The diversification of Flowers Foods and Grupo Bimbo

Flowers Foods and Grupo Bimbo are the leading companies in the U.S. bakery market and both have varying degrees of global diversification.

First, Flowers Foods’ top 10 customers in fiscal 2022 accounted for 54.5% of sales.

During FY2022, its largest customer, Walmart/Sam’s Club, comprised 21.7% of the company’s sales.

So the loss of, or a material adverse change in its relationship with, Walmart/Sam’s Club or any other major customer could have a material adverse effect on Flowers Foods’ business.

Walmart/Sam’s Club was the only customer that accounted for 10% or more of our sales during fiscal 2022, 2021 and 2020.

Fresh Baked Foods’ customers include superstores, supermarkets and other retailers, restaurants, fast food chains, food wholesalers, institutions, dollar stores and vending companies.

The company also sells returned and surplus products through a thrift store system. The company currently operates 238 of these stores and recorded sales of $64.5 million during FY2022 from these outlets.

Diversification of Flowers Foods

A 2022 Fitch Ratings assessment showed that Flowers’ ratings reflect its good competitive position, with a top-two ranking in the U.S. bakery products market.

Flowers has access to approximately 85% of the U.S. population with good market share penetration in the Mid-South, South Central and Southeast regions of the United States.

In contrast, Flowers has lower penetration in the Great Lakes, Plains and Northeast regions.

The ratings are constrained by a lack of diversification and material scale from a revenue and EBITDA perspective relative to its larger direct peer and other packaged food companies.

According to Fitch Ratings, Flowers’ ratings are in line with those of its direct competitor Grupo Bimbo.

Bimbo’s ratings incorporate its strong position as a leading global producer of bakery products that leverages an extensive distribution network, with operations in Mexico, the United States, Canada, Latin America, Europe and, to a lesser extent, Asia and Africa.

This reflects a much greater geographic diversification than Flowers.

As a result, Bimbo has substantially greater scale than Flowers, demonstrated by revenues and EBITDA more than four times higher than Flowers.