Sector News

B&G Foods seeking to acquire frozen or shelf-stable 'on-trend brands'

August 8, 2017
Food & Drink

Add B&G Foods, Inc. to the list of packaged food companies challenged by changing consumer trends in the recent quarter. Weak demand for brands such as Ortega, Bear Creek and Mama Mary’s, among other factors, contributed to a 4.9% decline in net sales, excluding recent acquisitions.

Net income in the second quarter ended July 1 was $22,061,000, equal to 33c per share on the common stock, down 27% from $30,251,000, or 48c, in the prior-year period. Net sales of $368,134,000 were up 20% from $306,376,000, including the recent acquisitions of Victoria Fine Foods and the spices and seasonings business of ACH Food Companies.

Following the earnings release, shares slid by as much as 11% on Aug. 4 to $31.15 from a prior-day close of $35.15.

“While the current consumer environment remains challenging, we believe that bolstered by our recent acquisitions, there is a significant amount we can do to grow our overall business in both the near and long term,” said Robert C. Cantwell, president and chief executive officer, during an Aug. 3 earnings call with investment analysts. “And consistent with our growth strategy, we continue to search for accretive acquisition of on-trend brands.”

The company has the infrastructure and financial ability to acquire additional shelf-stable and frozen brands, he added.

“As I look back over the past two years, our three most recent acquisitions have combined to double the size of B&G Foods, and each one is exceeding our expectations,” Mr. Cantwell said.

Like many of its packaged food peers, adapting to the evolving retail landscape is another priority for B&G Foods.

“E-commerce and all the other things that everybody talks about is here to stay,” Mr. Cantwell said. “It’s a small part of… the food business today, but we are also dedicating a team to make sure we’re out in front of that because we think it will be a bigger and bigger part of the food business as we go forward. Our expectation, though, is, hopefully, that helps some of our brands, not hurts it.”

B&G Foods also expects to launch a “number of new items across our portfolio” in the months ahead, Mr. Cantwell said. The company’s largest business, Green Giant, posted a 1.9% decline in sales during the quarter, as strong growth of recently introduced frozen products was more than offset by distribution losses with certain customers that negatively affected the brand’s shelf-stable products. In the coming quarters, the company plans to introduce a new line of products that will “mark our entry into a new category of frozen vegetables,” Mr. Cantwell said.

“We’re really excited about our launch that we’ll announce in September for delivery in January in the frozen space that nobody else is doing today,” he said. “We’re really excited about our approach to innovation on Green Giant, which is, in a lot of ways, as simple as, let’s try to deliver vegetables in a format that the consumer wants to eat them today, not just as a side, but a lot more ability to use in recipes along with a side or use as a main meal altogether.”

For the remainder of the year, management expects to see an improvement in year-over-year trends, with net sales of the base business up approximately 2%, driven by a double-digit net sales increase in Green Giant, offset by a net sales decrease of 2% to 3% for the rest of the base business, Mr. Cantwell said.

“Trends at the center of the store aren’t the best, and we need to win those tactical fights,” he noted. “We have brands that are small enough that little winds get us over the hump. Most of our brands could allow us to have some of those little winds that can keep us flat to up, and we need to achieve that.

“We had some bigger hits this quarter and kind of year-to-date on some of those key brands that drove some bigger dollar numbers. Once you get past the bigger dollar numbers, I mean, there’s a lot of little shortfalls and some gains, but they’re all relatively small pluses and minuses…

“Still doesn’t help our overall results, so we felt let’s be more conservative here as we look at the rest of the year until we prove that we can do better.”

By Monica Watrous

Source: Food Business News

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