Major acquisition rocks US bakery market

By Rod Addy

- Last updated on GMT

Flowers Foods acquires Lepage Bakeries

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Flowers Foods’ $370m acquisition of Lepage Bakeries allows Flowers to expand its presence across the north east of the US and gives it high potential organic brands, the company claims.

In an online briefing, Flowers chairman and chief executive George Deese said the deal “brings three highly efficient bakeries with available production capacity”. Lepage has two factories in Lewiston, Maine, totalling seven production lines and one in Brattleboro, Vermont with two production lines.

 “This capacity will supply our existing marketplace with bread, buns, English muffins and donuts,”​ said Flowers Foods president Allen Shiver.

The purchase “adds strong regional brands”​ in the form of Country Kitchen and Barowsky’s and would enable Flowers to, “to cover the Eastern Seaboard fully in time”,​ said Deese. “We have always been interested in having Lepage become a part of Flowers Foods. I’m impressed with the good job they are doing with organic lines and we will be evaluating that for expansion.”

Additional 18 million people

Deese said the move would add more than $166m to the annual net sales of Flowers, which claims to be the second biggest US producer and marketer of packaged bakery foods. It would make its bakery products available to an additional 18m people and fitted with its growth strategy, declared in 2011, to grow sales by three to five percent, said Deese.

Lepage’s direct-store-delivery capability would enable Flowers to increase the speed with which it could make its Nature’s Own and Tastykake brands available to more people.

LePage, which has 550 staff, and Flowers were “similar in nature and operations”​ and so offered considerable common ground on which to build, said Deese. He had admired Lepage for some years for its highly innovative approach, he said.

Industry consolidating

“We have repeatedly said we think this industry’s consolidating and this is further proof,”​ said Deese. The agreement follows the sale of Sara Lee’s North American Fresh Bakery business to Grupo Bimbo in November last year.

Referring to whether Flowers remained in acquisition mode, Deese said, despite the cost of the acquisition: “With a strong cash flow and the way that we plan to pay down the debt, we will still have room to do other things. We will continue to participate as the market continues to consolidate.”

Current Lepage president and chief executive Andrew Barowsky and Albert Lepage would continue at the helm as co-chairmen and Barowsky would also be vice chairman of innovation, Flowers said in a statement.

Flowers, which operates 41 plants across the US, expects the deal to be completed in the second quarter of its financial year. The company clocked up sales of $2.8bn in 2011 and its brands include Whitewheat, Cobblestone Mill, Mrs Freshley’s and European Bakers.

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