Speaking on the firm’s Q1 earnings call Friday, CEO Ryals McMullian said: “Most encouragement is the fact that with a significant amount of price increases in January, we actually grew our units as well with our top brands, Nature’s Own, Dave’s Killer Bread, and Canyon Bakehouse.
“Despite higher prices and supply chain headwinds, volumes for those brands increased… up 1.7%, 5.3%, and 13.1% respectively. The current environment underscores the importance of our leading brands. We believe consumers continue to see value in the differentiated attributes of our products, and recent results seem to confirm exactly that.
“IImportantly, we’ve seen less elasticity in the most-premium products in our portfolio.”
Total sales increased 10.3% to $1.436bn in Q1, with higher prices partially offset by a 3.2% volume decrease mostly driven by declines in the firm’s cake, fast food, and private label business, in part due to supply chain disruptions. Net income rose 19.4% to $85.6m.
‘Private label’s been declining in our category for a long time, and it’s still declining’
While private label had increased its market share in some grocery categories in recent weeks, “We’re not seeing that in our category right now,” added McMullian. “Private label’s been declining in our category for a long time, and it’s still declining’
A second price increase is planned for early June, he said: “There’s a bit of a wait and see there to see how the consumer reacts to that second round of pricing.”
When it comes to retail customers, however, “as far as the pricing acceptance goes, we have not had any issues,” he added. “I don’t know what the retailers will do in the future. What I can tell you is that for our June 6 price increase, there’s been no issue there for us.”
New Dave’s Killer Bread Bars have ‘exceeded expectations’
As for recent innovations, he said, moves to expand the Dave’s Killer Bread brand into snacks were looking promising, “So far, we have commercialized three varieties of Dave’s Killer Bread Bars. Results in the test markets [Houston-area H-E-B Markets and Maryland/Washington D.C. Giant Foods Stores] have exceeded our expectations so we are working to expand distribution.
“We also have an exciting pipeline of additional snack items under the Dave’s Killer Bread brand that we expect will bolster our entry into the healthy snacking category.”
Working from home
While many Americans are returning to the office, a significant number are continuing to work from home, at least some days each week, which has also presented new opportunities, said McMullian, who said Flowers had gained 5.2milllion new households since 2019.
“Further, the increased prevalence of hybrid-work arrangements, which encourage greater at-home eating, seems to be enduring.
“What we’ve experienced, is a shift within the category… to specialty buns and roll-type products to breakfast, and a lot of that is driven by work from home and also a shift to more premium items away from that traditional 20-ounce loaf segment.”
‘Activly seeking potential acquisitions’
As for M&A, he said, “We continue to monitor the deal market, actively seeking potential acquisitions that add capabilities, brands, or products to our strong existing lineup.”
Based in Thomasville, Georgia., Flowers Foods is one of the largest producers of packaged bakery foods in the United States with sales of $4.3bn in 2021. Its leading brands are Nature’s Own, Dave’s Killer Bread, Wonder, Canyon Bakehouse, and Tastykake.