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Flowers Foods gets green light to buy ex-Hostess bread assets

By Elaine WATSON , 08-Jul-2013
Last updated on 09-Jul-2013 at 00:29 GMT

Brands snapped up by Flowers Foods following the demise of Hostess Brands include Nature's Pride, Wonder, Butternut, Home Pride, and Merita
Brands snapped up by Flowers Foods following the demise of Hostess Brands include Nature's Pride, Wonder, Butternut, Home Pride, and Merita

Georgia-based Flowers Foods has received the regulatory seal of approval for its $360m deal to acquire several bread brands and other assets from the business formerly known as Hostess Brands.

Under the deal approved by a bankruptcy court judge in March, Flowers is acquiring the Wonder, Nature's Pride, Merita, Home Pride, and Butternut bread brands; 20 bakeries; and 36 depots from Old HB, Inc., formerly known as Hostess Brands. 

Shares in Flowers Foods - which expects to complete the transaction in the coming weeks - have risen significantly since Hostess went out of business last November, with sales of Tastykakes up significantly following the exit of Twinkies.

However, the competitive environment in the snack cakes arena will get much tougher when Twinkies - which now have new private equity owners - return to shelves later this month, predict analysts.

Tastykake brand set to generate $400m at retail in 2013; Nature's Own to hit $1.1bn 

Speaking at the firm's annual shareholder meeting in May, CEO Allen Shiver told investors that retail sales of Tastykake were about $241m when it was acquired by Flowers in 2011. This year, the company is predicting sales will be around $400m, he said.

"[In 2011], the majority of Tastykake sales were in the Mid-Atlantic where Tastykake has been a favorite snack cake brand since 1914. We told you last year that we were adding Tastykake throughout Flowers' DSD territory, and... Tastykakes are now available to consumers throughout much of the country."

The Nature's Own brand will be worth $1.1bn at retail this year

President Bradley Alexander added that the recent rollout of Nature's Own and Tastykake products to stores in New England to which Flowers gained access via the 2011 acquisition of Lepage Bakeries has also significantly increased distribution for both brands.

"Our timing for the Tastykake and Nature's Own introductions was perfect since those brands helped fill the void when Hostess exited the market."

Shiver added: "This year, Nature's Own will reach more than $1.1 billion at retail. In the last decade, the brand has achieved a compound average growth rates of over 11%."

The return of Twinkies

According to the new owners of Twinkies - private equity firms Apollo Global Management and C. Dean Metropoulos & Co - Twinkies will have significantly higher distribution in c-stores, drugstores, club stores and dollar stores when they return to shelves this month.

Hostess Brands LLC - which also snapped up Mini Muffins, Cup Cakes, Ho Hos, Zingers and Suzy Q’s in a $410m deal earlier this year - is also switching from a direct store delivery (DSD) model to delivering to retailers' warehouses, C. Dean Metropoulos told the Wall Street Journal (click here ) this week. 

Meanwhile, production has been consolidated from 11 bakery plants to four in Schiller Park, IL; Columbus, GA; Emporia, KS; and Indianapolis, IN. 

Hostess Brands filed for a full shut down and sale of its assets last November after nationwide strikes from members of the BCTGM, who were angered by a pay-cutting deal enforced upon them as part of a recovery plan to lift Hostess out of financial difficulties.

The liquidation led to the closure of 33 bakeries, 565 distribution centers, around 5,500 delivery routes, 570 bakery outlet stores across the US and 18,500 job losses

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