THOMASVILLE, GA. — With its $795 million deal to acquire Simple Mills, Flowers Foods Inc. aims to diversify its bread and baked foods portfolio and fortify its presence in the better-for-you baked snacks and foods segment.

Under the cash transaction, announced Jan. 8, Thomasville-based Flowers is slated to buy Simple Mills from founder and chief executive officer Katlin Smith, Simple Mills management, top individual shareholder Vestar Capital Partners and initial angel investors. Plans call for Simple Mills to operate as an independent subsidiary of Flowers, maintain its operations in Chicago and Mill Valley, Calif., and continue to be led by Smith and her executive team.

“This is a transaction that offers significant strategic and financial benefits to both organizations,” Flowers chairman and CEO A. Ryals McMullian told analysts in a conference call on the acquisition. “In addition to enhancing Flowers’ growth prospects and diversifying our category exposure, the transaction provides immediate financial benefits, which we expect to compound over time. The acquisition leverages Flowers’ demonstrated ability to grow acquired brands in the better-for-you space, and we expect to apply our best-in-class capabilities and deploy additional resources to enhance Simple Mills’ growth by broadening distribution, accelerating innovation and amplifying brand awareness.”

Simple Mills’ product roster spans crackers, cookies, snack bars and baking mixes. McMullian described the company’s “unique ability to blend purposeful, nutritious ingredients with exceptional taste” as having “disrupted” center-store grocery categories to become the leading cracker, cookie and baking mix brand in the natural channel and the leading multi-outlet natural cracker brand, with distribution in over 30,000 stores nationwide. From 2019 to 2024, he said, Simple Mills’ sales rose by a compound annual growth rate of 28%.

“That approach has enabled Simple Mills to successfully garner mainstream appeal and dedicated consumers for what historically has been a specialty market – much like the self-proclaimed ‘bread heads’ fiercely loyal to Dave’s Killer Bread,” McMullian said. “Simple Mills consumers have demonstrated a strong loyalty to the brand and a willingness to follow Simple Mills into new segments.”

Smith acknowledged Simple Mills’ impact on the baked foods space in a Jan. 8 LinkedIn post about the deal. Founded in 2012, the company generated estimated 2024 net sales of $240 million, up 14% year over year.

“When I look at grocery shelves today, I’m amazed at how radically different they are than when I started Simple Mills over a decade ago,” Smith said. “We’ve transformed the center aisles with delicious, nutritious pantry staples made with stunningly simple ingredients; pioneered the use of innovative nutrient-dense nut, seed and vegetable flours; partnered with farmers to implement regenerative practices and reimagine a more sustainable, less extractive food system; and, most importantly, helped raise the bar of what consumers can and should expect from their food. Today, Simple Mills is the leading cracker, cookie and baking mix brand in the natural channel.

“With Flowers’ partnership, we will be well-positioned to broaden our distribution, accelerate innovation, amplify brand awareness and advance our mission.”

Acquiring Simple Mills aligns with Flowers’ strategy of entering “faster-growing parts of branded retail,” McMullian said, citing his company’s previous acquisitions of the Dave’s Killer Bread (DKB) and Canyon Bakehouse.

“We already have a strong position in better-for-you products, and more recently, we’ve moved into snacking with the DKB bars and snack bites,” he said. “The addition of Simple Mills accelerates that transition, immediately boosting our position in those attractive spaces and offering a robust platform from which to expand far into the future.”

McMullian said Simple Mills brings “robust internal research-and-development capabilities” that include in-house labs and expertise in alternative flours and other ingredients, providing a “repeatable innovation approach that has consistently generated a pipeline of successful products.”

“We see significant opportunities to leverage Simple Mills’ strong brand and consumer loyalty by adding new products in its existing categories as well as entering new categories in snacking and beyond,” he said.

Simple Mills also offers long-term potential in large categories where the brand already has gained share, with a total available market size of about $32 billion, according to McMullian. Flowers sees a big opportunity to grow Simple Mills’ sales with current customers by raising the average number of items carried at each store.

“Other category-leading brands offer more than twice as many items per store than Simple Mills does, which presents attractive potential upside,” he said. “We see additional opportunity to expand distribution by adding new retail partners in existing channels. For example, Simple Mills has less than 10% household penetration in crackers and cookies and less than one-third of total distribution points compared to leading cracker brands, offering ample upside for future growth.

“Another promising area of potential growth is adding new distribution in channels where Flowers’ portfolio already has a presence, but Simple Mills does not have current distribution. Channels such as foodservice and convenience stores present exciting opportunities and highlight the compelling potential upside and out-of-home occasions which are largely untapped today.”

Flowers expects to close the Simple Mills acquisition in the first quarter of 2025, pending regulatory approvals and customary closing conditions.

“We view the acquisition positively, as it adds a higher-growth and higher-margin branded revenue stream in adjacent, better-for-you categories within the broader baked goods category,” Sturdivant & Co. analyst Mitchell Pinheiro said in a Jan. 8 research note.

Pinheiro also cited Flowers’ “strong acquisition track record” and noted that the deal marks its first acquisition since buying Canyon Bakehouse in 2018.