B&G Foods Considers More Asset Sales, Cuts 2024 Guidance (Again) After Mixed Q3 Results
B&G Foods, Inc., the maker of Ortega, Cream of Wheat, and Crisco, is considering the divestiture of “some or all of the assets” in its Green Giant frozen and vegetable business unit to improve margins and cash flow following mixed Q3 results, president and CEO Kenneth Keller told shareholders during yesterday’s earnings call.
In the quarter ended Sept. 28, B&G Foods saw an 8.3% year-over-year drop in net sales, driven by isolated inflation in categories like black pepper and garlic and increased competition in vegetable oil and Mexican food. The results also reflect the impact of the divested Green Giant U.S. shelf-stable business in Q4 2023.
Adjusted EBITDA for Q3 decreased by $10 million compared to the prior-year period, partially due to divestitures and foreign exchange impacts.
Keller cited decreased consumer demand as the primary driver of lower-than-projected results, saying, “Base business trends on most of the B&G Foods portfolio have been slower to recover than expected, consistent with the center store package foods industry. We haven’t seen much improvement relative to consumers adjusting their purchasing patterns in the wake of high food inflation.”
The rising popularity of private label brands among price-conscious shoppers has impacted some of B&G Foods’ brands more than others.
According to the company, private label frozen vegetable products have taken some of the category share away from B&G Foods’ Green Giant frozen business and competitors like Conagra Brands-owned Birds Eye. Private label has also negatively impacted the sales of B&G Foods’ Crisco vegetable oil, though the brand has been hurt more by competitor Wesson’s aggressive pricing actions made in an effort to hold their position in the marketplace.
One bright spot in B&G Foods’ earnings report was its Spices and Flavor Solutions business, which saw a 2.6% increase in net sales for Q3. Additionally, the company has launched a new line of licensed seasoning and grilling blends under the Four Sixes brand, which is expected to enhance its product offerings.
Looking ahead, portfolio reshaping remains B&G Foods’ primary goal, as the company believes it will sharpen focus, improve margins and cash flow, and maximize future value creation. According to Keller, the company is reviewing its portfolio for non-core assets, including the possible divestiture and sale of “some or all of the assets in the Frozen and Vegetables business unit.”
When B&G Foods sold the Green Giant shelf-stable product line to Seneca Foods Corporation in November 2023, it retained ownership of the Green Giant trademark, as well as the Green Giant frozen, Green Giant Canada, and Le Sueur businesses.
However, on yesterday’s call, Keller said Green Giant may no longer be the right fit with B&G Foods’ focus and capabilities, particularly because there are no plans to add more assets in the frozen portfolio given opportunities in the core shelf-stable business and there are overall capital constraints.
“We will do some restructuring activity in our cost profile to make sure that as we divest businesses, we look not only to take out proportional costs but also ways to get more efficient with a more focused portfolio,” said Keller.
B&G Foods acquired the Green Giant and Le Sueur brands from General Mills in 2015 for approximately $765 million, marking its entry into the frozen foods segment, which executives were bullish on at the time of the purchase.
Based on its Q3 results, B&G Foods has (again) cut its 2024 guidance, now forecasting net sales between $1.92 billion and $1.95 billion, adjusted EBITDA between $295 million and $305 million, and adjusted diluted earnings per share between $0.67 and $0.77.
