
Reviewing highlights, Mr. Shiver said Nature’s Own Whitewheat buns were the first “better-for-you” hamburger bun on the market when they were introduced in 2005. Now they are the top selling bun in the South region tracked by Information Resources, Inc.

Similarly, Nature’s Own 100% whole grain soft variety bread, introduced in 2009, became the top selling new loaf in units and dollars in the soft variety segment.

“2010 was the year of the sandwich round,” Mr. Shiver said. “Nature’s Own was the first on the market with a resealable bag and garnered the most sales growth of any new product in I.R.I. South in this particular segment.”

In 2011, Flowers already has had new product introductions and reformulations with an emphasis on healthy options and portion control in bread and rolls.

Building on the success of its Nature’s Own sandwich rounds, the company has expanded the line to four varieties, including a Whitewheat sandwich round.

“The center version of the traditional bun has been one of the most exciting new product developments in the category that I can remember,” Mr. Shiver said. “We also modified the recipe for Nature’s Own thin sliced bagels and introduced the line in resealable packaging.

“Sandwich rounds and thin bagels have had a positive effect on category. Consumers are using them for breakfast, lunch, dinner and snacks. Most households are purchasing sandwich rounds in addition to their regular bakery purchases.”

Emphasizing the importance of the Nature’s Own brand to the growth prospects of Flowers, Mr. Shiver noted the brand has enjoyed a compound annual sales growth rate of 13% since 2000.

“There is no doubt that our future growth is anchored in the Nature’s Own brand,” he said.

Turning briefly to the cake category, Mr. Shiver said recent new products introductions include chocolate bells and chocolate chip muffins containing Hershey brand chocolate. The continuing focus on healthy eating has not eliminated growth opportunities in snacks, Mr. Shiver said.

“People are still indulging in their favorite snacks,” he said.

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