Earnings Roundup: B&G’s Lofty Innovation Plan; Hormel M&A Pipeline ‘Full’

Meagan McGinnes

When it comes to what’s in the works for some of the food industry’s heaviest hitters, there’s one initiative the companies have in common: M&A.

Over the last week, B&G Foods Inc., The Hershey Company, Pinnacle Foods, Sprouts Farmers Market and the Hormel Food Corporation each held quarterly earnings calls for analysts and investors. Here’s what the companies had to say about growth, road bumps and road maps for 2017.

EarningReport_970B&G Maps Out Aggressive Innovation Plan For 2017

B&G has piled a lot on its plate for 2017.

In an effort to stabilize its brands, expand its offerings and grow sales, the company laid out an aggressive outline for the year during its quarterly earnings call last week.

“Although there are no easy answers, we do plan to stabilize our base business in 2017,” President and CEO Robert Cantwell said during the call. “Among other things, we’ve restructured internally in an attempt to put proper focus on all brands and groups of brands in our portfolio. We also intend to be much more aggressive with new products that truly satisfy changing consumer preferences.”

Products in the pipeline include new products from Cream of Wheat, Pirate’s Booty and soup and grains brand Bear Creek. Recently acquired Green Giant is also expected to launch additional products in 2017 and Cantwell said that the company hopes these launches will make up for some growing pains related to its transition from General Mills.

Still, Cantwell added that the company has seen and expects to continue seeing success with Green Giant — and it hopes to see similar gains with another acquisition in 2017.

“We’re ready [and able] to do the next [acquisition] and if something comes along that makes sense to be part of B&G’s portfolio,” he said. “We’re going to be aggressive to go after. So I don’t think we look at ourselves and think about taking a break at all. But it has to be the right acquisition and we’re ready.”

Hormel: ‘Pipeline is Full’ For M&A ventures

Hormel reported that the company’s earnings grew for the 15th consecutive quarter to reach a new record, due in part to a calculated expansion within the natural channel. Over the past two years, Hormel has divested from its Diamond Crystal Brands and Farmer John business, and acquired natural brands Applegate Farms and Justin’s. CytoSport, which just launched Evolve, a vegan protein line, also posted growth this quarter.

James Snee, President and CEO, told analysts on the call that the company’s M&A “pipeline is full.”

“As we think about what we are focused on, the need to become more global, businesses or items that afford us the opportunity to become more healthy, holistic, on-the-go, multicultural are all things that are squarely in our wheelhouse,” he said. “And then we also, of course, are looking for those right opportunities that will add scale or support existing businesses with the idea that we want businesses that are margin accretive, that are one or two in the categories where they compete. We want to make sure that we’re bringing more than just a check that we really can add value to the business.”

Hershey’s Sees Wins In American Snacking, Losses in International

Americans are snacking more, and Hershey’s is loving it. During the company’s quarterly earning call this week, CEO Michele Buck said the company will focus more on snacking products than confectionary items in 2017, not only by deepening its current brands but also by seeking M&A in the snacking category.

“We believe M&A will play an important role in diversifying our portfolio going forward,” she told analysts on the call.

Buck noted that Hershey’s is the second largest U.S. snacking company after PepsiCo, showing , not only that healthy food is not the only category seeing growth within the snack world but that indulgent snacks like candy and salty snacks are also posting increases. Buck said she wants to ensure its namesake chocolate bar, Twizzlers and Reese’s are “innovative snacking powerhouse[s],” while still diversifying its portfolio with brands like beef jerky maker Krave and healthier snacking brand barkTHINS.

But while American snacking shows potential growth for the company, its international business is less sweet. Buck said Hershey’s will cut its global workforce by about 15 percent, or about 2,700 people. The layoffs are part of a plan to help its international businesses “return to profitability as soon as possible,” she said.

Pinnacle Sees Potential in Plant-based Proteins and Natural Brands

Investing in plant-based proteins and natural brands provided Pinnacle with plentiful yields this quarter. Net sales of the new Boulder Brands segment — which includes the U.S. retail business of Udi’s, Glutino, EVOL and Earth Balance — and gardein totaled $365 million for the year.

Gardein, a leading refrigerated meat-alternative brand, saw net sales growth at a “strong, double-digit rate,” according to CEO Mark Clouse. To keep up with this demand, Hormel is bringing on new production capacity this quarter at a refurbished facility in Hagerstown, Md.

“We continue to believe that the growth of plant-based proteins represents a very significant opportunity, and gardein is poised as the leader in this space to benefit meaningfully,” Clouse said during the company’s quarterly earnings call last week.“Plant-based proteins and spreads continues to have significant momentum in demand.”

Within the Boulder Brands portfolio, Clouse said EVOL is currently the fastest growing division, even ahead of longtime natural leaders like Udi’s, Earth Balance and Glutino.

“It is a combination of the fact that that transparent ingredient line and the relevance of that being moved into mainstream location and broader distribution is working very effectively,” he said.

Sprouts Sees Healthy Growth Ahead of Competitors

While other natural grocers are struggling to increase sales, Sprouts Farmers Markets continues to grow.

The grocer’s net sales increased across the board in its fourth quarter with $986 million and the company’s growth is not limited to its sales. Sprouts also noted it opened three new stores in California, Oklahoma and Texas. In 2017, it plans to open 32 new stores and enter 2 new states: Florida and North Carolina.

“We believe that as we cycle this difficult deflationary environment, we will show improvement in our comps and earnings,” Chief Financial Officer Bradley Lukow said. The call was stark in comparison to Whole Foods Market’s quarterly call released a week prior, which announced declining sales, slumping same-store sales and store closures.

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