THOMASVILLE, GA. — Flowers Foods Inc. sees some potential wrinkles in its consumer outlook for the bread category, despite a continued shopper focus on value and food-at-home, said A. Ryals McMullian, chairman and chief executive officer.

“When we provided our initial 2024 financial outlook, it included a cautionary note regarding the uncertain consumer and promotional environment,” McMullian said in remarks on fiscal 2024 third-quarter results. “While trends in those areas remain relatively consistent with the recent past, we have detected some shifts in consumer behavior, and year-over-year increases in promotional activity have continued.”

To stretch their dollars, consumers – especially those with lower income levels – have favored food-at-home over food-away-from-home purchases and shifted to value retail channels like mass and club stores. But a change may be afoot in bread, McMullian said.

“Despite that positive shift to at-home eating, the bread category as measured in tracked channels has been pressured as consumers gravitate more to the store perimeter,” he explained. “Meal preparation ingredients like proteins, spices and oils have shown particular strength. Consistent with this theme, notable pockets of growth within bread include tortillas and buns and rolls. Since the pandemic, we have seen a slow reversion of share gains in perimeter bread, though not back to prior levels.”

In fiscal 2024, Flowers’ unit sales in fresh packaged bread have risen steadily, edging up 0.2% year-over-year in the first quarter, 1.5% in the second and 0.7% in the third, compared with quarterly decreases of 1.5% to 4.4% going back to the fiscal 2022 fourth quarter.

“We expect this shift to meal preparation items to be temporary, but we are leveraging consumer trends to help grow the overall category through innovation — providing consumers appealing new options such as our keto products,” McMullian said. “Those actions drove continued outperformance, growing bread unit and dollar sales in tracked channels for the third consecutive quarter.”

Dollar sales growth for Flowers’ fresh packaged bread, though, has decelerated this fiscal year – up 4.3% year-over-year in the first quarter, 1.9% in the second and 0.5% in the third – amid lower price inflation and elevated promotional activity in the bread category.

“In the second half of the year, we have seen a notable increase in promotional activity,” McMullian said. “However, despite the greater promotional levels, the average category price was flat versus the year-ago period. Part of the explanation for that trend is a mix shift to premium products, but some is also likely due to a greater percentage of products sold on promotion, though with less promotional intensity.”

He noted that the category’s promotional environment “remains rational,” below pre-pandemic levels.

“Consumers are responding well to promotions, and we continue to effectively leverage our enhanced trade promotion management capabilities,” he said. “For example, rather than simply focus on price, we have been emphasizing display execution to better highlight our brands for consumers. Similarly, because consumers are responding well to differentiation, we continue to invest in innovation to meet their evolving needs.”

On the innovation front, in spring 2025, Flowers plans to kick off a national rollout of Nature’s Own keto hot dog buns to follow up a nationwide launch of keto hamburger buns now underway. McMullian cited the strong appeal of Nature’s Own Keto loaf bread, which despite launching only last year has already gained 730 basis points in unit share and 770 basis points in dollar share and is “rapidly approaching No. 1 market share in its subcategory.”

In better-for-you bread segments, Flowers has seen organic sales advance 3.9% and gluten-free sales climb 4.2% over the 52-week period ended Oct. 6.

Pricing and promotional headwinds, meanwhile, have slowed the momentum in private brands. Flowers reported that private label unit share decreased 0.4% in the third quarter after a 0.2% dip in the second and a 0.5% increase in the first quarters.