NEW YORK — Flowers Foods, Inc. is in the process of cutting the number of ingredients in Nature’s Own bread to 14 from 26, said Bradley K. Alexander, executive vice-president and chief operating officer of Flowers Foods.
Speaking April 14 at an investor’s day presentation held at the New York Stock Exchange, Mr. Alexander and his colleagues described the change both as fitting within the evolution of Nature’s Own dating back decades as well as part of a clean label initiative at Flowers.
“To grow our sales beyond the core white bread segment, we introduced the (Nature’s Own) brand in 1977,” he said. “It offered consumers a soft wheat bread with no artificial preservatives, colors or flavors. Over the years, we’ve continued to introduce varieties under the brand with better-for-you attributes, including sugar free, low carbs, high fiber and whole grains.”
In 2009, high-fructose corn syrup was eliminated as an ingredient.
“More recently we are working to reduce the number of ingredients by almost half,” he said.
While he did not elaborate on the move to sharply reduce the number of ingredients in Nature’s Own, the initiative also was addressed in comments about the bread market by R. Steve Kinsey, executive vice-president and chief financial officer.
“I would say in food as a category you have seen a nice recent run,” Mr. Kinsey said. “A lot of that is the consumer is getting back into food generally. They appreciate the value of food. Consumer trends, consumer tastes have changed. Overall, when you look at bread specifically — how on trend items are like organic, gluten-free, better-for-you or quality type ingredients. As Brad pointed out, we are looking at a cleaner label initiative. We’ve done that in some markets. That’s giving us great opportunities in this category. We continue to see better-for-you as a trend — not so much of a focus any longer on caloric intake or carbs.”
Neither executives offered details about which ingredients would be eliminated, in which Nature’s Own varieties and whether the changes would be incorporated wherever Nature’s Own is sold.
An industry source, not specifically familiar with the Flowers initiative, offered two ways large numbers of ingredients could be cut from a particular bread formulation. First, enzymes could be used in lieu of dough conditioners — dough strengtheners and crumb softeners. In Nature’s Own Honey Wheat bread, purchased April 16 in Kansas City, the ingredient panel included: “dough conditioners (contains one or more of the following: sodium stearoyl, lactylate, calcium stearoyl, lactylate, monoglycerides, mono- and diglycerides, distilled monoglycerides, calcium peroxide, calcium iodate, datem, ethoxylated mono-and digycerides, enzymes ascorbic acid).” An alternative approach would be replacing enriched flour with whole flour, obviating the need to list the components of enrichment.
In a related topic, Allen L. Shiver, president and chief executive officer of Flowers Foods, said the rapid growth of the market for organic foods, including bread, has not escaped the company’s notice.
“We are very attentive to developments within the organic bread category,” Mr. Shiver said. “And we look forward to growing our share.”
Currently, Flowers participates in the organic bread market with its Barowksy’s bread, buns and specialty rolls. The products are available in New England, New York, New Jersey and Pennsylvania. Mr. Shiver framed his discussion of the organic bread market as part of a broader discussion of health and wellness trends.
“Our long experience in the fresh bread category gives us valuable perspective as we watch various trends emerge,” Mr. Shiver said. “For example, we’ve positioned ourselves as consumers took interest in better-for-you variety breads. Considering the current environment, you will see consumer interest in better-for-you foods continuing to build as evidenced by the steady growth in the overall organic food category. Sales of organic breads in particular have ramped up in recent years. While still small, estimated to be just over 1% of the total bread market, the rapid growth and high price points in this segment are certainly attractive.”
Through Barowsky’s, Flowers is gaining experience and establishing important connections in the organic market, Mr. Shiver said.
“We have working relationships with key natural and organic retailers, as well as valuable production and supply chain expertise,” he said.
Other initiatives discussed by the Flowers executives include the recently launched Cobblestone Bread Co. line and efforts to grow Flowers food service business.
Mr. Alexander suggested Flowers is achieving modest success in the roll-out of its Cobblestone Bread Co. He said sales year-to-date are up 30% versus the company’s former Cobblestone Mill brand.
“C.B.C. targets millennials and foodies taking fresh breads with unique flavors and characteristics,” he said. “This year we are introducing new products under the brand to grow our sales in underdeveloped segments focusing on wide pan specialty segments, breakfast items and tortillas.
“Breakfast breads are a priority for us. Our new product line will build on consumer interest in non-cereal breakfast foods that can easily be eaten on the go. Tortillas are also seeing strong growth. With high household penetration, and strong volume growth, we are eager to grow our share of the segment.”
Both Mr. Shiver and Mr. Alexander said food service, which accounts for 22% of the company’s business at present, offers promising opportunities for Flowers looking forward. Much of this potential is predicated on the strength of consumer interest in sandwiches, Mr. Shiver said.
“Sandwiches remain an important part of the American diet,” he said. “For many years now, research group NPD has reported that when Americans decide what to eat, they most often choose the sandwich. Furthermore, NPD also noted that a share of all eating occasions today, sandwiches are being chosen more often. We already have a strong position in the white and soft variety bread and bun segment. We are working to further develop our share in some categories where we see opportunity, such as breakfast and premium specialty breads. Flatbreads such as tortillas and wraps are another category experiencing growth as consumers look for new and different ways to make sandwiches. We have recently aligned our resources in this segment to help grow our share of the retail flour tortilla business.”
He went on to say that sandwiches often represent a core menu item in the rapidly growing fast casual restaurant format.
“We have the ability to not only produce and develop bread, buns and rolls but also distribute those products over a broad geographic area,” Mr. Shiver said. “These capabilities allow us to develop strong relationship throughout the food service category.”
Mr. Alexander expanded on the role of food service at Flowers, noting that the company distributes to the sector both through its direct-store delivery and warehouse segments.
“Our customers look to us to help them develop new items that can often be carried into the retail bread category,” he said. “As many of you are aware, mass casual concepts with fresh, high quality on trend foods with an overall lower price point and no tipping are winning in the marketplace. Flowers is well positioned for success in this segment. New products and product innovation are key to success at food service. Both restaurant operators and patrons are always on the lookout for something different. Restaurant patrons expect a consistent experience. Our food service team has expertise products that are not only unique but can also be produced economically and consistently.
“A great example of how we bring innovation to food service customers is a craft beer bun we recently developed for a customer. Leveraging a growth trend toward craft beers we incorporated attributes of that flavor to create a substantial hamburger bun that perfectly complements the deluxe multi-topping burgers that are so popular with consumers. Beyond hamburgers, we’ve also helped customers develop sandwiches of all kinds that incorporate a wide variety of dense and rich breads that our bakeries can produce.”
Asked to elaborate on the company’s growth objectives in the breakfast bread and specialty baked foods categories, Mr. Alexander offered very specific estimates and projections.
“In the breakfast, I think we’re about 1.8 (market share),” he said. “We need to double or triple that over time. There is no reason in my mind we can’t double or triple our share over the next 18 months, I would say.
“In specialty, we are around a 4 share. I think we can get to about 6 in the next 18 months. That would be a good goal. We have some new products coming to market that we haven’t announced to date. For competitive reasons we haven’t said much about them, but we have some things in R.&D. our marketing group has worked on and we’re excited about. It will be later in the fall or early next year before we launch those.”
