Flowers Foods CFO Steve Kinsey offered a few updates and insights for the company during the company’s discussion during the 2024 Consumer & Retail Conference hosted by Bank of America.
Kinsey said Flowers remains “fairly cautious” about consumers given the inflationary period of the last 12 to 15 months, when they gravitated more toward value and private label products. That trend moderated a bit in the fourth quarter, he said, but the fact that consumers leaned in toward private label a bit makes them cautious. Kinsey added, that trend impacted mass and value channels more so than traditional grocery, where brands did well despite the shift in consumer trends. There are signs that things could be swinging back, but Flowers was “not ready to call it yet,” Kinsey said.
Private label typically impacts Flowers’ wheat and white bread offerings more than the premium products, and those specialized products have done well for Flowers recently. Nature’s Own has held up well due to its innovation and premium products.
Dave’s Killer Bread (DKB) has been driving performance based on its premium positioning, as consumers look for better-for-you solutions — which has in turned seemed to drive a volume response. Flowers acquired DKB in 2015, and last year, the brand became a billion-dollar brand in retail, representing a significant amount of growth in a short time. And Flowers isn’t stopping there.
Geographically, the brand has whitespace to fill in between the Northeast and West Coast areas in which it’s been primarily focused, and DKB is being expanded into other categories as well. English muffins and bagels, for example, have seen good growth and got support via acquisition that helped with production capacity for DKB breakfast-oriented products. Meanwhile, Flowers has launched snack bars in three flavors and will roll out three new flavors and a protein-added bar under the DKB brand this year.
But Flowers isn’t done expanding the DKB brand there. The company is testing a snack bites product that is a “cross between loose granola and a crunchy cracker,” and plans to roll that product out in the back half of 2024. Overall, the DKB brand has resonated across multiple categories, and Flowers plans to continue to build it out and take advantage of the opportunities present.
Flowers Foods also continues to keep its eyes open for M&A opportunities, including potentials in those same adjacent categories where DKB is growing. Within its core bakery business, Kinsey noted that there are still opportunities in the Midwest and elsewhere that would fit well with Flowers and help it fill in some of the whitespace in those regions.
The BofA host asked about the Tastykake business in relation to the big acquisition of Hostess Brands, looking for insight on how Flowers Foods views Tastykake and its performance. Kinsey said that the brand faces challenges but has held its own in the category regardless. Operational challenges, he said, have been no secret, and the company is making improvements but is not yet where it wants to be. Flowers continues to seek out opportunities to make the brand more relevant in the category, he said.
Finally, Kinsey said, while there was “a nice transaction in that space,” Flowers Foods believes cake still has a place in its portfolio.
