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The company that bought the Columbus Dolly Madison plant out of bankruptcy this last spring appears to be in no rush to reopen the place.
The facility in the 3000 block of North National Road remains closed with giant cement blocks forming a thick, gray barricade around the property’s perimeter to discourage unwanted visitors. Empty, unused trailer trucks dot the site or stand adjacent to silent loading docks that once buzzed with workers moving snack cakes, doughnuts and sweet rolls to store shelves.
The plant has been closed since Nov. 16 when the bankruptcy of parent company Hostess Brands put 200 or more Columbus-area workers on the unemployment line.
Keith Hancock, a spokesman for the plant’s new owner, Flowers Foods of Thomasville, Ga., said Flowers doesn’t have any plans to reopen the Columbus bakery at this point, but that could change as consumer demand for bread products purchased from the bankrupt Hostess company gain steam and the company moves into new sales territories.
“Our plan is to reintroduce the Hostess products. And as sales of those bread products improve, that could lead us to adding capacity and reopening plants,” Hancock said last week.
His comments reflect similar remarks made by Flowers’ President and CEO Allen L. Shiver in two recent meetings with Wall Street analysts, one in mid-August and another early this month.
Many former employees have moved on to other jobs, while others are waiting to collect pension benefits at retirement age under procedures approved by a U.S. Bankruptcy Court judge in White Plains, N.Y.
Some others, including 52-year-old James Baker Jr. of Columbus, a former shipping clerk who made $14 an hour at the peak of his 28-year career with Hostess, is still hunting for a new job. Baker holds out faint hope that he and other displaced workers could return to the National Road facility, if Flowers Foods ever turns the lights back on there.
“It was a modern plant. I hope they reopen it,” said Baker, who attended a job fair Sept. 11 with his resume in hand. “I’ve signed up for my pension, but the earliest I could collect on it is when I’m 55.”
Meanwhile, Flowers has reported vibrant sales and its stock price has risen 38 percent since early January.
Since spring, Flowers has reaped the benefits of its $355 million court-approved deal to buy 20 bakeries, 36 depots and assorted bread and snack brands like Wonder Bread, Nature’s Pride, Merita, Home Pride and Butternut from the remains of Hostess.
Flowers said earlier this month at a Wall Street financial conference that its sales in the first half of 2013 have reached $2.03 billion, up 28 percent from a year earlier, due in part to adding Hostess bread products to the mix.
Right now, Flowers is making the inherited Hostess breads — led by the nearly $397 million a year in sales of Wonder Bread brand — by using the capacity at many of its existing 45 manufacturing plants. For instance, a new bread production line was added in May at a Flowers facility in Oxford, Pa., and shipping procedures have been automated at 22 of Flowers’ plants over the past three years.
Nineteen other acquired Hostess plants haven’t reopened either.
Flowers’ executives have made no promises about the possible time frame of any plant reopenings, and they’ve been unwilling to speculate about whether the company might end up selling one or more of the Hostess plants to rid itself of unwanted or excess capacity.
The earliest any of the former Hostess plants could reopen would be the fourth quarter this year or in 2014 as consumer demand increases, the company has told stock analysts.
“That’s a long-term process, and we just don’t generate those incremental sales overnight,” Shiver, the Flowers’ president, told Wall Street analysts in an earnings call last month. “Also as we bring individual plants on speed to handle that additional volume, it will be a very methodical, organized process that won’t happen overnight.”
Shiver said Flowers’ existing plants have handled production so far. Flipping the “on” switch for any of the acquired plants “will be a market-by-market situation,” he said. “We’re very early in the game.”
Flowers acknowledges that it costs some money to keep plants closed. Plant carrying costs — basically the cost of utilities to keep buildings cool or properly heated in summer, fall and winter; property taxes; maintenance; and security — could be as much as $9 million in the second half of this year, said R. Steve Kinsey, Flowers’ chief financial officer.
Some stock analysts have been pressing Flowers executives for any information about whether some of the acquired manufacturing facilities might be sold in real estate deals if the company finds it doesn’t need all that capacity.
Flowers has been noncommittal on that front.
“It really depends on sales volume and the capacity that’s going to be needed,” Shiver said in the most recent conference call. “If there is a plant we don’t need, and we determine that, then we’d be able to (reduce) some of our carrying costs there,” Shiver said. “But we’re not at that point yet.”
Stock market analyst William B. Chappell of SunTrust Robinson Humphrey Inc. also questioned Shiver about transport distances for baked goods as Flowers moves products into new parts of the country to boost sales. Flowers has traditionally been strongest with sales in the South, where many of its own plants are located.
Shiver said when Flowers has entered new markets in the past, it has been willing to ship baked goods “a distance further than we’d like” for some time. And new plants are opened only when sales support such a move, he added.
“That model has worked really well, and as we look at the acquired bakeries that we’ve recently picked up, we’ll approach it the same way. We’ll probably enter new markets and be transporting products from our current bakeries farther than we’d like. And then at the point that we’re established in the marketplace and our sales support the reopening of a bakery, we’ll look at those one at a time,” the CEO said.
Shiver declined to say which of the acquired Hostess plants might need the most improvements or upgrades before they could reopen.
“Obviously, there will be some facilities that would need more capital than others,” Shiver told analysts without discussing where the Columbus plant or any of the others might fit in that equation.
Wonder Bread leads
Meanwhile, citing the company’s own market research, Shiver told stock analysts that Wonder Bread was the top brand his firm acquired from Hostess.
In fact, a 2012 market study found that 96 percent of consumers knew the brand and 74 percent viewed Wonder Bread as an iconic or legendary part of the American diet, the company said.
“From a customer standpoint, food retailers are well aware of the power of the Wonder Bread brand,” Shiver said at a mid-August earnings conference. “The other bread brands we acquired — Merita, Home Pride, Butternut and Nature’s Pride — have strength in selected regional markets.
“With the addition of Wonder, we now have a national white bread brand that will help accelerate our growth especially in new markets,” Shiver said.
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