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Flowers Foods CEO on Hostess re-entry: ‘We have confidence that our cake business will weather that reintroduction well’

By Kacey Culliney , 14-Aug-2013
Last updated on 14-Aug-2013 at 13:03 GMT2013-08-14T13:03:54Z

Flowers Foods CEO is confident in its Tastykake brand and said it will withstand the Hostess re-entry
Flowers Foods CEO is confident in its Tastykake brand and said it will withstand the Hostess re-entry

Flowers Foods remains confident in the strength of its Tastykake business a month after Hostess re-entered the market with the infamous Twinkie et al., its CEO says.

Hostess Brands re-entered the market last month with Twinkies, Ding Dongs and Cup Cakes returning to shelves across the US half a year after the firm went into liquidation. But Flowers Foods CEO Allen L. Shiver said its cake brand Tastykake has a lot of promise and won’t be stumped by Hostess competition.

“Since we acquired the Tastykake brand in 2011, we have increased sales significantly, almost doubling our cake sales,” Shiver told analysts in the firm’s Q2 earnings call yesterday.

Consumers across US are responding well to the brand, he said, and sales have grown at a “good pace” since Hostess left the market.

Volume gains to be maintained

Company CFO and executive vice president R. Steve Kinsey said overall business volume was strong in the second quarter – up 21.8% - primarily the result of gains in the marketplace as Hostess exited the market in November 2012.

Shiver added: “We realize that Hostess cake may have a place in the market, but we have confidence that our cake business will weather that reintroduction well.”

IRI data indicates that Flowers’ cake brands maintained their market share in the first two weeks of Hostess being back in business, he said.

“Our strategy over time has been to continuously invest in our existing and our new bakeries, improve our product quality and enhance our brands. That strategy positioned us to be able to take on significant new volume in our existing bakeries when Hostess exited the market,” the CEO said.

Wondering about Wonder Bread…

The CEO also said Flowers has big plans for its newly acquired ex-Hostess bread brands Wonder, Merita, Home Pride, Butternut and Nature’s Pride.

“We plan to reintroduce the brands in a way that will enhance consumer choices, strengthen the overall category for retail customers, build our distributors business and, of course, positively impact the Flowers Foods’ bottom line,” he said. The brands will be re-introduced into most markets in the fall.

Shiver said the Wonder brand continues to have pan-US strength and is well-recognized and the other bread brands will have strength in selected regional markets. He said food retailers are “well aware of the power of the Wonder brand”.

Q2 Flowers round-up

After $3.7m in acquisition-related costs, overall net profit for the quarter was $46.5m, up from $28.4m in Q2 in the previous year.

Flowers pulled in sales of $898.2m, up 31.8% from Q2 2012, attributable to increased volumes and contributions from the Lepage Bakeries and Sara Lee/California acquisitions, it said.

“From any perspective, our second quarter results were outstanding,” Allen told investors.

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