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Flowers Foods (FLO) Buys Koffee Kup Bakery's Assets to Aid Growth

·3 min read

Flowers Foods, Inc. FLO has been focusing on acquisitions to strengthen its product portfolio and expand in untapped markets. Progressing along these lines, the company purchased the assets of Koffee Kup Bakery, Inc. (KKB) in Burlington, VT. Notably, the transaction includes three closed bakeries situated in Burlington; Brattleboro, Vermont and North Grosvenor Dale, Connecticut. Additionally, the company acquired Koffee Kup Bakery and Vermont Bread Company brands. The company acquired these assets from the court-appointed receiver of the assets.

We note that Flowers Foods is not planning to reopen the bakeries immediately. The company is on track to assess its strategic options related with the opening of these bakeries. All being said, management believes that the buyout expands Flowers Foods’ presence in the key Northeast market.

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Zacks Investment Research

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Acquisitions Fuel Market Share

Flowers Foods has long been benefiting from its focus on acquisitions, which is helping it expand presence. In 2015, the company bought Dave’s Killer Bread (DKB) and Alpine Valley Bread Company. With the acquisition of DKB, it got access to the Pacific Northwest market. In December 2018, the company completed the acquisition of Canyon Bakehouse, which has helped Flowers Foods foray into the growing gluten-free bakery space. Well, the company has successfully integrated Canyon Bakehouse, which is yielding results.

Markedly, brands like DKB, Nature's Own and Canyon Bakehouse brands have been performing well. During the first quarter of fiscal 2021, tracked channel sales of Canyon Bakehouse and DKB increased almost 14% and 7%, respectively, despite unfavorable year-over-year comparisons. Further, Canyon, DKB and Nature’s Own sales increased nearly 101%, 42%, and 16%, respectively, compared with first-quarter fiscal 2019 figures (pre-pandemic level).

What Else Should You Know?

Flowers Foods is on track with its core priorities, which include developing its team, concentrating on brands, prioritizing margins and looking out for prudent mergers and acquisitions. To this end, the company intends to shift focus toward value-added branded retail products, which are anticipated to drive top-line growth and enhance margins. Also, the company expects its optimized portfolio to drive market share gains through innovation. Further, Flowers Foods is focused on optimizing supply chain, while enhancing efficiency and reducing costs. Moving to margins, the company’s brand-building efforts such as plans to shift a larger proportion of sales mix to branded retail are likely to boost margin performance. Management intends to remain committed toward making marketing investments, undertaking innovation and go for smart M&A activities in line with its portfolio strategy.

Notably, shares of this Zacks Rank #3 (Hold) company have gained 11.2% so far this year compared with the industry’s 11.7% growth.

Some Solid Food Bets

Medifast, Inc. MED, currently sporting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 12.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Darling Ingredients Inc. DAR, currently sporting a Zacks Rank #1, has a trailing four-quarter earnings surprise of 29.8%, on average.

Nomad Foods Limited NOMD, currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 10.3%, on average.

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