THOMASVILLE, GA. — Reflecting confidence the brand will resonate with consumers beyond the bread aisle, Flowers Foods, Inc. has introduced snack bars under the Dave’s Killer Bread name. An update on the effort together with other company strategies was offered in an investor conference call Feb. 11 by A. Ryals McMullian, president and chief executive officer of Thomasville-based Flowers.
Available in three varieties — Cocoa Brownie Blitz, Trail Mix Crumble and Oat-rageous honey almond — the bars currently are being offered in Houston at H-E-B Markets and in Maryland/Washington at Giant Foods stores.
The products are part of an initiative to introduce products beyond traditional baked foods, a move that has been the subject of hints from Flowers for many years.
In May 2017, when Mr. McMullian was promoted to chief strategy officer, the company announced a strategic imperative to “capitalize on product adjacencies.” Numerous potential categories were identified, including “healthy snacking.” When his elevation to CEO was announced in February, Mr. McMullian committed to taking the “necessary steps to better position Flowers for future growth in a dynamic business environment by strengthening critical brand-building capabilities, moving into growing adjacent segments.”
The move into snack bars showcases Flowers’ competency to develop new products, Mr. McMullian said in his remarks Feb. 11. He noted that the move into snack bars followed a series of line extensions that demonstrated the DKB brand could succeed in product lines beyond sliced bread. He said the company’s “new agile innovation group” is “tasked with accelerating the development of truly innovative new products that are outside of our core categories.”
“DKB’s brand strength enables it to expand to different categories in ways that other brands can’t,” Mr. McMullian said. “When our loyal DKB consumers, affectionately known as breadheads, expressed a desire for DKB products beyond loaf bread, we introduced bagels, English muffins and burger buns, all of which have been met with strong demand. That success gave us the confidence to expand the product line beyond bread. The snack bars are being tested in several markets and have shown strong initial results that are exceeding our own expectations. We’re excited about the promise of these new products and the potential for additional developments from our agile innovation group. Our pipeline is full, and we plan to bring more innovation to market later this year.”
Flowers is devoting resources to developing new products under all these brands, Mr. McMullian said. In addition to the DKB introductions, he cited Nature’s Own Perfectly Crafted flatbreads and Nature’s Own Perfectly Crafted rye as examples.
He also described other signs the company is progressing toward its objective of becoming a more brand-centric company. Over the last four years store brand sales have declined to 12% of total revenues from 15%.
“Our leading brands continue to perform very well,” he said. “Our household penetration grew significantly over the last two years. Importantly, we’ve held onto many of those new customers and further increased penetration of our leading brands in 2021. Since 2019, our household penetration has increased 300 basis points, with Nature’s Own up 460 basis points, Dave’s Killer Bread up 350 basis points and Canyon Bakehouse up 70 basis points. And consumers are also increasing the number of times they buy our products, with repeat rates up 270 basis points since 2019. These improved metrics are driving sales and market share gains. Nature’s Own, Dave’s Killer Bread and Canyon Bakehouse grew 2021 tracked channel sales by 0.3%, 11% and 16%, respectively, despite the difficult prior year comparisons. Those top brands also gained a combined 60 basis points of market share.”
Also during the call, Mr. McMullian offered an update on the company’s digital initiatives first announced in February 2021. The effort is crucial for the company to achieve its aspirations around efficiency, he said.
“When we launched this initiative, I highlighted some of the digital domains we were focusing on initially,” he said. “These domains included bakery of the future, e-commerce and autonomous planning. The bakery of the future domain, among its many benefits, is expected to provide new business metrics, real-time performance management; and automate repetitive processes. We expect those changes to translate into meaningful benefits such as reduced scrap and labor expenses, even more consistent product quality and ultimately lower production cost per hour.
“We’ve already launched pilots at several bakeries, and we expect to deploy this program to half of our bakeries by the end of the year.”
Even as the company has communicated its plans around the bakery of the future for more than a year, details about what the initiative entails have been sparse. Asked during the investor call whether installations would be disruptive to current facilities, Mr. McMullian offered hints of what may be involved in the projection.
“From an operational standpoint, it’s not disruptive,” he said. “We’re not having to shut things down. This is mostly data-driven type stuff at this point. Obviously, we’re doing some automation work, robotics and that type of thing, which is a little bit of a different story, as we did that in Navy Yard. But the pure initial for us to bakery of the future is mostly around data, better data, more real-time data, driving out inefficiencies, lowering scrap costs, et cetera.”
Regarding e-commerce, Mr. McMullian said the company is looking to extend the reach of its products.
“Our ultimate goal is to become the category leader driving sales at traditional retailers’ websites, online retailers and last-mile delivery partners,” he said.
In an effort to build its autonomous planning resources, Mr. McMullian said Flowers seeks to connect the various pieces of its supply chain digitally.
Such capabilities would help the company “predict consumer demand with higher accuracy and integrate that insight from point of sale through the supply chain to ensure the right raw materials are on site at the right time,” he said.
He explained that producing the right products at the right bakeries, delivering products to optimize on-shelf availability will greatly benefit the company.
“These digital domains and others are expected to drive greater sales and efficiencies, enabling us to meet or exceed our long-term financial targets,” he said. Underpinning the digital initiatives is an upgrade of the company’s enterprise resource planning system. He said the ERP project has moved beyond the design phase and into the build phase.The upgraded system will “deliver better data; automate processes; and enable us to become a more digitally agile company with the ability to leverage data and technology to further improve efficiencies, operations and service.”