Investor Update March 2020
Regarding Forward‐Looking Statements Statements contained in this press release that are not historical facts are forward‐looking statements. Forward‐looking statements relate to current expectations regarding our future financial condition, performance and results of operations, planned capital expenditures, long‐term objectives of management, supply and demand, pricing trends and market forces, and integration plans and expected benefits of transactions and are often identified by the use of words and phrases such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "should," "will," "would," "is likely to," "is expected to" or "will continue," or the negative of these terms or other comparable terminology. All forward‐looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected. Other factors that may cause actual results to differ from the forward‐looking statements contained in this release and that may affect the company's prospects in general include, but are not limited to, (a) general economic and business conditions and the competitive conditions in the baked foods industry, including promotional and price competition, (b) changes in consumer demand for our products, including changes in consumer behavior, trends and preferences, including health and whole grain trends, and the movement toward more inexpensive store‐branded products, (c) the success of productivity improvements and new product introductions, (d) a significant reduction in business with any of our major customers including a reduction from adverse developments in any of our customer's business, (e) fluctuations in commodity pricing, (f) energy and raw material costs and availability and hedging and counterparty risk, (g) our ability to fully integrate recent acquisitions into our business, (h) our ability to achieve cash flow from capital expenditures and acquisitions and the availability of new acquisitions that build shareholder value, (i) our ability to successfully implement our business strategies, including those strategies the company has initiated under Project Centennial, which may involve, among other things, the integration of recent acquisitions or the acquisition or disposition of assets at presently targeted values, the deployment of new systems and technology and an enhanced organizational structure, (j) consolidation within the baking industry and related industries, (k) disruptions in our direct‐ store delivery system, including litigation or an adverse ruling from a court or regulatory or government body that could affect the independent contractor classification of our independent distributors, (l) increasing legal complexity and legal proceedings that we are or may become subject to, (m) product recalls or safety concerns related to our products, and (n) the failure of our information technology systems to perform adequately, including any interruptions, intrusions or security breaches of such systems. The foregoing list of important factors does not include all such factors, nor necessarily present them in order of importance. In addition, you should consult other public disclosures made by the company, including the risk factors included in our most recently filed Annual Report on Form 10‐K and Quarterly Reports on Form 10‐Q filed with the Securities and Exchange Commission ("SEC") and disclosures made in other filings with the SEC and company press releases, for other factors that may cause actual results to differ materially from those projected by the company. We caution you not to place undue reliance on forward‐looking statements, as they speak only as of the date made and are inherently uncertain. The company undertakes no obligation to publicly revise or update such statements, except as required by law. 2
Flowers Investment Highlights Leading Brands in a Operate the #1 organic bread, loaf bread, and gluten‐free bread brands in Large and Stable the U.S. in Dave’s Killer Bread, Nature’s Own, and Canyon Bakehouse. Market Growth in Strategy developed to capitalize on underdeveloped regions and build share Underdeveloped in $32‐billion fresh bakery market Markets Executing on strategies designed to manage costs, leverage data‐driven Priorities to insights, and reposition our company for success Drive Margins Focus on Dividend paid in 69 consecutive quarters and a management team that is Shareholder aligned with shareholder interests Returns 3
Business Overview Value Creation Strategy Financial Review & Outlook Business Overview
Leading Fresh Bakery Brands Drive Our Business SALES OVERVIEW BRAND PORTFOLIO HIGHLIGHTS #1 loaf bread brand Store branded retail 16% #1 organic bread brand Branded FY19 Sales Breads 50% $4.1B #1 and FASTEST GROWING gluten‐free bread brand in U.S. Branded Snack Cakes 98% consumer awareness 10% Non‐retail & other Branded retail 24% 60% Iconic snack cakes since 1914 Source: Internal Sales Data Warehouse 52 Weeks Ended 12/28/2019 5
Fresh Bakery Market Overview $32.4B FRESH BAKERY MARKET Large and US FRESH BAKERY ‐ RETAIL OUTLETS RETAIL & FOODSERVICE stable market $ in Billions $30.0 $24.7 $24.3 $24.0 $23.9 $23.7 $ 7.7B $25.0 Foodservice 1 $20.0 $15.0 $10.0 $ 24.7B $5.0 Retail Breads, Snack Cakes, Tortillas 2 $‐ 2015 2016 2017 2018 2019 1. Data for Retail Outlets sourced from IRI. FY 2019. 6 2. Data for Foodservice sourced from Techonomic 2019.
Improving Competitive Position FRESH PACKAGED BREADS SHARE FLOWERS MARKET SHARE CHANGE #2 0.9 0.9 Baker and 0.8 0.8 Growing Share 16.9% 23.0% Flowers Store brands 0.6 0.5 0.4 0.4 29.1% 0.3 BBU/ 25.0% Sara Lee Independent bakers 6.0% Pepperidge Farm 17Q4 18Q1 18Q2 18Q3 18Q4 19Q1 19Q2 19Q3 19Q4 7 IRI Flowers custom data base Total US MultiOutlet – 19Q4
Smart, Disciplined M&A Driving Share Gains $ in Millions Capturing growth TOTAL ORGANIC FRESH TOTAL GLUTEN‐FREE FRESH PACKAGED BREADS PACKAGED BREADS by anticipating shifting consumer preferences $694.7 $320.3 $604.1 $294.1 FLO $267.3 $257.3 $488.0 Share $232.1 FLO 64.7% $355.5 Share $274.3 25.3% FY15 FY16 FY17 FY18 FY19 FY15 FY16 FY17 FY18 FY19 Organic Segment Source: Flowers Custom Database – IRi Total US Multi Outlet + C Store 8 Gluten‐free Segment Source: IRI Custom Scan Data Total US Multi Outlet + C Store combined with SPINS Total US Natural & Specialty Gourmet Channel
Underdeveloped Markets Provide Upside FRESH PACKAGED BREADS CATEGORY DOLLAR SHARE IN THE US Substantial room to grow share 5.3 8.5 GREAT LAKES NORTHEAST & PLAINS 43.1 37.4 27.5 32.7 24.2 21.4 15.2 25.8 MID SOUTH, 28.1 25.7 SOUTH CENTRAL, CALIFORNIA & WEST & SOUTHEAST 35.2 23.7 ■ Flowers ■ Store Brands 20.3 25.9 ■ Bimbo USA ■ Independents 9 IRI Flowers custom data base Total US Multi Outlet + Convenience – 19Q4
Market Share Opportunities Beyond Loaf Breads #1 in Traditional Loaf Brand extensions and M&A in adjacent segments DKB extension driving share gains in breakfast segment $4.5 $4.0 Billions $4.0 $3.4 $3.5 $3.0 $2.5 $2.0 $2.0 $1.6 $2.0 $1.5 $1.0 $0.4 $0.3 $0.2 $0.5 $0.0 Traditional Loaf Specialty/Premium Loaf Sandwich Bun/Roll Breakfast/Dinner/Other Total Branded FLO IRI Flowers custom data base FY19 10
Well Positioned as E‐Commerce Accelerates FRESH BREAD & ROLLS E‐COMMERCE CHANNEL $700.0 $ in Millions Fresh Bakery E‐Commerce $595.7 Channel Facts: $600.0 • $595.7M channel, $500.0 +51% YOY growth 1 $395.6 • E‐commerce is ~4% of total $400.0 fresh bread & rolls category 2 Flowers’ leading brands provide • $266.0 $300.0 a competitive advantage in the $240.5 E‐commerce channel $200.0 $100.0 $‐ FY16 FY17 FY18 FY19 1. IRI Syndicated E Market Highlights, FY19 11 2. IRI Syndicated E Market Highlights , FLO dollar share for FY19
Broad Scale is a Platform for Profitable Growth 46 Channels served Grocery / Mass Operating bakeries Natural & Organic Club & Dollar, C‐store E‐commerce Direct‐store‐distribution access to Foodservice & Vending 85 % of the U.S. 5,590 population 9,700 IDP* territories Warehouse distribution NATIONWIDE employees Information as of year‐end fiscal 2019 12 * “IDP” – Independent Distributor Partners
Business Overview Value Creation Strategy Financial Review & Outlook Value Creation Strategy
Project Centennial Defined Our Strategic Priorities DEVELOP TEAM FOCUS ON BRANDS Restructure around Prioritize national brands • • priorities, drive execution Invest in brand growth • • Add critical capabilities to and innovation build brands, manage costs, • Streamline product and deliver insights assortment SMART M&A PRIORITIZE MARGINS • Proactive M&A in product and • Reduce organizational and geographic adjacencies in the indirect costs baked foods category Strategic pricing • • Pivot portfolio to growing • Optimize portfolio and network bakery segments 14
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