THOMASVILLE, GA. – The company’s portfolio of premium products should hold up well in the event of a recession, said A. Ryals McMullian, president and chief executive officer of Flowers Foods, Inc., Thomasville.
In remarks issued May 19 in connection with the company’s first-quarter financial results, Mr. McMullian said a look back a decade to another period of higher costs and economic weakness offers hopeful signs for what may be in store for Flowers in the event of a recession.
“The last period of significant inflation coincided with the financial crisis and aftereffects that occurred roughly from 2007 to 2012,” he said. “The common perception is that recessions encourage consumers to trade down to lower priced products, particularly private label. However, what we found during this period was that despite the severe economic hardships, including high unemployment and low consumer confidence, private label did not gain meaningful share, though we did see a shift from foodservice to branded retail as consumers cut back on more-expensive restaurant visits. Further, differentiated products held up better than more commodity-like products.
“I would also note the significant changes we’ve seen in the competitive environment since that period. The industry was much less consolidated, and some larger players were under financial distress, which led to pricing pressure. Our product portfolio was also less differentiated as we had not yet acquired Dave’s Killer Bread or Canyon Bakehouse. Nor had we yet developed the Nature’s Own Perfectly Crafted line.”
Asked by an investment analyst about how private label may fare this time around in the event of an economic downturn, Mr. McMullian said recent data show sales of private label continue to decline, though not as steeply as earlier quarters.He added that the possibility consumers may “trade down” to some degree should not be discounted.