BOSTON — Berenberg Capital Markets L.L.C. Has initiated insurance of Flowers Foods Inc. With a “maintain” score. While Thomasville, Ga.-based Flowers has been gaining proportion inside the baked meals category in current years, Berenberg warned that usiess profitable products, inclusincludings Killer Bread, had driven the income growth.
Based in Boston, Berenberg is a subsidiary of Joh. Berenberg, Gossler & Co. KG, Hamburg, Germany. Berenberg has a charge goal for Flowers of $22 according to proportion, about $1.50 in step with a ratio lower than where the company’s stocks have been buying and selling at mid-day July 19. Donald McLee, a Berenberg analyst, summarized the baking category as large ($36 billion in annual income) and “fragmented.”
“The bulk of that low growth is pushed by the conventional bread loaf, which is reasonably commoditized,” Mr. McLee said. “However, tumerous pockets of elevated client call for expertise items. Flowers is the market leader for organic baked items, the primary underlying growth phase that has become a key differentiator in recent years. The fulfillment of its Dave’s Killer Bread logo has helped guide almost 100 basis factors of 12 months-over-yr growth for Flowers’ marketplace share within the broader category to 17% inside the first zone of 2019. We anticipate the strength of the natural class to support similar marketplace share gains in the intermediate term.”
Describing baking as “fiercely aggressive,” Mr. McLee stated lots of regional bakers, neighborhood bakers, and store-owned bakers vie for marketplace percentage. The 3 biggest baking groups — Grupo Bimbo S.A.B. De C.V., Flowers, and Pepperidge Farm, Inc. — account for approximately 50% of the marketplace, which Mr. McLee mentioned has been developing very slowly. “Given the commoditized nature of the conventional bread loaf, the charge is regularly the biggest determining aspect for purchasing customers,” Mr. McLee stated.
“This generally makes the traditional bread loaf a decrease-margin product with confined rate elasticity. Against this backdrop, the area of expertise bread has been a desired street for growth. Mr. McLee stated gluten-free bread might be one of the quickest developing segments in coming years, noting that increase because 2015 has compounded annually at a 6.6% charge, well outpacing the overall marketplace. Flowers entered this market with the December 2018 acquisition of Canyon Bakehouse, Johnstown, Colo.