NEW YORK — B&G Foods Inc. is searching for ways to make its Cream of Wheat business more relevant with today’s consumers. Doing so may help the company move the needle on sales that have not moved much since the business was acquired by Kraft Foods Inc. in 2007.
Bob Cantwell, president and chief executive officer of B&G, described the company’s effort to grow Cream of Wheat as “a tougher challenge” in a June 2 presentation at the Stephens Spring Investment Conference at the New York Palace hotel in New York.
“Cream of Wheat is a business we bought that was a little less than $60 million in sales (when) we bought it from Kraft,” Mr. Cantwell said. “We did some things. We created some new instant Cinnabon flavors and a few others, and got the business at one point to $65 million, $66 million. The business today is close to $62 million. It has a steady baseline at the $62 million. The biggest challenge for us today is how we move the needle on this because it’s a very profitable business for us. It has extremely high margins. This is EBITDA margins of 50% business.”
|Bob Cantwell, president and chief executive officer of B&G Foods|
The challenge, Mr. Cantwell said, is that Cream of Wheat is fundamentally a product that baby boomers have known and eat. He said a few younger consumers who eat it, but the majority of people are aging baby boomers. As a result, he said B&G is “trying to make it more relevant for the younger consumers.”
One way the company hopes to reach millennials is through the launch of instant Cream of Wheat cups. Mr. Cantwell said B&G expects to see the benefit of the instant cups once the fall season starts in the middle of August.
“We’ve (received) a lot of acceptances from most retailers on the cups, but now we’ve got to see if consumers will buy it off shelf,” he said. “But you won’t see most of it on shelf until middle of August, ready for that September push for hot cereal.”
The one thing Mr. Cantwell is sure of is that Cream of Wheat is an important brand because of its profitability.
“We are challenged to make it grow,” he said. “The interesting dynamic, it’s really two businesses in one. There is a cook-on-stove business and then there is the instant business. You go to the hot cereal category, all you see is instant flavors. You’ll see Quaker just dominate shelf space with instant flavors. What actually grows in the hot cereal category is the cook-on-stove. Cream of Wheat cook-on-stove has grown for us from the day we bought it and so has Quaker.
“It’s the product you don’t have to trade spend against because that’s that consumer who wants to have it at home, wants to doctor it up the way they want. It’s original Cream of Wheat. It’s not flavored. They do whatever they want to do with it because everybody has their own little recipe for Cream of Wheat. Same way cook-on-stove oatmeal does.”
Because there isn’t a whole lot more B&G can do with its cook-on-stove Cream of Wheat line Mr. Cantwell said the company has been “throwing a lot of things against the instant piece.”
“The instant piece comes and goes,” he said. “We create new flavors. It comes and goes. We’re hoping the cups will stick and build a little piece of business. It remains to be seen.“It is a difficult challenge for us. We’re talking to some agencies about how we can try to get this into younger consumers, because it is a taste profile that you either like or don’t. It’s not something that most people would say, ‘It’s okay, I’d have it occasionally,’ or ‘I won’t.’ A typical consumer is either going to not like this mouthfeel or will like it.”