Dive Brief:
- Flowers Foods will acquire Utah-based Papa Pita Bakery for an undisclosed amount. Papa Pita makes flatbreads, bagels, tortillas, breads, buns and English muffins. The deal, which is expected to be completed in the first quarter of 2023, will be funded with cash on hand and existing credit facilities.
- The bakery, founded in 1983, has a 270,000 state-of-the-art facility in West Jordan, Utah. It also has a significant co-manufacturing business and direct store delivery model in the Western United States.
- Many large food companies use acquisitions not only to broaden their portfolio, but to increase their manufacturing, delivery capabilities and brand reach across the U.S.
Dive Insight:
In 2020, Flowers President and CEO Ryals McMullian set priorities for the company to grow: Expanding the reach of its branded products, and looking for M&A opportunities in grain-based foods.
The two years since have seen Flowers make progress in meeting these targets, and the purchase of Papa Pita builds on that momentum. Flowers is adding a suite of well-known regional brands to its portfolio — including Papa Pita, Great Grains, Bubba’s Bagels and Maya’s Tortillas. It also gets a manufacturing hub and distribution network in the Western U.S., where it currently has fewer bakeries.
In a statement, McMullian said Papa Pita’s beginnings as a family business and its skill at execution made it attractive to Flowers. Prior to the acquisition, Flowers partnered with Papa Pita as a co-manufacturer.
“I’m thrilled about the opportunity to realize manufacturing and distribution synergies, in addition to expanding our geographic reach and welcoming the passionate Papa Pita team to Flowers,” McMullian said.
Papa Pita’s manufacturing facility, built 10 years ago, is likely just as valuable to Flowers as the new slate of brands. In October, Flowers discontinued operations at a pair of plants in Arizona in part because of the high costs of modernizing the facilities.
But Flowers also is leaning into its brands, and that strategy has paid off. In its most recent quarter, dollar sales of its Nature’s Own, Dave’s Killer Bread and Canyon Bakehouse brands posted double-digit increases, McMullian said in prepared remarks accompanying the company’s earnings report.
While many of the Papa Pita brands aren’t well known outside of the West, Flowers’ wide reach can get them to shelves nationwide and build name recognition among a wider variety of consumers.
Flowers hasn’t closed a big deal since buying Canyon Bakehouse for $205 million in 2018, but it’s been looking. The company invested an undisclosed amount in gluten-free and grain-free bread company Base Culture this summer. In the most recent earnings call, McMullian said Flowers spent $11.6 million to pursue an acquisition that did not come to fruition.
