THOMASVILLE, GA. — Beyond the announced plant closings precipitated by the coronavirus pandemic, Flowers Foods, Inc. has contended in recent weeks with the effects of numerous employees at multiple plants being sickened by COVID-19, said A. Ryals McMullian, president and chief executive officer.
Mr. McMullian offered insights into how Flowers has been affected by and dealt with COVID-19 as a panelist in a July 29 webinar, “Maneuvering Food Companies During a Pandemic.” The webinar was part of the CPG Speaks series produced by the Consumer Brands Association.
With baking plants in a number of states that experienced spikes in confirmed cases of COVID in late June and July, Flowers has had “quite a few” employees at its many plants who were sickened or quarantined, Mr. McMullian said.
“We’ve felt it in Florida,” he said. “We’ve felt it in Georgia. We’ve felt it in Texas. It does create some operational challenges, because you have to have enough people to run a line. We’ve had situations where we’ve had to close a bakery for a couple weeks, not because there has been widespread outbreak at the plant, but because you take enough people off that shift you can’t run that shift. You take enough people out of the bakery that are out on quarantine or have been confirmed with COVID, you can’t run the bakery. Fortunately for us, we have enough bakeries, we can back that production into other plants and not really skip a beat serving that market. It’s not the most efficient way to do it. Most of the time it’s a line that shuts down here or there for a while, but there have been a couple instances where we had to close a whole plant for a couple weeks.”
Discussing COVID-specific challenges Flowers Foods has faced, Mr. McMullian said securing masks was a challenge early during the pandemic. The company has put travel restrictions in place and “very restrictive visitor policies that are actually still in place.” He said the visitor policies are beginning to ease slightly.
“We haven’t really had a problem as far as spread inside the plant,” Mr. McMullian said. “We’ve certainly had cases, and we’ve had more cases since the economy started to reopen than we did at the very beginning. We had almost none at the beginning. The real problem now is not spread within the bakery, where we do temperature screenings, all those kinds of things; it’s what people are doing when they leave. With the economy opening back up, people socializing more, going back into restaurants and all that, that’s the real reason we’ve seen the cases rise a bit, since mid-June.”
Mr. McMullian traced the impact of COVID on the Flowers business from the outset of the pandemic. Because the company operates plants on the West Coast, Flowers was keenly watching the situation from the first confirmed diagnoses and the larger early outbreak in Seattle, he said. Flowers realized the pandemic represented a serious situation in March, when panic buying ramped up, Mr. McMullian said. Even within the food industry, the pandemic created particular challenges for bakers.
“We basically don’t have any inventory, being fresh and DSD (direct-store delivery), so moving to a limited assortment across the entire network was really key for us,” he said. “There was no backfill to take to stores, and we’re basically baking to order virtually every day.”
Asked whether operating a direct-store-delivery system has proven to be an advantage during the pandemic, Mr. McMullian said it has. At the same time, he acknowledged that operating a DSD system is often costly.
“(DSD is) really service to the retailers,” he said. “We’re furiously going there every day. I’m not going to tell anybody that we weren’t out of stock at some point somewhere along the way, but for the most part even during the very height of it, because our independent distributors are going to the store virtually every day, the bakeries are turning out product every day, perhaps Flowers and others in the industry were able to serve the stores a little better. Particularly at the beginning, at the height of the panic buying, being able to get that product to the shelves on a daily basis to replenish as well was also important. For us, being fresh, there isn’t as much pantry loading because it’s going to go bad, so it’s important for that product to be there for repeats as those folks come back to refill the bread stocks.”
While he believes there’s no better distribution model for Flowers, Mr. McMullian said it isn’t for everyone.
“To really serve the consumer and the customer, going DSD is probably the best way,” he said. “But it’s also not cheap. It’s a pretty expensive way to go to market, which is probably why some folks have decided to move away from it and go to warehouse.”
Like many companies, Flowers has found remote work necessary for many of its non-production employees. At a company that always has valued in-person interaction, Mr. McMullian said the abrupt transition has gone remarkably smoothly.
“You really just kind of get stuck in your ways,” he said. “And there’s tradition. For us at Flowers, it is very much of an in-person, fly here, there to meet. It’s just habit. There was never really a big push to go to a remote work situation or rely like we are now on Zoom or Teams or whatever platform that you’re using.
“I will say that now that we’ve done it, we were pushed into the situation, it has worked remarkably well for us. We conduct all of our meetings on Teams to the extent that people are working remotely; we’ve also done our last four or so board meetings over Microsoft Teams. I’ve been amazed at how well it has worked, how collaborative we’ve been able to be on a virtual platform. We are working on a different remote work policy going forward. For the time being we’re still out of the office. Some of us cycle through in shifts, but for the most part we’re working remotely, and like I said I’ve been pleasantly surprised with how well it has worked for us. You can certainly see going forward, we’re all trying to manage costs better; you can certainly save on some travel costs. There are times you need to be there. There are times it is not necessary. This platform has proven pretty valuable to us.”
In a discussion about how food companies will retain the increased household penetration they have secured during the pandemic, Mr. McMullian said marketing spending will be important but added that a heightened focus on e-commerce will be necessary as well.
“E-commerce may be one of the most permanent changes in my opinion,” Mr. McMullian said. “I’m not sure that behavior ever goes fully back to brick-and-mortar. I think a lot of consumers have come back to products and brands they may have left for one reason or another. Whether it’s because they’re eating out all the time, they’re on the go, it’s dietary, there could be a gazillion reasons for it. I think there are a lot of brands, like the brands represented here today on this call that have started to regain that trust with the consumer. All of us deliver a wholesome, quality product; the service is consistently to retailers good. We’re reliable. I think that matters. How much does in-home eating continue going forward? Certainly not at the rate we saw at the peak, but I do think at some level that will continue. I think families have rediscovered sitting down to dinner together, including my own. I think a lot of folks have really enjoyed that."
“Our brands want to be there for that purpose. So, it’s about the shelves being stocked. It’s the same thing for the digital shelves, too. It’s important to us that we win the digital shelf just like we seek to win the physical shelf."
“We have increased our marketing budget to try to keep the momentum, to keep the brands front and center with the consumer when they go into the store. We know consumers when they are going to the store are spending less time there, so to the extent we can have those off-rack displays or make sure our shelf set looks great and is fully stocked, the better off we’re going to be. So they’ll think of us when they think of a baked product.”