US bakery major Flowers Foods has blamed bread category weakness for “lower-than-expected sales”.
And it suggested the widespread use of GLP-1 weight-loss drugs, which have been linked to changing consumer attitudes, could be one possible culprit for a dip in demand, as well as the rise of the Make America Healthy Again movement.
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Releasing its Q4, 2024 and full-year results on Friday (7 February), the Wonder, Dave’s Killer Bread and Nature’s Own bread brand owner’s CEO Ryals McMullian said: “Turning to weakness in the bread category, the causes are difficult to isolate, but some attribute it to a variety of factors, including an economic slowdown, GLP-1s, and healthier eating trends.”
McMullian said that Flowers had documented for several quarters a consumer shift away from traditional loaves toward more “differentiated and premium items” but suggested the company is successfully pivoting to meet changing consumer demands.
“I am pleased to report that due to our brand investments, gains in organics, keto, buns and rolls, and gluten-free, more than offset softness in those more traditional segments,” he said.
However, the CEO admitted the company’s financial guidance for this year is “cautious” as a result of the “volatile environment that we see continuing into at least the first half of 2025”.
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By GlobalDataMcMullian said much of the pressure in the category has been focused on sweet baked goods and traditional loaf products such as white and wheat bread.
“To overcome retail headwinds, we are investing in our brands to meet the needs of an evolving consumer, finding pockets of growth in a slowing bread category,” he said.
Flowers is also attempting to shift its portfolio towards healthier products via M&A.
Last month, it acquired local better-for-you biscuit and snack-bar maker Simple Mills for $795m.
Speaking on Friday, McMullian said: “This acquisition increases our exposure to better-for-you and attractive snacking segments, diversifies our category exposure and enhances our growth and margin prospects.”
M&A specialists believe the bakery industry is well placed to attract acquisition interest from investors and food manufacturers this year, with the speciality sector, particularly better-for-you and other niche areas, attracting much of the attention.
More broadly, though, McMullian said he is confident the company has the right brand of products to meet this consumer paradigm shift.
“We believe our portfolio is well positioned to capitalise on the seeming secular shifts in the category to more-premium and better-for-you items,” he said, adding that Flowers is “investing in our brands to meet the needs of an evolving consumer, finding pockets of growth in a slowing bread category”.
He pointed to the performance of Dave’s Killer Bread, an organic brand with no artificial ingredients or preservatives, as an example of where it sees growth coming from.
“Dave’s Killer Bread’s ability to achieve positive unit growth rates in all income cohorts, confirms the increasing preference for differentiated, better-for-you products,” he said.
McMullian said in his comments accompanying the results announcement that lower-than-expected sales were “more than offset by margin expansion, which benefited from efficiency initiatives and moderating input costs”.
He added: “Ultimately, our goal is to transform Flowers into a faster-growing, higher-margin business that will compound shareholder value over time.”
In the Q4 period, ended 28 December, the company’s net sales were down 1.6% year-on-year at $1.11bn but net income was up 20.9% to $43.1m and adjusted EBITDA was up 6.3% at $102.4m.
Over the full-year, net sales were up 0.2% compared to 2024, at $5.10bn, while net income was up 101% to $248.1m and adjusted EBITDA was up 7.3% at $538.5m.
For full-year 2025, Flowers expects net sales of approximately $5.40bn to $5.48bn, representing growth of 5.9% to 7.5%. But excluding the impact of the Simple Mills acquisition, this dips to $5.18bn to $5.25bn (1.5% to 3.0% growth).
Adjusted EBITDA is forecast to be $560m to $591m ($526m to $554m, excluding Simple Mills).
