B&G Foods posted net sales of $408.4 million during the third quarter, up 28.3% from the same period in 2016, the company said in an earning statement. Net income was $32.7 million, compared to $22.1 in the year-ago period.
The New Jersey company increased its full year 2017 net sales guidance to between $1.66 and $1.68 billion and reaffirmed guidance for adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to $352.5 to $367.5 million. The increase in net sales guidance reflects in part the recent Back To Nature acquisition, which B&G Foods expects to contribute approximately $17.5 million in net sales during its fourth quarter of 2017.
Robert Cantwell, the company's president and CEO, highlighted innovation during the quarter at its Green Giant line, as well as strong performances from some of its smaller brands, including Polaner, Underwood, New York Style and Cream of Wheat. "We are optimistic that these positive trends will continue through the fourth quarter and into next year,” he said in a statement.
B&G's seven largest brands and its spices and seasonings business account for more than 75% of net sales and 80% of adjusted EBITDA, Cantwell said during an earnings call on Tuesday. These brands include Green Giant, Cream of Wheat, Maple Grove Farms, Ortega, Pirate Brands, Victoria, Back to Nature and spices and seasonings brands such as Mrs. Dash.
Half of B&G's brands saw net sales increases during the quarter, according to the latest earnings report. A particularly bright spot was Green Giant's frozen products, where net sales jumped by $11.6 million, or 6.4%, due to several innovations. The iconic brand is being augmented by a line of veggie spirals, which will begin shipping to retailers in January.
The company also experienced a strong rebound in its Pirate Brands snack line, with a 21% boost in net sales during the quarter. Other brands that showed positive performance were the company's Polaner line of fruit spreads, preserves and spices, Underwood Meat Spreads, New York Style snack brand and Cream of Wheat cereal.
One not-so-bright spot was the company's Ortega brand of Mexican food products, which posted a modest decrease in net sales during the third quarter, in part from what Cantwell termed "strong competition with our friends at Old El Paso among others."
B&G Foods is known for its keen sense of adding struggling brands to its portfolio and then rejuvenating them through innovation and new product launches. Green Giant, which the company bought in 2015 from General Mills, is a perfect example. Then in 2016, the company acquired Victoria Fine Foods and Victoria Fine Foods, as well as the spices and seasonings segment of ACH Food Companies. Most recently, it bought Back To Nature and SnackWell — giving B&G products that fit with the consumer who is snacking more and interested in healthier and clean-label brands.
B&G hasn't yet seen much impact from its Back To Nature acquisition since it just closed on October 2. However, the company views the new family member as a leader in better-for-you snack brands that will increase its access to certain higher-growth customer channels, Bruce Wacha, the company's executive vice president of corporate strategy and business Development, said during Tuesday's earnings call.
Despite its recent acquisition spree, more may be on the horizon. B&G is continuing to look for ways to add to its brand roster and to increase stockholder value, Cantwell said, according to the Seeking Alpha earnings transcript.
"Even after completing three acquisitions in the past 11 months, we remain well-positioned for future acquisitions," he said. "This organization is ready and structured to be ready to continue to grow through acquisition. So, feeling really comfortable that we put in place an organization that can easily support a business twice if not more in size today."
B&G seems to have the Midas touch when it comes to buying and turning around struggling brands, plus it has been targeting for acquisition on-trend product companies that can add value in complementary and innovative areas. As long as sales keep growing and costs are kept down — and the acquisitions don't come too fast so the company doesn't have time to adequately integrate them — there's no reason to think the current growth won't continue though the rest of this year and beyond.
The risk, however, is that as B&G looks to more deals, there is always a possibility that a big purchase doesn't pan out as expected, and the company is forced to divert more attention and money to fixing it. At the same time, similar challenges could arise if the company is juggling the integration of several new brands at a time. But for now, with the pace of the deals, and the overall success B&G has had with them, there is little reason to question the company's strategy or management's thinking.