BOSTON – The recent realignment of business segments at B&G Foods, Inc. represents “the refinement of a strategy” to generate slow and steady organic growth, said Kenneth C. Keller president and chief executive officer of B&G Foods. , Inc., during a Sept. 8 “fireside chat” with industry analyst Andrew Lazar at the Barclays Consumer Staples Conference in Boston.
“I think the change for me is to put a strategy in place and focus on a portfolio that can actually deliver 1% to 2% organic growth,” Keller said. “It’s a change because, like I said before, we weren’t doing that.”
Before the pandemic, organic growth was flat or negative, he said.
“We don’t expect crazy growth,” Keller said. “We just expect to get our fair share of category type growth in some of these categories.”
When Mr. Keller joined B&G just over a year ago, he saw a portfolio that was too broad and too complex, he said. The company had 54 brands in several categories.
“All companies were competing for resources,” Keller said. “So for me, the huge opportunity was how to reshape that portfolio to have more focus, more long-term potential for organic growth as well as inorganic growth.”
In June, B&G announced the creation of four business units: Spices and Seasonings, Ready Meals, Frozen Foods and Vegetables, and Specialties.
With the release of second quarter financial results, B&G lowered its EBITDA guidance for the full year. Asked by Mr. Lazar whether B&G has enough pricing and productivity to cover costs in the future, Mr. Keller said the company has met all the pricing needed to catch up with inflation over the course of the year. of exercise 22.
“I think next year we will see inflation,” Keller said. “Our estimates right now on our portfolio are around 3% to 5%. So we’ll take some additional pricing next year, probably early next year to cover where we see the increases. But the 3 % at 5% compares to 20% this year.
He said B&G entered the year expecting inflation to be in the 11% to 12% range. With the start of the war in Ukraine, commodity prices have been thrown into turmoil, Keller said.
“Our portfolio is very sensitive to some of the big commodity moves of 2022,” he said. “Twenty percent inflation, I think that’s higher than most of our peers. Soybean oil is probably 40% of our commodity exposure due to Crisco. In the past 18 months, that has more than doubled.
Bruce C. Wacha, Chief Financial Officer, added, “As we move through this economic cycle, we should see margins recover, which should help the calculations with an increase in EBITDA. We had two years of increased working capital. So costs are higher, costs basically go into inventory instead of being working capital neutral.
“We had a drag for two years, and it’s not something we’ve typically experienced for more than a year. There is a bit of normalization that needs to happen and a focus on reducing leverage. This could be accelerated by asset divestments or equity sales as long as it makes sense at a certain price. But certainly, we should get a very good boost just from the economic cycle, recovery and working capital. »
Any future divestitures will likely take place in the specialized business unit, Keller said. The company said it wanted to stabilize cash flow and margins for this collection of brands.
“There are probably businesses in there that don’t necessarily match our capabilities or even really match what we’re trying to do in the specialty unit,” he said. “Disposal is definitely part of our future.”