Q1 2021 Flowers Foods Inc Earnings Call

Yes definitely thank you and then just last 1 for me just on the digital initiative have you had have you made any of these investment so far cause. It's just my reading of your comments was that you're sort of you're not there yet, but you're so committed to the 5 sons of funding that you talked about are those more.

<unk> it should it should we expect those to come through more in the back half or have you already so to start a bed, making these in basketball.

Yeah, No. We have already started I mean, a lot of it on a Friday.

Working with our outside partners in the for the planning and design phases, but you know the nickel is still good for the year, so that'll be a little more heavily weighted in the in the back half as we start executing on the plan at which time also.

Later this year will be giving you got some more detail on where we're headed from a digital strategy standpoint.

Perfect. Thank you very much.

Thank you.

Alright next question, Pennsylvania, Mitch Pinero from <unk>.

Room mate again.

Good morning.

So.

A couple of questions here perspective private label for for a second is.

<unk>. It is a remarkable dropping you looked at the the trend.

From you know just even several years ago.

And you talked about as being sort of consumer behavior.

Red is any of this retailer Reds.

[noise] I don't I don't think so I think it's I think it is consumer light. If you think about the category overall mentioned just back up.

Let's just call it 5 years ago, just to use around around number you know there wasn't nearly as much.

Innovation, if you will.

In our category you didn't have.

Dk be nationwide certainly that was basically a west coast phenomenon until we bought it kind of the same thing with can you know that was all in Costco or in the freezer case et cetera.

And since then.

I mean, we'll even talk about our competitors I mean, certainly coming out with our desanto us coming out with perfectly crafted.

And then obviously Larry on Dk be in Canada, I think I think a lot of innovation on the bread wall is driving this too and as you know what our category, there's not much differentiation among.

Among private label items in our category, it's basically white white and wheat bread.

Similarly within the category, we've seen a shift from kind of your traditional clothes still what's old, but you are 100% whole wheat or or honey wheat to the specialty items buns breakfast in particular, there's kind of a mix shift in the category that we've been watching for some.

But obviously with our new items in both of those sub segments, we benefit I think that's the primary driver Mitch.

Okay.

Okay. Thank you.

And then.

You know looking at your <unk>.

To your set.

Gross you did 3% in in this quarter versus 19 first border.

That's you know looking at that you know over 2 years.

Obviously, it's a little above your.

You you you know your long term growth rate is that you and and looking at your sugar revenue guidance for the remainder of the it looks like you expected to see this type of stack Grove.

For the remainder of the or is that is that accurate.

Yeah, we actually feel pretty pretty good about that much I mean are are branded retail business is actually a 13, 7% I believe it was J T over over 19.

So we're really pleased with the with the overall trajectory frankly.

It to me, it's even more exceptional considering the fact that private labels off as much as it is.

Plus we've done quite a bit of skew ran over that period of time too.

So you have taken all that complexity out of the portfolio really focusing on the winters I think we're showing that that's paying take some nice dividends and we see that we see that through the rest of the year.

My optimistic there.

Have you ever defined uhm your <unk> your ski rationalization.

Drag.

I'm, sorry, I missed that 1 more time and you were gonna defined or given us any color on what the skew.

Rationalization drag was in percentage terms when you're Gregory.

No I don't think so.

Okay, and how meaningful is it is it is it in the.

Low single digits or is it is it is it less than 1% I mean does it how meaningful as few rent.

To these numbers.

Yeah I'd have to go back and look at that match I don't have that in front of me.

Okay, and then as it relates on the same thing on.

Looking at your growth and it was just an EBITDA from 19th quarter to this the current quarter.

Is it.

Is it all.

Mixed or.

Is there anything else in there any any any cost of good savings in there any anything else in his.

Just the positive mixed just.

Yeah, no. They are absolutely as we had our we had our $10 million to $20 million and hopefully optimization savings last year, we actually beat the top end of that so you've got that piece of it and that's a mix of procurement savings overhead savings.

Savings so it's kind of it's kind of a broad cost basket.

We have a target of $30 million to $40 million out there for this year and many of those same categories and we're on track to deliver on that as well.

And then match if you think about the bakery efficiencies and some of the underperforming bakeries, making some really nice progress that Navy yard, which I know you'll be happy to hear things like that are efficiency was up.

And the first quarter of those those add meaningfully to the to the bottom line as well.

Okay, perfect and then.

My last question.

You know you're so your your market share has been.

Creeping up in bread.

I went over the list.

You're too and.

Is there you know.

Have you seen any any anything to call out and the Moon regional differences there I mean, a U I don't see the regional scanner data, but is that.

Uhm any noteworthy changes in.

In any any you know regional.

Market share games or or losses.

Over the last year or so.

Not really I mean, it's it's.

Overall, the share trends have been have been good obviously, a little bit down.

Over the quarter last year, just given the massive gains but sequentially up from from Q4, which is great to see.

You know, there's there's been a lot of talk about geographic chefs and people moving out of the northeast, Florida or out of California to Texas, whatever whatever it might be.

Looked at that but there's nothing specific to call out.

Except for 1 region, which is the northeast and that's the 1 that.

We've been focused all we've been talking about that for the last few quarters. We're we're kind of underpenetrated, there and making some nice nice share gains as we as we focus on that important market. So that's just 1 that I would call out to Ya.

Okay.

Alright, well thank you for your time.

Thanks, so much.

N as a reminder that style 1 for questions.

Our next question comes from 9 Am Brian Bell.

From customer edge research and May begin.

Hi, everyone.

Uhm it hurts.

If if we're trying to get a benchmark is your non branded business from what we can keep track channel trends.

And how should we think about that going forward.

In general I mean, we've been seen private label across your categories declining.

Given your intentional emphasis on your branded products.

Software got some your private label business spelled as to what we've seen track channels.

Is that something that we should expect to see for the foreseeable future.

Well I mean, I think I think it's yet to be seen right. I mean, obviously, we're focusing on our brands and I as I said I think consumers driving a lot of that so.

Again, the shift to brand the differentiation and brand that you don't find in private label I think is driving a lot of that.

Now, we we are making some decisions about select pieces of our private label business kind of the same way that we're looking at foodservice to the extent, it's underperforming are under delivering well relative to what it should I mean private label is what it is.

We have made some decisions to the exit certain pieces of business, but I wouldn't I wouldn't describe that in terms of magnitude as being the primary driver the primary driver.

Is consumer driven.

Thanks.

That's helpful and then.

M&A being you for a strategic priority.

Would you be able to provide any updated thoughts that's the current M&A landscape I just in terms of availability of the assets evaluations of wrong.

Absolutely Yeah things are.

And sure things are really heating up I mean since the first of the year you have people sort of took a break largely last year.

And it's.

There's a lot of books flat out around out there right now I'm sure you guys have read about some of the more public ones.

But there's there's quite a bit opportunity Brian the challenge as it has been for the past few years is valuation.

We're committed to maintaining our disciplined approach, we certainly have the balance sheet to Lehman.

Where we've got high conviction.

But we're only going to do so in a reasonable way.

There's only so far will go.

And maintain our disciplined approach so.

I'm pleased to see the opportunities start to come back.

Certainly we are active we remain active.

And I think it will be Ah I think overall it will be a very active year and the food space. There's just a lot of there's a lot of money sloshing around out there trying to find a place to land.

Okay. Thank you and I think this is the last 1 for me.

In terms of the organic growth side.

Meditations lying flat print.

Could you maybe talk about the opportunity or how fast sweetie.

Smith extension.

Absolutely Yeah, we're really pleased with the the flat breads that we introduced in the northeast obviously continuing to innovate with Dave's the rise out there it's doing great.

Right on right on target great reception from consumers. If you haven't tried it I suggest you do it's a it's a great loaf of Rye bread.

And then further out I mean, we're standing up the are agile innovation team.

It's early days were just getting wrapped up.

But the the early prototypes I've shown me of some of the things that we're looking at are just are just outstanding. So there's a lot of great things to come and we all know how important.

We all know how important innovation is going to be for us to continue to grow our top line in line with the long term targets.

Great. Thank you.

Thanks Rod.

And once again, that's star 1 for questions.

Hey, I'm not showing any current questions in the queue.

[noise].

Okay.

Well. Thank you very much everyone for your interest and flowers and we look forward to speaking to you next quarter.

Sure.

This concludes today's conference call. Thank you for participating you may now disconnect.

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