Flowers Industries, Inc. History

Company Perspectives:

Flowers Industries' mission is to create shareholder value as the nation's leading producer and marketer of fresh and frozen baked foods. Flowers operates efficient bakeries, develops quality products and brands, and provides outstanding customer service. Flowers firmly believes in the long-term growth of baked foods. Baked foods are a staple of the human diet today and are consumed at every eating occasion. With its production flexibility, well-established direct-store-door delivery of fresh products, efficient distribution network for frozen products, and its outstanding team of experienced employees and associates, Flowers will continue to expand in every market where baked foods are sold. To our customers, we pledge to provide you with the quality products you want, when you want them, and where you want them for a good value. To our consumers, we pledge to offer the finest quality baked foods available. To our shareholders, we pledge our continued best efforts to enhance the value of your company. Key Dates:

Key Dates:

1914:

William Howard Flowers and Joseph Hampton Flowers open Flowers Ice Cream Company.

1919:

The Flowers brothers form the Flowers Baking Company.

1934:

William Howard Flowers dies, leaving control of the bakery to son Bill.

1942:

Flowers Baking Company joins the Quality Bakers of America, a baking industry cooperative.

1947:

Bill Flowers's younger brother, Langdon S. Flowers, joins the company.

1967:

Company makes its first acquisition when it purchases Atlanta Baking Company.

1968:

Flowers goes public and changes its name to Flowers Industries, Inc.

1975:

Company relocates its corporate headquarters.

1976:

Flowers enters the frozen food market with the acquisition of Stilwell Foods.

1977:

Flowers launches a new brand of variety breads called Nature's Own.

1991:

Company enters the frozen foodservice dessert market with the purchase of Pies, Inc.

1996:

Flowers buys Mrs. Smith's Bakeries and acquires Keebler Corporation.

1998:

Flowers becomes the majority shareholder of Keebler; Keebler goes public.

Company History:

Flowers Industries, Inc. produces fresh and frozen baked foods and is the third largest wholesale baker in the United States. The company operates three primary businesses: Flowers Bakeries makes fresh baked goods and markets the products to retailers, mostly in the South and Southeast. The Flowers Bakeries division includes such brands as Nature's Own, a leading national bread brand, Cobblestone Mill, and BlueBird. The company's Mrs. Smith's Bakeries division makes frozen breads and desserts, including the nation's leading brand of frozen pie. Pet-Ritz, Stilwell, and Oregon Farms are among the brands in the Mrs. Smith's Bakeries group. Flowers Industries also owns 55 percent of Keebler Foods Company, the number two producer of cookies and crackers in the United States.

Roots in Ice Cream and Bread: Early 1900s-20s

Flowers Baking Company was founded in 1919 in Thomasville, Georgia, by William Howard Flowers. A native of Blakely County, Georgia, Flowers attended school in Poughkeepsie, New York, before returning to his home state to marry. He moved his new family to Thomasville in 1909. In 1914 Flowers and his brother, Joseph Hampton Flowers, opened Flowers Ice Cream Company to cater to wealthy families from the North who vacationed in Thomasville.

Just before World War I, Thomasville was a small town known primarily as a popular winter resort destination. While the Flowers Ice Cream Company was moderately successful, the brothers soon discovered an even more promising opportunity in that Thomasville had no bakery. The town had to arrange for all of its bread to be shipped in from other locations, and there was no large bakery within 200 miles. Seizing the opportunity, William and Joseph opened a bakery in November 1919. The first modern bakery in the area, Flowers Baking Company was soon flourishing.

During the 1920s, Joseph remained in charge of the ice cream company while William directed the operations of the bakery, which grew rapidly under his leadership. Soon local newspapers were lauding the bakery as having the most modern and sanitary machinery available, and noting that the company was able to produce thousands of loaves of bread each day. (They sold for nine cents a loaf.) In 1928 the company expanded its product line to include sweet rolls and cakes. By the end of the decade, as Flowers Baking Company garnered a reputation for high-quality baked goods, William Flowers began shipping the firm's products to customers throughout the region.

Persevering During Difficult Times: 1930s-40s

With the onset of the Great Depression in the 1930s, many small businesses throughout the United States either collapsed or significantly scaled back their operations. Earnings for Flowers Baking Company fell precipitously; however, bread, being a staple, still sold at a brisk pace. In 1934, at the height of the Depression, Flowers Baking Company reported $90,000 in sales, counted 25 employees, and operated seven wholesale routes. During the same year, William Howard Flowers died, leaving his 20-year-old son Bill in charge of the bakery. Bill Flowers guided the company through its most difficult years. In 1937 he purchased a bakery located in Tallahassee, Florida, initiating a growth-through-acquisition strategy that served the company for many years.

When World War II began, Bill Flowers sought to join the U.S. Armed Services, but the federal government required him to remain at home and contribute his share to the war effort by running his bakeries at full capacity. Flowers's ovens proceeded to bake bread on a hectic schedule of 24 hours a day nearly seven days a week in order to meet the demand of American military bases in the Southeast. In 1942 Flowers Bakery joined the Quality Bakers of America, a baking industry cooperative. It was Quality Bakers that created the popular Little Miss Sunbeam trademark that member bakeries, like Flowers, could use to market their products. The trademark was an immediate hit with homemakers and helped Flowers Bakery sell large quantities of its bread. Like many other bakeries during the war, Flowers Bakery distributed small recipe pamphlets that showed how to cook healthy meals at a time when food rationing was common. The pamphlet included such culinary inventions as "Pigs in Clover," "Bologna Blitz," and "Peasant Sandwich."

In 1946 Flowers Bakery purchased a bakery in Jacksonville, Florida. In 1947 Bill's younger brother, Langdon S. Flowers, joined the company after serving in the U.S. Navy. Langdon Flowers sought to develop marketing strategies that would increase sales and foster growth. The Little Miss Sunbeam trademark became a prominent part of the Flowers Bakery marketing program, with the emblem adorning the uniforms of the company's sales force, loaves of bread, and delivery trucks. Little Miss Sunbeam became the company's highly popular "spokesgirl," and revenues skyrocketed. By the end of the 1940s, Flowers Bakery Company was ready to embark upon a period of enormous growth.

Growth and Success: 1950s-80s

The Flowers Bakery Company expanded rapidly during the 1950s. In 1959 the baking industry introduced batter-whipped bread. According to company literature, batter-whipped bread was made by a new process that was 'roughly comparable to what a housewife uses in preparing cake batter with an electric mixer.' With a softer texture and no holes, the bread was immediately popular, and by the start of the new decade Flowers reported that 18 million loaves had been baked in its ovens.

In the early 1960s, annual sales for the company jumped to over $6 million, and employees numbered around 500. To inspire and honor its sales force, Flowers Bakery initiated annual award ceremonies such as the Outstanding Service award and Salesman of the Year award. The company arranged a televised 'Media Appreciation Day' to strengthen its ties to local communities around Thomasville. In order to promote batter-whipped Sunbeam bread, the company conducted 'Miss Batterwhip' contests across its entire marketing territory. During the mid-1960s, Flowers Bakery purchased bakeries in Panama City, Florida, and Opelika, Alabama. In 1965 the company opened a new bakery in Jacksonville, Florida, and two years later Flowers acquired the Atlanta Baking Company in Atlanta, Georgia. In 1968 the company changed its name to Flowers Industries, Inc., and went public, trading shares on the OTC exchange. One year later, the company was listed on the American Stock Exchange.

Entering the 1970s, Flowers was not only the preeminent bakery in the Southeast, but also one of the fastest-growing companies in the United States. In 1970 the company had 2,600 employees and annual revenues of $54 million. Flowers's office staff had outgrown its small building in Thomasville, and in 1975 the company relocated its corporate headquarters to a new building on the outskirts of the city. More like a country estate than the home of a Fortune 500 company, the administrative offices were set among 15 acres of pine trees populated by quail, deer, and fox.

In 1976 Flowers entered the frozen food business by acquiring Stilwell Foods of Stilwell, Oklahoma, along with its subsidiary Rio Grande Foods of McAllen, Texas. Stilwell had a strong reputation for high-quality frozen foods, which included vegetables, fruits, desserts, and a variety of baked goods. Flowers aggressively pursued success in its new market, implementing a comprehensive capital expenditure program to retool Stilwell and Rio Grande production facilities, upgrade equipment and technology, improve cost-effectiveness, and promote better employee training methods.

The company also continued to grow its fresh bakery business. In 1977 Flowers brought out a new line of variety breads called Nature's Own. These variety breads quickly became one of the best-selling variety breads in the southeastern United States. Besides Nature's Own, Flowers was selling many different kinds of bread, including Sunbeam Rye, Sunbeam Wheat, Sunbeam French, Hollywood Diet, Sunbeam Low Sodium, Sunbeam Batter-Whipped Enriched, and Sunbeam Thin-Sliced Sandwich.

During the 1970s and 1980s, Flowers purchased bakeries in Texas, Tennessee, West Virginia, and Kentucky, and other states, including such well-known regional companies as El Paso Baking Company in El Paso; Griffin Pie Company in London, Kentucky; Kralis Brothers' Foods in Mentone, Indiana; European Bakers, Ltd., in Tucker, Georgia; and Bunny Bread, Inc., in New Orleans. In the late 1980s Flowers acquired the bakery operations of supermarket chain Winn-Dixie, Inc., and entered the retail in-store bakery arena. In 1983 Flowers introduced Cobblestone Mill, a premium brand of specialty breads, which soon developed into a diverse product line including sandwich buns and English muffins.

Also in 1983, William Flowers retired as chairman of the board after nearly 50 years of directing the company. For the next two years the company was run by Langdon Flowers, until he also retired. The position of CEO was filled by Amos R. McMullian, who had worked in a number of different positions at the company since 1963.

Continued Expansion in the 1990s

During the early 1990s, Flowers continued to grow. The company embarked on a capital improvement plan, allotting $377 million over a six-year period to modernize its bakery equipment. Flowers expanded its frozen bakery business and specialty bakery product line, while continuing to acquire firms that enhanced its traditional bakery business. In 1991 Flowers purchased Pies, Inc., marking its entrance into the frozen foodservice dessert market. The company expanded its Our Special Touch product line for deli-bakery supermarkets and other in-store foodservice operations. Having discovered that the Nature's Own brand of premium bread was one of the company's best sellers, management continued to add such new products as 100% Whole Grain and Light Sourdough to the product line.

In the mid-1990s, management at Flowers planned to continue its strategy of growth through acquisition while also expanding its extensive variety of breads, pastries, desserts, and frozen goods. To maintain its momentum in an extremely competitive industry, Flowers implemented a 'new generation' of bakeries to help guarantee the highest quality control for its entire product line. With state-of-the-art computerized equipment, a well-trained staff of technicians, and an extremely efficient, high-technology operation, Flowers was poised to take the frozen food and bakery industries by storm.

Flowers began its assault on the nation's fresh and frozen baked foods industries in 1995 when the company acquired five businesses, including bread bakeries and sweet product operations. It was not until 1996, however, that Flowers put its expansion and growth strategy into high gear; Flowers formed a joint venture with Artal Luxembourg Corporation SA's U.S. subsidiary Invus Group Ltd., and the newly formed unit, known as INFLO Holdings Corporation, acquired Keebler Corporation for about $487 million. The major acquisition greatly strengthened Flowers' position in the baked foods industry and instantly transformed Flowers from a regional baked goods firm to a national one.

Keebler then acquired Sunshine Biscuits, Inc., the third largest producer of cookies and crackers in the United States, from G.F. Industries, Inc., for about $171.6 million, solidifying Keebler's number two position in the cookie and cracker market. Prior to the acquisition, Keebler had a market share of about 16 percent and sales of about $1.5 billion in 1995. The buy boosted Keebler's market share to about 23 percent and increased its sales to more than $2 billion a year. Though Keebler still lagged behind market leader Nabisco Biscuit Co., which boasted a market share of 36 percent and annual sales of more than $3 billion, Keebler felt confident that the acquisition would strengthen operations considerably.

Not only did Flowers acquire Keebler in 1996, but the company also bought Mrs. Smith's Inc., expanding Flowers' reach in the frozen baked foods market. The purchase of Mrs. Smith's from J.M. Smucker Co. included the top-selling frozen pie brand in the United States, and Flowers hoped to increase sales of frozen pies, desserts, and baked goods with the aid of Mrs. Smith's strong brand image and extensive distribution network.

Fiscal 1996 proved to be a strong year for Flowers, and the company reported revenues of $1.2 billion, a ten percent increase compared to fiscal 1995 sales, which marked the first time in the company's history that sales exceeded $1 billion. Not only did Flowers benefit from the Keebler and Mrs. Smith's acquisitions, but the company also worked to strengthen existing operations. Flowers added new routes for its fresh bakery lines, launched its Nature's Own and Cobblestone Mill brands into new markets, and invested $75 million in capital improvements during fiscal 1996. A new bread line, construction of a new baking facility, new frozen pie line, and automation of shipping departments were among the improvements.

In 1997 Flowers bought Allied Bakery Products, a maker of frozen breads for the foodservice industry in the Northeast. Later that year INFLO was merged into Keebler, and Keebler changed its name to Keebler Foods Company. In 1998 Keebler launched its initial public offering, and Flowers increased its ownership of the company to 55 percent, becoming a majority shareholder. Also that year Keebler acquired President International, Inc., the fifth largest cookie producer in the nation and best known for making Girl Scout cookies. President's other brands included Famous Amos and Murray.

In late 1998 Flowers began a one-year modernization project at its Mrs. Smith's Bakeries division. Flowers hoped to take advantage of the industry-wide increase in foodservice sales by maximizing production efficiencies and updating equipment at Mrs. Smith's facilities. The company began by shutting down five bakeries and restructuring the remaining plants to focus on specific types of production. New technology and equipment were introduced, and Flowers planned to increase production by about 50 percent to make 200 million pies annually with half the existing workforce. Unfortunately, however, the transition period proved more difficult than Flowers had anticipated--the plants were plagued with equipment problems, which caused low production levels and unusually high operating costs. In order to fulfill orders, primarily for the critical winter holiday season, Flowers hired hundreds of temporary workers to prepare and pack the pies and also shipped pies directly to stores to meet deadlines.

Though Flowers contended that the problems at Mrs. Smith's Bakeries were solved, 1999 earnings were negatively affected. Net income for the year was $7.3 million, an 82.6 percent drop compared to fiscal 1998. Luckily for Flowers, Keebler had a stellar year, reporting record sales of $2.7 billion, up 20 percent from 1998 sales of $2.2 billion. Keebler's retail sales of cookies, crackers, and brownies increased 17 percent, and its specialty division, which included sales to foodservice businesses and to the Girl Scouts of the U.S.A., enjoyed a 33 percent rise in sales. Keebler, which had proved to be a successful investment for Flowers, bought Austin Quality Foods, Inc., a maker of single-serve baked snacks, such as cracker sandwiches, in early 2000, again strengthening its cracker operations. Flowers Bakeries had sales of $961.7 million in 1999, a two percent rise from 1998. The division sought to improve production equipment in order to increase production and made two strategic acquisitions during 1999; Flowers Bakeries purchased Home Baking Co., a provider of baked goods to foodservice customers in the Southeast, and the Memphis bakery operations of supermarket chain Kroger Co., which served Kroger stores in Tennessee, southern Missouri, and northern Arkansas.

As Flowers faced the new millennium, the company planned to continue its strategy of long-term growth. The production and equipment problems that affected the company in the late 1990s had been solved, and Flowers prepared to increase its market share in the frozen and fresh baked goods industries. Chairman and CEO McMullian noted in his letter to shareholders in the 1999 annual report, 'We will not let one year of disappointing results undermine this [long-term growth] strategy or cloud our vision for our company. You should take comfort in the underlying strengths of Flowers Industries.' As a trend of industry consolidation ensued in early 2000, and such conglomerates as Nestle SA and Groupe Danone began looking to purchase, analysts began suggesting that Keebler Foods would make an attractive acquisition or takeover target. The fate of one of Flowers' most valuable subsidiaries was therefore uncertain.

Principal Subsidiaries: Keebler Foods Company (55%); Flowers Bakeries, Inc.; Mrs. Smith's Bakeries, Inc.

Principal Competitors: Interstate Bakeries Corporation; Nabisco Holdings Corp.; Sara Lee Corporation.

Further Reading:

• Cohen, Deborah L., 'Keebler Spinoff Takes Root for Flowers; Owner's Dilemma; Free Company or Risk Takeover,' Crain's Chicago Business, April 24, 2000, p. 1.
• 'Flowers Expects Record Year in Fiscal '97 with `Strong Recovery,' Milling & Baking News, October 1, 1996, p. 14.
• 'Keebler Adds Sunshine Business,' Milling & Baking News, June 11, 1996, p. 1.
  A Look Back At 75 Years: Flowers Industries, Inc., Thomasville, Ga.: Flowers Industries, Inc., 1994.
• Palmer, Eric, 'Working over the `Long Pull,' Milling & Baking News, January 23, 1996, p. 23.
• Palmeri, Christopher, 'Pie in the Face,' Forbes, February 21, 2000.

Source: International Directory of Company Histories, Vol. 35. St. James Press, 2001.