Flowers Foods (FLO) sells bread and cake products under the Nature's Own, Wonder, Cobblestone, and Tastykake brands, among others. The company has a market cap of $3.9 billion and a dividend yield of about 2.9%. Excluding the impact of spin-offs and divestitures, Flowers Foods (formerly Flowers Industries) has paid steady or increasing dividends since 1987. The company's stability comes from its strong brands in the slow changing bread and cake industries.
Flowers Foods is a Dividend Achiever as it has increased its dividend payments for 10 consecutive years. Flowers Foods was founded in 1919 and is currently headquartered in Thomasville, Georgia. Despite its long history, the company's distribution currently only covers 70% of the US. Flowers Foods business, competitive advantage, and future growth prospects will be analyzed in this article.
Business Overview
Flowers Foods operates in two segments: Direct Store Distribution, and Warehouse. The Direct Store Distribution segment was responsible for 85% of the company's sales in its most recent quarter. The Warehouse segment was responsible for just 15% of total sales in the most recent quarter.
The Direct Store Distribution segment delivers the company's bread products directly to retailers. The Warehouse segment delivers products (primarily Tastykake and frozen goods) to retailer distribution centers. Flowers Foods core bread brands and the majority of sales and profits come from its Direct Store Distribution segment.
Competitive Advantage
Flowers Foods competitive advantage comes from its strong bread brands. The Nature's Own brand reached over $1 billion in sales in full fiscal 2013, on 17.2% sales growth versus 2012. The company is the second largest baker in the US, behind only Grupo Bimbo. Flowers Foods has a 14% market share in the bread, buns, and rolls category. The company has grown its market share from 7.7% in 2009 to 14% today as the bread industry slowly consolidates. The image below shows the slow consolidation of the bread industry in the US:
