Dive Brief:
- Flowers Foods announced a restructuring plan and cost-reduction strategies during an investor briefing Sept. 27 at the New York Stock Exchange. The company's initiatives include a buyout plan, first announced in July, which will result in a net headcount reduction of approximately 450 people, including a 15% reduction in management positions, according to Food Business News.
- Flowers Foods executives also discussed the company's 2017 outlook. They anticipate sales will be flat to down by 1%. Earnings per share are anticipated in the range of $0.67 to $0.69. The company also outlined brand investments it will make in fiscal 2018. Additionally, the company maintained its EBITDA margin goal for fiscal 2018 of 12% to 13%.
- "Flowers is well positioned in a large category that is relevant to consumers and profitable for retailers," President and CEO Allen Shiver said in a statement. "We have built competitive advantages that provide a strong platform for continued growth. That said, the category is evolving and we intend to evolve right along with it. With Project Centennial, we are focused on driving growth in our core business, capitalizing on adjacencies, reducing costs, and making strategic investments to improve margins and profitably grow the top-line over time."
Dive Insight:
Flowers Foods first went public with the voluntary separation program in July, but did not provide many details in its buyout announcement. The plan is the latest step in the company's broader effort to cut costs and improve the firm's financial position. In June, Flowers launched Project Centennial, a five-year plan to strengthen its competitive position and drive profitable revenue growth.
It will be interesting to see how Flowers Foods operates post-buyout with 15% fewer managers. While higher-paid supervisors obviously present a higher business cost, buying them out is also a major expense. At this week's presentation, Chief Financial Officer R. Steve Kinsey estimated the cost of the buyouts at upwards of $27 million in the coming financial quarter.
Flowers Foods is working on the same sort of major transition that faces other CPG companies: How it can cut internal costs and remain relevant in a consumer world where e-commerce and social media are becoming just as important as traditional in-store shelving, marketing and merchandizing.
In the wake of the buyouts, which Kinsey hinted are allowing a shift from an old regionally based model, Flowers Foods recently brought on two new management team members who are digital veterans. The new CIO is Harish Ramani, who has led IT programs for Dr Pepper Snapple, Cadbury Schweppes, Red Bull Americas and Constellation Brands. Debo Mukherjee has been named the incoming chief marketing officer. He founded and owned Intacta Consulting Group, served as CEO of Redco Foods, and has been in marketing roles with Mars, Unilever, Kraft Heinz and Hershey.
In addition to the shifts in staffing, the company is working on separating the business into two units, which was initially announced in May. The bakery business — which includes Nature’s Own, Wonder and Dave’s Killer Bread — will focus on driving brand growth and profitability through incremental innovation, execution and cost-efficiency.
The snacking and specialty section — which includes brands such as Tastykake and Mrs. Freshley's — will drive brand growth and profitability using product innovation and building scale in growing categories. It appears the company is positioning much of its future growth by tapping into consumers' interest in snacking.
The Georgia-based company's most recent earnings report showed it has room for improvement as far as sales are concerned. Sales decreased 0.9% to $927 million, compared with the same period a year ago. And net profit declined 12.5% in the second quarter to $44.7 million — meaning internal costs could likely also be trimmed.