Retailers see value in bakery, says Flowers

Retailers see value in bakery, says Flowers

Flowers Foods said today (4 February) that it was "hopeful" that the bakery category would see less promotional activity in 2010 after seeing margins continue to be eroded in the last three months of 2009.

Speaking to analysts after reporting its fourth-quarter and full-year results, chairman and CEO George Deese said Flowers expected a similar level of promotions in the first quarter of 2010 but with prices starting to rise in the spring and summer.

Deese said Flowers' own promotions had been "effective" and had helped the company's brands "maintain share in a highly competitive market".

"We achieved what we wanted to achieve. We did stop the erosion on our branded products. That was our number one objective," Deese said. "Going forward, second, third and fourth quarter, maybe we can have less products but not quite as deeply promoted."

Across the group, Flowers fourth-quarter sales were down 7.2% at $576.8m - and flat when an extra week was removed from its 2008 numbers.

Increased promotions meant Flowers gross margins dipped from 48.3% in the fourth quarter of 2008 to 47.1% in the last three months of 2009.

However, Allen Shiver, who became president of Flowers at the start of the year, claimed there was a growing awareness among the company's retail customers of the value of the bakery category to their businesses.

"One of the encouraging things from our stand-point is that we're hearing more of our retailers recognise that the bakery category is one of their top sells and the number one profit category. More retailers are recognising that price deflation is not a good thing for the category," Shiver said.

"And I expect as we move into the year, retailers are going to become aggressive and limit how much promotions they allow in their stores."

Shares in Flowers were down 1.9% at $24.71 at 13:52 ET today.