From April 25, the business – owner of leading bread brands including Nature’s Own and Wonder – will launch Dave's Killer Bread (DKB) in 9,000 US stores, with a further 2,000 coming early this summer.
Oregon-based DKB, which was acquired by Flower’s last year, was by far the fastest-growing branded US bread supplier in 2015, with sales up 32.1% year on year to $87.7m in a flat overall market [IRI 52w/e December 27 2015].
'Nothing short of remarkable'
Retail acceptance of the brand been “nothing short of remarkable”, said Flowers senior vice president David Roach at a presentation given to analysts this week.
“We’ve had retailers asking us when can they put it in,” he added. “They want it in a big way.”
The business told analysts the organic market would be key to its future growth plans, and would enable it to tap the speciality/premium bread market where it currently holds an 8.5% share of branded sales. In contrast, Flowers accounts for a 33.1% share of branded white loaves and 30.1% share of branded soft variety bread.
Citing IRI data, Flowers added that household penetration of organic fresh bread and rolls was 9.6%, versus 98.6% penetration for conventional bread.
And Roach pointed out that household penetration of organic bread was far lower than penetration of organic milk and organic produce (see table below).
Limited access to fresh, organic bread
“We believe this is a result of limited access in the market to fresh, organic bread,” he added.
Flowers acquired another organic business, Arizona-based Alpine Valley Bread Company, shortly after securing DKB, and is now six months into the integration of the two firms.
“We immediately began improving production capability at Alpine Valley to service the south west, and are now completing the conversion of our Tuscaloosa bakery to organic production,” said Roach.
DKB is to be distributed fresh to stores through Flowers’ direct store delivery (DSD) system, while Alpine Valley will primarily go into frozen warehouses.
Fresh and frozen distribution
2016 fiscal guidance
Flowers reaffirmed its sales and earnings guidance for fiscal 2016 at the briefing.
The business said it continues to expect sales in the range of $3.986bn to $4.080bn, representing growth of approximately 5.5% to 8% compared with fiscal 2015.
"Going forward, we are focused on developing our existing geographic footprint, driving growth from our organic brands and other underdeveloped segments, and improving promotional and operational efficiencies,” said Flowers Foods president and CEO Allen Shiver.
Flowers plans DKB to be sold in the traditional fresh bread aisle, with off-rack displays to help drive sales, while Alpine Valley will be merchandised ‘on the perimeter’ of stores in freezers and in-store bakeries.
This will give Flowers’ organic bread distribution through two distinct channels in stores, said Roach.
“Location is the key,” he added. “Whether a consumer is shopping center store of the store, or the perimeter of the store, we want them to find one of our organic brands.”
Flowers also told analysts that, while further acquisitions were not in its plans for 2016, it did expect to make strategic acquisitions in the longer term.
Strategic acquisitions
The business currently holds a 14.9% dollar share of the fresh packaged breads market, and said it had its sights set on taking a 20%-plus share.
“Consumers are becoming more selective in how they shop,” said executive vice president & chief operating officer Brad Alexander. “They want food that is real, fresh and sample – and that is exciting for us as, in our mind, bread is just that.”
