On the money: Flowers sees gains from Hostess demise
The US baker has been named the "stalking horse" bidder for the majority of Hostess Brands' bread business. While the assets will be sold off in a competitive auction process at the end of this month, Flowers revealed yesterday (7 February) it is already reaping the benefits of its rival's demise.
Flowers said sales for fiscal 2012 increased 9.8% to US$3.05bn. Gains accelerated in the fourth quarter, when the company was able to step in and fill orders that would otherwise have been unmet after Hostess liquidated in November.
"Our team members throughout the company rallied to serve customer needs when Hostess exited the marketplace on November 16th. As a reminder, that was the Friday before Thanksgiving, the start of one of the busiest weeks of the year for our customers - not a time when customers can afford to have empty bakery shelves," Flowers president Allen Shiver commented on a conference call with analysts. "We worked overnight to increase production levels and provide the additional service to take care of our customers."
According to Shiver, this effort contributed to Flowers ability to outperform the US bakery category. Quoting IRI data, he suggested the overall category was down about 1% in terms of value and volume. Flowers unit sales increased 12.9% while dollar value was up 10%, led by growth of the Nature's Own brand, he revealed.
The fourth quarter was "a very busy time to say the least", Shiver said. While Flowers is continuing to pick up new customers in the first quarter of this year, he acknowledged that this was at a slower rate.
He added: "We are encouraged looking at the first four weeks of this year growth is continuing and in some areas accelerating."
While welcoming the good top line showing, Janney Montgomery Scott analyst Jonathan Feeney emphasised Flowers' dollar sales lagged the volume gain and the company struggled to improve margins in what remains a highly competitive environment.
"Flowers top-line surge amidst Hostess' absence underscores the opportunity, but we were disappointed by the lack of corresponding margin lift which we believe speaks to our broader concerns about the extent to which profitability can improve in the tough, over-competitive bread industry," he wrote in a note to investors.
Despite this structural issue, Feeney said that Flowers "will retain the best competitive positioning" and added the group's "consolidation plans, paralleling those of Grupo Bimbo", could "eventually improve industry dynamics".
What is your outlook for the industry in 2013?
Join hundreds of food industry executives in giving your views on the prospects for the sector in just-food.com's annual confidence survey - and have the chance to win one of five free annual subscriptions to just-food.com worth £175.
Click here to answer questions on M&A, consumer confidence, innovation and sustainability.
All answers will remain confidential. Results will be published in a just-food webinar on 28 February.
MarketLine's Company Mergers & Acquisitions (M&A), Partnerships & Alliances and Investments reports offer a comprehensive breakdown of the organic and inorganic growth activity undertaken by an organi...
US breakfast cereal group Post Holdings kicks off a relatively quieter week of results with its half-year numbers on Monday. On Tuesday, meat giants Marfig and JBS will report on how it fared in the f...
With a significant reliance on both the mature US bread market and on its domestic Mexican bakery market, Mexico-based Grupo Bimbo SAB de CV could struggle to find areas in which to grow. However, the...
Confectionery in Mexico industry profile provides top-line qualitative and quantitative summary information including: market share, market size (value and volume 2007-2011, and forecast to 2016). The...
- SIAL 2014: Greek yoghurt firm Fage targets Europe
- On the money: Spreads, ice cream top Unilever woes
- Why Nestle is relaxed about the China "drag"
- Focus: Will Danone return to growth in dairy?
- Growth question hangs over refocused Premier
- SIAL 2014: Premier in talks over US manufacturing
- Kellogg, Nestle slammed for "chaotic" salt policy
- Premier cautious on profits after Q3 sales slide
- Mars puts R&D at centre of US plant expansion
- Italy warns of EUR200m hit from Russia ban