As sales decline, B&G lowers the price of Crisco.
NJ — PARSIPPANY B&G Foods, Inc. executives are keeping an eye on the effects of price threshold crossing on brand sales.
President and CEO Kenneth C. Keller stated, “There’s no doubt as you cross a threshold that consumers behave a little bit differently,” during a teleconference with investors on August 3 to review the financial results of the second quarter. “On that marginal move, the elasticities tend to get a little higher.”
Crisco is one example. Prices went over $5 a bottle, and compared to the same period last year, net sales for the brand fell 7% during the second quarter that concluded on July 1.
Mr. Keller stated, “Price elasticities, specifically on Crisco, remain high, greater than 1, above the key $5 and $6 per bottle price point.” “We anticipate dropping back below key price thresholds on the shelf during baking season this fall, and we project volumes to improve at lower price points. We are reducing our net prices to reflect lower commodity oil costs.”
In the quarter, B&G Foods reported net income of $10.55 million, or 15¢ per share on common stock, as opposed to $256,000 and no gain on shares in the same period last year. Due mostly to the Jan. 3 divestment of Back to Nature, which generated sales of $9.8 million in the second quarter of 2022, net sales decreased 1.9% to $470 million from $479 million.
“With Back to Nature serving as the first step last January, we continue to evaluate exiting businesses that have lower margin and cash flow, higher working capital complexity, or do not fit with our core capabilities and structure,” Mr. Keller stated. “A target list is being developed to restructure the portfolio; however, there is no time frame attached. Our expectation is that the proceeds from divestitures will mainly go toward paying down long-term debt.”
On August 3, following the market’s close, B&G Foods disclosed its financial results for the second quarter. On August 4, the company’s stock price increased by 8% to close at $14.35 per share on the New York Stock Exchange, up from $13.28 at that time.
The cessation and rationalization of lower-margin innovation in the frozen portfolio, which we will start to lap at the end of Q3, is still reflected in volume declines, according to Mr. Keller. “Del Monte and other companies have likewise shown themselves to be. Particularly active with promotions and prices to reduce higher-than-normal pack stockpiles from previous seasons.
Clabber Girl saw a 44% increase in net sales, Maple Grove Farms saw a 2.9% increase, and Cream of Wheat saw a 1.9% gain.
Bruce C. Wacha, chief financial officer, stated, “Clabber Girl is continuing to see strength across all product lines, including baking powder, baking soda, and cornstarch, and channels, including branded retail, private label, and industrial.”
Regarding private label, Mr. Wacha stated that while the category has recently regained share, it still tends to be lower than levels seen in 2019.
“Undoubtedly, private label has gained some share in the (Crisco) market,” he stated. “We would expect that to moderate or possibly reverse as price points come down.”
B&G’s net income for the first half of the fiscal year was $14 million, or 19¢ per share on common stock, compared to $24 million, or 35¢ per share, during the same period the previous year, a 42% decrease. Net sales for the first half fell 3%, from $1.01 billion to $981 million.
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From a range of $2.13 billion to $2.17 billion, B&G Foods lowered its fiscal-year net sales expectation to a range of $2.11 billion to $2.13 billion. According to Mr. Wacha, the fiscal-year outlook was negatively impacted by the Green Giant canned and bag-in-box business’s lower-than-expected volume.
“We are keeping a close eye on our volumes, especially for the brands that we have taken the biggest price on,” he stated. “As we approach the latter half of the year and complete the majority of our price increases, we anticipate that the pace of our volume declines will continue to reduce.”