BOSTON — Fundamentally altering a strategy dating back decades, Flowers Foods, Inc., Thomasville, Ga., is streamlining its brand lineup and will focus resources on its four largest brands — Nature’s Own, Wonder, Dave’s Killer Bread and Tastykake, said Allen L. Shiver, president and chief executive officer.
Mr. Shiver described the new Flowers approach, an outgrowth of the company’s Project Centennial restructuring, in a Sept. 6 presentation at the Barclays Global Consumer Staples Conference.
|Allen Shiver, president and c.e.o. of Flowers Foods|
“Our priority to reinvigorate our core business is all about focusing on our core brands and improving execution in the marketplace,” Mr. Shiver said. “We’re focusing on innovation and marketing resources on four key brands. We will work to bring to market new items under these brands that have a clear point of difference and resonate with the consumer.”
Commenting very briefly on each of the four brands, Mr. Shiver said Nature’s Own is the top selling loaf bread in the United States, Wonder has 98% consumer awareness, Dave’s Killer Bread is the leading organic bread in the nation and Tastykake is drawing increased Flowers’ support through marketing partnerships and new varieties.
In focusing on the four brands, three of which are new to the company in the last six years, Flowers is adjusting its long-time playbooks. The company has made more than 100 acquisitions over the last half century, and for many years touted the success it achieved by continuing to market the small local or regional brands that came with acquisitions, supplemented by Flowers’ Nature’s Own brand.
Over time, the proliferation of brands has become costly and distracting, Mr. Shiver said.
“Decades of bolt-on acquisitions have left us with a complicated marketing assortment,” he said. “For the fall shelf sets, we will go to market with a streamlined offering, we’ll be able to improve merchandising and put support behind our strongest brands and products. As an added bonus, this action also increases run times and improves overall manufacturing efficiencies while also improving our order accuracy.”
Mr. Shiver said Flowers will invest in technology that will strengthen the company’s trade management capabilities and enhance “returns on that spend.” For the company’s independent distributors, Flowers will offer stepped-up support in an improved distributor ordering platform, increased use of data and analytics and the encouragement of better exchange of insights and best practices.
“Finally, we’re getting distribution in the Midwest with strategic partnerships that leverage our brands and allow us to build scale in new markets more cost effectively,” he said. “In short, by taking these actions to reinvigorate our core, we are confident that we will achieve our long-term goal of 2% to 4% compounded sales growth from our existing footprint over the next three to five years.”
Following Mr. Shiver’s presentation, R. Steve Kinsey, executive vice-president and chief financial officer, described how the largest aspects of the Flowers restructuring will be effected in two phases.
|R. Steve Kinsey, executive vice-president and c.f.o. of Flowers Foods|
“In fiscal 2017 and 2018, we will focus on transformation, optimizing our brands, reducing cost and creating a more streamlined operating model,” he said.
He said the company is “well along in this phase of the project.”
“In 2019 and beyond, with a more efficient organization, we anticipate our actions to reinvigorate the core and grow product adjacencies, we’ll begin to deliver on the top line, driving sales growth and margin expansion,” he said.
Through the second quarter, Flowers has captured more than $10 million of savings and currently is on a run rate of about $25 million annually.
“It's a good start, but there is much more to do,” he said. “Our long-term goal is to deliver at least 250 basis points of EBITDA, net EBITDA margin improvement by fiscal 2021.”
This margin improvement would equate to about $100 million in annual savings Flowers said it largely will invest back in the company.
As part of a new organizational structure, Flowers is in the midst of a voluntary separation program offered to certain employees. The program will result in charges not part of the current Flowers guidance, Mr. Kinsey said.He said the company does not yet know the full impact of the program but will have greater insight when the program closes later this month.