B&G Foods has spoken up about the prospects for Green Giant after its brand saw sales fall by more than 5% in the third quarter of 2019.
The US manufacturer said Green Giant’s net sales dropped 4.9% in the three months to 28 September amid changes to the way the company promoted certain lines, pressure on the supply of a particular product and a later Canadian Thanksgiving.
Go deeper with GlobalData
However, B&G’s management, speaking to analysts after the publication of the company’s third-quarter financial results, said the brand’s performance should improve in the final three months of the year.
“Green Giant net sales declined 4.9% versus the third quarter of 2018 primarily due to the implementation of our trade promotion optimisation strategy to increase the promotional price points of our bag-in-a-box product line. Much of this was planned, although at certain customers, the promotional volume sensitivity was great than we expected. However, we will continue this strategy in non-holiday time frames, as they contribute to our overall net price realisation, and we believe will help improve our margins through these products,” president and CEO Ken Romanzi said.
“We also experienced supply shortages of our frozen corn-on-the-cob products from the poor crop in 2018. We believed we could stretch the limited supply we had on hand, but it just didn’t last until the new crop came in. We’re now back in full inventory position fulfilling customer orders from the 2019 harvest.
“And Canadian Thanksgiving was later this year, which negatively impacted the third quarter, but should positively impact the fourth quarter. We recognised this is the first time in seven quarters dating back to 2017 that Green Giant hasn’t shown growth. But we’re confident that it will return to growth in the fourth quarter, the kind of growth we’ve come to expect from Green Giant.”
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataB&G snapped up Green Giant in 2015, with the US$765m deal marking the company’s debut in the frozen foods category in the US and Canada.
Romanzi said B&G had a series of new Green Giant products lined up to go on sale next year, including cauliflower and spinach gnocchi and vegetable hash browns. “These innovative new products will expand Green Giant’s reach into areas of the frozen food case beyond vegetables including frozen potatoes, frozen pizzas and frozen pasta,” he said, adding the company wanted to make Green Giant “the plant-based food brand of the future”.
Asked about whether the new products carried a risk of cannibalisation, Romanzi sought to emphasise B&G’s strategy of taking the brand into new segments.
“The retailers are always adding in the leading items across the portfolio, not just ours, but across the whole range of items. It’s their real estate, so they decide,” he said. “What we’re encouraged about with these items is we’re going outside the vegetable set. As we continue to launch new vegetable items, we always will lose some while we gain some. We’re going after sets that we’re not really present in. While our new product development strategy is very consumer-focused by bringing plant-based alternatives, particularly carb-replacement alternatives, to the consumer, it’s also going to expand our footprint and get net facings of the Green Giant brand beyond just traditional vegetables.”
B&G’s overall third-quarter sales fell 3.8%, a decline the company said was due in part to the effects of recent M&A, such as the sale of its Pirate Brands business to Hershey. However, sales from B&G’s “base business” decreased 2.5%, weighed down by the issues at Green Giant and by the company’s spices and seasonings business.
B&G said that unit had seen sales decline “about 3%”, hit by the loss of some “low-margin private-label contracts” and had seen lower commodity costs affect prices.
“Some of this promotional timing in certain periods, some of it is distribution losses on some small SKUs, but nothing major that we’re concerned about,” Romanzi said.
The third-quarter results saw B&G reduce its forecast for adjusted EBITDA for 2019 as a whole, which it now expects to come in between $295m and $310m.
B&G said the change in forecast was due to higher vegetable pack costs for Green Giant and a rise in import tariffs on products including garlic.
CFO Bruce Wacha said: “We are currently trending at about $292m in trailing 12-month adjusted EBITDA through the end of the third quarter of 2019 or essentially flat in 2018 adjusted EBITDA after removing the contribution of Pirate Brands. As we outlined earlier this year, we expect to see benefits from increased price and cost savings initiatives that would offset the increases in costs. We have executed on this plan and we expect to continue to do so in the fourth quarter.”
