PARSIPPANY, NJ. – 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 for the year ended Jan. 2 spiked to $132 million, equal to $2.06 per share on the common stock, up 74% from $76 million, or $1.17 per share, in fiscal 2019.
Annual sales were $1.97 billion, a jump over the previous year when sales were $1.66 billion. Base business net sales rose $244.5 million during the year and sales from acquisitions accounted for $63 million.
“Leading our brand performance was Green Giant, which reached approximately $639 million in net sales during fiscal 2020, marking an increase of $112.2 million or 21.3% for the year,” said Bruce C. Wacha, chief financial officer. “Green Giant's outperformance was largely led by shelf-stable, with Green Giant Le Sueur shelf-stable net sales up by approximately $64.8 million or 39.7% for the year.”
Other brands experiencing growth during the year included Cream of Wheat, up 22%, Clabber Girl (19%), Ortega (13%), and Victoria (26%).
Mr. Wacha called the company’s fiscal 2020 performance “unprecedented” and said the expectation for fiscal 2021 is elevated net sales in the early months that is driven by consumption that has remained more than 10% higher than pre-pandemic levels on a blended basis.
“We don’t expect to exceed our net sales for March, April or May 2020 when there (was) a surge in sales driven more by pantry loading than by consumption,” he said. “Our current year is off to a tremendous start as we have strong expectations for fiscal 2021, especially when compared to 2019.”
Management did not issue a detailed forecast for fiscal 2021, but said the expectation is for sales to fall in a range 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.
“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.”