B&G Foods’ impressive year is tempered by supply issues and inflation
As a manufacturer and marketer of center store staples like frozen food, prepared foods, spices, seasonings and other products, B&G Foods, Inc.’s fiscal 2020 was beyond expectations. Now the company is facing rising costs due to commodity inflation and supply chain constraints that may pressure performance.
“The great majority of our brands grew in fiscal 2020, some substantially because of the dramatic effects of COVID on consumer buying and dining patterns,” said David L. Wenner, interim president and chief executive officer, during a March 2 conference call to discuss year-end results.
Net income increased 74% from $76 million, or $1.17 per share, in the fiscal 2019 to $132 million, or $2.06 per share on the common stock, for the year that ended on January 2.
$1.97 billion in annual sales was a rise above $1.66 billion in sales the year before. During the year, net sales for the base business increased by $244.5 million, with $63 million coming from acquisitions.
According to chief financial officer Bruce C. Wacha, “Green Giant led our brand performance, reaching approximately $639 million in net sales during fiscal 2020, marking an increase of $112.2 million or 21.3% for the year.” Shelf-stable contributed significantly to Green Giant’s outperformance; Green Giant Le Sueur shelf-stable net sales increased by roughly $64.8 million or39.7% annually.”
Throughout the year, there were other brands that saw growth: Ortega (13%), Victoria (26%), Cream of Wheat (22%), and Clabber Girl (19%).
The company’s fiscal 2020 performance, according to Mr. Wacha, was “unprecedented,” and for fiscal 2021, he predicted high net sales in the first few months, driven by consumption that has stayed, on a blended basis, more than 10% higher than pre-pandemic levels.
“We do not anticipate surpassing our net sales from 2020 March, April, or May, when there was a spike in sales primarily due to pantry loading rather than consumption,” he stated. “Compared to 2019, we have high expectations for fiscal 2021, and our current year is off to a tremendous start.”
The management did not release a comprehensive estimate forfiscal 2021, while it stated that sales are anticipated to drop to a level between $2.05 billion and $2.1 billion.
“We do expect 2021 to bring us a different set of challenges than we faced in 2020, and these challenges will include a return of inflation across a number of key input costs, including certain agricultural products, packaging and freight,” Mr. Wacha said. “In my opinion, cost relief on some elements of costs such as commodities is uncertain. There will be significant competition for what crops get planted this year, and the outcome is in doubt until the harvest this fall.”Adding to the pressure are poor crop conditions that have affected the Green Giant brand.
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“Early on in the fourth quarter, we realized that due to crop conditions and co-packer capacity issues, the supply of Green Giant shelf-stable products would not meet the elevated demand we were seeing and placed those products on allocation, resulting in relatively flat sales for the quarter,” Mr. Wenner said. “We will not see meaningful relief in this area until the summer when the new crop arrives. Since we took that action, we’ve seen competition take similar actions, not surprising since we were all affected by a relatively poor crop last fall.”
B&G Foods’ innovation pipeline was handicapped in 2020 due to COVID and remains stalled, with the schedule for new product launches dependent on retailers, said Mr. Wenner.
“We are teed up and ready to go, but we have to have retailers willing to do resets and take on the products,” he said. “And that’s really … we’re in the starting gate, waiting for all of that to start happening.”