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Edited Transcript of BGS.N earnings conference call or presentation 5-Nov-20 9:30pm GMT

·56 min read

Q3 2020 B&G Foods Inc Earnings Call PARSIPPANY Nov 6, 2020 (Thomson StreetEvents) -- Edited Transcript of B&G Foods Inc earnings conference call or presentation Thursday, November 5, 2020 at 9:30:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Bruce C. Wacha B&G Foods, Inc. - CFO & Executive VP of Finance * Kenneth G. Romanzi B&G Foods, Inc. - President, CEO & Director ================================================================================ Conference Call Participants ================================================================================ * Brian Patrick Holland D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst * Carla Casella JPMorgan Chase & Co, Research Division - MD & Senior Analyst * Eric Jon Larson Seaport Global Securities LLC, Research Division - Research Analyst * Hale Holden Barclays Bank PLC, Research Division - MD * Karru Martinson Jefferies LLC, Research Division - Analyst * Kevin John Lehmann Evercore ISI Institutional Equities, Research Division - Director * Michael Scott Lavery Piper Sandler & Co., Research Division - Director & Senior Research Analyst * Robert Bain Moskow Crédit Suisse AG, Research Division - Research Analyst * William Michael Reuter BofA Merrill Lynch, Research Division - MD ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good day, and welcome to the B&G Foods Third Quarter 2020 Earnings Call. Today's call is being recorded. You can access detailed financial information on the quarter in the company's earnings release issued today, which is available at -- in the Investor Relations section of bgfoods.com. Before the company begins its formal remarks, I need to remind everyone that part of the discussion today includes forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer you to the company's most recent annual report on Form 10-K and subsequent SEC filings for a more detailed discussion of the risks that could impact the company's future operating results and financial condition. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The company will also be making references on today's call to the non-GAAP financial measures, adjusted EBITDA, adjusted net income, adjusted diluted earnings per share and base business net sales. Reconciliations of these financial measures to the most directly comparable GAAP financial measures are provided in today's earnings release. Ken Romanzi, the company's President and Chief Executive Officer, will begin the call with opening remarks and discuss various factors that affected the company's results and selected business highlights. Then Bruce Wacha, the company's Chief Financial Officer, will discuss the financial results for the third quarter as well as expectations for the remainder of 2020. Ken will then wrap up with his thoughts regarding the priorities for the remainder of 2020 and beyond. I would now like to turn the call over to Ken. -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [2] -------------------------------------------------------------------------------- Thank you, operator. Good afternoon, everyone. Thank you for joining us today for our third quarter earnings call. With a portfolio of brands and products, we're very well suited for the stay at home, work from home, cook from home and eat at home world, B&G Foods delivered another strong quarter of sales and earnings. Our portfolio of Green Giant vegetables, spices and seasonings, condiments, baking products and other brands for all day [parts] really deliver when consumers need it to feed their families at home. Out of necessity at first, then out of the rediscovery of their love for cooking and baking. This resulted in another great quarter for our business with net sales increasing 22% and adjusted EBITDA growing 21.3% as compared to the third quarter of last year. These results drove reported adjusted diluted earnings per share of $0.74 for the quarter, an increase of 37% compared to last year. We experienced tremendous strength in almost all of our brands with nearly 80% of our brands growing net sales versus last year. And nearly 60% of those at a double-digit pace. Throughout this pandemic, we have remained focused on our 3 major priorities: protecting the health and safety of our employees, continuing to meet the unprecedented customer and consumer demand and making the investments necessary to ensure the long-term financial health and success of B&G Foods. Our operations team continues to do an incredible job ensuring that our supply chain meets the unprecedented increase in demand for our products by keeping our manufacturing facilities operating efficiently, while at the same time, ensuring the health and safety of all of our employees. I'm pleased to report we have been very successful keeping our employees safe. Keeping them safe is not only the right thing to do, but we believe that it has been a competitive advantage as it has allowed us to keep our supply chain humming without disruption to meet this unprecedented surge in demand. Our supply chain has been a clear contributor to our growth among -- being among the best in the industry. And while we have seen some supply shortages in about half a dozen of our product lines, we've maintained excellent customer service levels on the vast majority of our 50 [best] brands throughout the pandemic. I cannot thank our front-line workers enough for working tireless around the clock for many months to meet our customer and consumer needs during the time. They continue to be our true heroes. Our impressive growth in net sales across our portfolio was driven by a continuation of strong sustained consumption growth throughout the quarter. For the 13 weeks ending October 3, as reported by Nielsen, the total B&G Foods portfolio consumption grew 18% versus last year. This was nearly 50% greater than the total packaged food growth rate of 12.4% for the same time period, keeping B&G Foods consistently among the fastest-growing publicly traded bulk packaged food companies in the U.S., both for the quarter and the entire period since the beginning of the pandemic. In addition, we continued to gain or hold market share in nearly 2/3 of our brands and categories. Our largest brand, Green Giant, grew 31.5% in net sales, driven by strong (inaudible) consumption growth of 46.6% in shelf-stable vegetables, where we gained 2.1 share points in the canned vegetable category and more than 13% consumption growth in frozen vegetables, where we gained share in the frozen vegetable category that grew 10.6%. Our spices and seasonings grew net sales 30% despite a material exposure to the foodservice channel. Strong retail consumption growth of 29% for the quarter drove strong net sales growth. Many of our other brands also had a strong third quarter. For example, net sales of Victoria increased 55.9%, and net sales of Cream of Wheat increased 17.2%, and our baking products really boomed amongst the consumer's newfound love for baking. Powered by our Clabber Girl line of baking products, which increased 23.2% versus last year. When speaking of [vision], before turning the call over to Bruce, I want to talk about our most recent exciting announcement. As you all likely have seen, we recently entered into an agreement to acquire the iconic Crisco brand of oils and shortening from the J.M. Smucker Co. This acquisition is the second largest in B&G Foods company history and one about which we are absolutely thrilled. Crisco is an excellent complement to our existing portfolio of baking brands, including Clabber Girl, Davis, Rumford, Grandma's Molasses and our Pure Maple Syrup brands. The acquisition of Crisco is consistent with our long-standing acquisition strategy of targeting well-established brands with leading market positions and strong cash flow profiles at reasonable purchase price multiples. Crisco has a strong heritage as the original all vegetable shortening that transformed the way people baked and cooked over 100 years ago. Crisco is the #1 brand of shortening, the #1 brand of vegetable oil, and it also holds leadership positions in other cooking oils and sprays. Consistent with our acquisition strategy, we expect the acquisition to be immediately accretive to our earnings per share and free cash flow. I'll come back later to share more about how we plan to continue to capture the many opportunities we have with Crisco and all of our brands after Bruce provides you with more details on our third quarter financial performance. Bruce? -------------------------------------------------------------------------------- Bruce C. Wacha, B&G Foods, Inc. - CFO & Executive VP of Finance [3] -------------------------------------------------------------------------------- Thank you, Ken. Good afternoon, everyone. As Ken just outlined, we continue to see the same elevated business trends during the third quarter that we saw during the first 2 quarters of the year, largely as a result of the ongoing COVID-19 pandemic and its impact on consumers. Our Q3 2020 results include net sales of $495.8 million, adjusted EBITDA of $104.6 million and adjusted diluted earnings per share of $0.74. Adjusted EBITDA as a percentage of net sales was 21.1% for the quarter. Our net sales increased by $89.5 million or 22% in the third quarter of 2020 when compared to last year's third quarter. The increase in net sales was almost entirely driven by increased volumes. While the impact of M&A, pricing and foreign exchange were negligible. Similarly, base business net sales increased by $89.1 million or 21.9%. Our volumes increased by $89.8 million, primarily driven by the elevated trends resulting from COVID-19. In addition, the third quarter also benefited from an extra week due to the occurrence of the 53rd week during our fiscal year. Our average weekly sales in the third quarter of 2020 were approximately $35 million. Third quarter net sales included strong performance across the majority of the brands within our portfolio. With nearly 60% of the brands in our portfolio generating double-digit percentage growth in the third quarter of 2020 when compared to last year. Among our larger brands, net sales of Green Giant, including Le Sueur increased by $37.9 million or 31.5%. Net sales of our spices and seasonings increased by $24.3 million or 29.5%. Net sales of Victoria increased by $6.3 million or 55.9%. Net sales of Maple Grove Farms increased by $3.2 million or 18.2%. Net sales of Cream of Wheat increased by $2.4 million or 17.2%. Net sales of Ortega increased by $1 million or 3%. Net sales of all other brands in the aggregate increased by $14 million or 11.1%. Gross profit was $136 million for the third quarter of 2020 or 27.4% of net sales. Excluding the negative impact of $0.1 million of acquisition, divestiture-related and nonrecurring expenses during the third quarter of 2020, our gross profit would have been $136.1 million or 27.5% of net sales. Gross profit was $108.8 million for the third quarter of 2019 or 26.8% of net sales. Excluding the negative impact of $1.5 million of acquisition, divestiture-related and nonrecurring charges during the third quarter of 2019, our gross profit would have been $110.3 million or 27.2% of net sales. While we have continued to see significant operating leverage within our gross profit as a result of our increased sales, these benefits were offset in part during the third quarter by COVID-19 preventative costs, enhanced compensation during the pandemic for employees at our manufacturing facilities and approximately 100 basis points of freight rate inflation. Our COVID-19 costs, including the enhanced compensation for our manufacturing employees, continue to run about $1.5 million per month or approximately $4.5 million in the third quarter. Meanwhile, on a rate basis, increased freight rates cost us about $5.5 million in the quarter. Selling, general and administrative expenses were $43.4 million in the third quarter of 2020, which was an increase in dollar terms, but favorable by about 60 basis points as a percentage of net sales. SG&A costs increased by $5.3 million compared to the year ago third quarter. The dollar increase was composed of increases in consumer marketing, including investments in e-commerce of $3.8 million; general and administrative expenses of $2.7 million; selling expenses of $1.8 million; and warehouse expenses of $0.3 million, partially offset by a decrease in acquisition divestiture-related and nonrecurring expenses of $3.3 million. Expressed as a percentage of net sales, selling, general and administrative expenses were 8.8% for the third quarter of 2020 compared to 9.4% for the third quarter of 2019. We generated $104.6 million in adjusted EBITDA in the third quarter of 2020 compared to $86.2 million in the prior year quarter, which represents an increase of approximately $18.4 million or 21.3%. The increase in adjusted EBITDA was primarily driven by an increase in net sales volume. Adjusted EBITDA as a percentage of net sales was 21.1%, which was in line with adjusted EBITDA as a percentage of net sales in the prior year third quarter of 21.2%. Year-to-date, adjusted EBITDA as a percentage of net sales is now 19.8%, approximately 20 basis points higher than the prior year period. We generated adjusted net income of $47.9 million or $0.74 per adjusted diluted share in the third quarter of 2020 compared to $34.9 million or $0.54 per adjusted diluted share in the third quarter of 2019. Earlier this year, like many in our peer group, we suspended our annual guidance at the onset of the COVID-19 or coronavirus pandemic. While we noted that the world had changed and that forecasting our business would be challenging due to the many factors outside of our control, we expressed our belief that we would materially exceed the financial forecasts that we had made earlier in the year of $1.66 billion to $1.68 billion in net sales and $302.5 million to $312.5 million of adjusted EBITDA, and we certainly have. While life has not returned to normal yet, given where we are in the year, we believe we are in a position to provide guidance for the remainder of fiscal 2020, and we certainly expect to see continued elevated performance throughout the remainder of the year. When factoring in our guidance, however, please keep in mind that while we are very excited about the announced acquisition of Crisco from Smucker, this transaction has not yet closed, and therefore, our guidance excludes the expected impact of the pending acquisition. So here it goes. Through the first 9 months of 2020, we generated $1.458 billion in net sales compared to $1.19 billion in the year ago period, an increase of $267.5 million or 22.5%. Similarly, through the first 9 months of 2020, we generated $287.9 million in adjusted EBITDA compared to $233 million in the year ago period, an increase of $54.9 million or 23.5%. While we don't expect to remain at the same torrid plus 20% area growth rate into perpetuity, we do anticipate growth in the fourth quarter to remain elevated or up as much as 10% or more for net sales, which will drive the rest of our model. Based on our first 9 months of performance and our outlook for the fourth quarter, we expect this strong performance that we are seeing to continue throughout the remainder of the year, and we expect to generate between $1.95 billion and $1.97 billion in net sales for 2020. We expect to generate between $360 million and $370 million in adjusted EBITDA. We expect slight improvements in our adjusted EBITDA as a percentage of net sales as operating leverage from increased volume is expected to continue to boost margins. However, similar to prior quarters, we expect some of these margin benefits to be offset by increased costs relating to the pandemic as well as the continued uptick in freight inflation. We are also providing adjusted diluted earnings per share guidance for the full year fiscal 2020 in the range of $2.30 to $2.40. We expect to spend approximately $40 million to $45 million for the year in CapEx. Based on our latest estimates and our continued debt paydown efforts, we are trending toward a net debt-to-adjusted EBITDA before share-based compensation of approximately 4.5x before the acquisition of Crisco. Pro forma for the pending acquisition of Crisco, we expect to remain well within our target net leverage ratio of 4.5x to 5.5x. Based on our latest forecast and our estimates for the acquisition, we now expect to finish the year at approximately 5x to 5.1x net debt-to-adjusted EBITDA pro forma for the acquisition. Ken discussed some of the highlights earlier, explaining why we are so very excited about the acquisition. I would also like to provide some additional financial information. Similar to many other brands in our portfolio, Crisco has seen elevated performance throughout the pandemic, boosted by strong double-digit increases in consumption as Americans are reembracing their kitchens and rediscovering the joys of baking. As previously announced, we expect Crisco will generate approximately $270 million of net sales and approximately $65 million to $70 million of adjusted EBITDA in 2021. We expect Crisco will be accretive to our adjusted diluted earnings per share by approximately $0.45 to $0.50. We also expect Crisco to add approximately $7 million to our annual CapEx needs. We are also very excited about the free cash flow generation profile of this business and expect it to help accelerate our deleveraging goals. We expect the acquisition to close during the fourth quarter and we expect to finance it initially through a combination of cash on hand and revolver draw. I would now like to turn the call back over to Ken to highlight our plans going forward. Ken? -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [4] -------------------------------------------------------------------------------- Thank you, Bruce. Our plans going forward, while the same blueprint we began implementing before the onset of the coronavirus pandemic. We call it our vision for growth, and it's anchored in 3 strategic priorities: drive organic growth, improve margins and make accretive acquisitions. Keeping our business healthy with modest organic growth and good cost management, so we can keep our cash flow strong and balance sheet ready for accretive acquisitions. For the purpose of returning a substantial portion of our excess cash to our shareholders in the form of dividend has always been the core of B&G's value proposition. The pandemic simply powered our vision for growth into overdrive. With tremendous organic growth this year, combined with expanded margins delivering outside cash flow, we've been able to reduce our leverage from over 6x at the end of the last year to 4.5x projected this year. This has allowed us to get back on the acquisition hunt. And as we mentioned before, Crisco is a classic B&G Foods acquisition, about which we couldn't be more excited. Furthermore, last week, our Board of Directors declared our 65th consecutive quarterly dividend since going public in 2004. So how do we keep all this going? To drive organic growth, we will capitalize on the growth we're seeing, driven by both existing users and the addition of new users. We believe much of the increased consumption of our brand is due to lasting changes in consumer behavior. We believe many more consumers will be working from home even after a vaccine is available. And we participate in great categories with well-known leading brands that cater very well to the work from home crowd. Whether it's baking, meals, condiments, spices and seasoning or vegetables, we have high-quality, tasty products in our portfolio that really satisfy consumers' basic needs. Our vast portfolio of branded products is driving growth in multiple ways from gaining new households, increased consumption in the existing households and both. In the latest 12 months ending in September 2020, 83% of U.S. household purchased at least one B&G Foods product, and that increased from 79% last year. That equates to approximately 5.7 million more households. The majority of our major brands have seen positive gains in household penetration, including Green Giant, Ortega, Clabber Girl, Cream of Wheat, Weber and Victoria. And these new households love our products just like our existing consumers with a repeat rate of 53%. Our broad portfolio of brands is driving growth in multiple ways, as I mentioned before. Brands that are getting most of their growth from new buyers include Clabber Girl, Mama Mary's, Victoria and Spice Islands. Brands that are getting most of their growth from existing buyers include Green Giant and Ortega. And we have brands that are seeing growth more evenly split between new and existing buyers, including Cream of Wheat, Bear Creek and Weber. We expect future growth to continue mostly from existing users as consumers have fundamentally changed their behavior and will continue to cook and eat more at home. All one has to do is read the report about how many companies are planning to have their employees work at home more in the future, regardless of whether or not there's a COVID vaccine. And our brand portfolio will be there for you. Meeting their needs with new recipes, usage ideas and innovation as they have been throughout the pandemic. Regarding new households, I stand by my belief, I have shared in the past that they are like the fountain of youth for any brand, particularly legacy brands like ours. So we expect they will add icing on the cake to our future growth opportunity. To retain those new households and keep our strong base of existing households keep coming back, we've been increasing our marketing investment and shifting those investments to more usage-oriented marketing with an emphasis on e-commerce. Examples of our recent efforts include partnering with leading media companies to promote our brands and recipes on high-impact sites like delish.com and allrecipes.com. We have also launched an exclusive online interactive kitchen with a digital pantry and freezer, [specked] with our brand and a host of recipes, tips and tricks to make eating at home with the family easier and more enjoyable. Additionally, we've partnered with Catalina Marketing to strategically target the new incremental households we gained during the pandemic. By delivering these new consumers recipes and usage suggestions online at home, on their mobile device and in-store to help encourage the function of our brands already found in their households and encourage repeat purchases thereafter. We've also partnered with a leading provider of household panel data to deliver enhanced consumer demographic, attitude and purchase behavior insights. These insights will not only aid in driving sales by better positioning ourselves to existing consumers and retail partners, but also among opportunity consumer segments that would be incremental to our business. And lastly, I am pleased to report that the Jolly Green Giant is back on national television with a fall advertising campaign, teaching consumers how to get more vegetables into their diet, featuring much of our frozen innovation. Regarding e-commerce, we estimate that the portion of our sales through e-commerce has grown 140% this year and represents approximately 7% of our consumption sales as reported by Nielsen. Now this really is only an estimate as retailers have not yet completely broken down our sales to them between traditional brick-and-mortar sales and put and collect and click and deliver. But we know it's growing very fast and becoming an increasingly important part of our business. Our largest brand, Green Giant, is also our largest brand in e-commerce by far. And according to Nielsen reporting, our share of frozen vegetable via e-commerce is north of 50%, approximately 4x that of our retail share. On this front, we've invested in much of the foundational work necessary to set ourselves up for success, including internal and external search functionality, where to buy, assortment optimization, key images and keywords. In addition, we're partnering with e-commerce retail partners to test and learn what's most impactful to consumers of B&G Foods products. This foundational work in customer is critical to our continued success in e-commerce in the near future, and we believe will allow us to hit the ground running even faster in 2021. And last but not least, product innovation will remain a major driver of our business going forward. While retailer reset delayed many new product introductions during the pandemic, we certainly didn't need the sales volume this year. We have focused our efforts on keeping the supply chain full for our best-selling product. But this delay had a hidden benefit. The delayed reset gave us 6 to 9 more months of lead time to develop new products. This is a rare luxury in the world of new product development. As a result, our new innovation pipeline is even more robust. Some of the highlights of new product introductions late this year and early 2021 include -- we'll keep the innovation train rolling onto Green Giant by introducing additional products that deliver on Green Giant's mission to help people get more vegetables into their diet. Our focus will continue to be to introduce new products made from vegetables that offers delicious carbohydrate replacement alternatives to large carbohydrate build categories such as pasta, rice and bread. This quarter, we will continue to roll out a Green Giant cauliflower [mountain] and cauliflower breadsticks. In addition, we've begun the rollout of Green Giant cauliflower for our vegetable-based veggie fries and veggie rings, our take on traditional onion rings. Early retail movement in these first few retailers that launched these new items is very promising. And next year, we plan to introduce a line of outstanding cauliflower-based pastas including ravioli, fettuccine and mac and cheese. These are delicious. One would never know they're made from cauliflower and other vegetables, and will be gluten free. And we will like to get our core vegetable franchise, so we're introducing a on giant vegetable season with our Dash salt-free seasoning, our first cross-brand product innovation. For our second largest brand Ortega, we're bringing the magic of our cauliflower to a category that really needs better-for-you innovation. We're introducing, Ortega, cauliflower and corn taco shells and tortillas, one of the first product formulation innovations in this category in quite some time. We will complement this launch with the introduction of Ortega Street Taco Sauces in 3 flavors, in squeeze bottles to capitalize on the growing food truck craze. In spices & seasoning, we are constantly innovating with new blends like our Dash everything but the salt blend, which allows people to enjoy the taste of an everything bagel without the salt. In addition, we've launched new Weber grilling brands including our Weber cowboy and savory steakhouse seasonings. Now the next one is very exciting. Under a licensing agreement, we just recently launched cinnamon toast crunch cinnamon dust seasoning blend, inspired by the second best-selling cereal in America, Cinnamon Toast Crunch. This product was introduced to much fanfare. Consumers on their social media pages and the media alike have been obsessed with the product, delivering over 2.7 billion media impressions since we announced it in late August, and our initial sales results have not disappointed. Cinnadust has quickly become the fastest selling spice blend within our entire seasoning portfolio at a major wholesale club partner. And we'll be expanding distribution of this terrific new product in early 2021. Our second strategic imperative of our vision for growth is improving margin. At the core of this is better price management and our cost productivity program, which continues to bear fruit across our supply chain in the area of logistics, product and package initiatives and manufacturing. We set a goal of driving $20 million in annual cost savings and delivered that in 2019. In 2020, we expect to deliver $17 million in cost savings from further optimizing our transportation costs, product weight outs, package cost reductions and repatriating products from co-packers into our manufacturing facilities. The $3 million gap between our expected savings and our goal was a decision we made to delay several manufacturing projects due to our desire to not disrupt our facilities as they significantly ramped up production at the beginning of the pandemic and have not slowed down since. We will begin implementing our manufacturing cost reduction programs as we catch up with COVID demand, and we will share more on our plans in this area at our year-end earnings call. Better price management is the second driver of our margin improvement imperative and COVID certainly helped in this area. Through the first 3 quarters of 2020, we've garnered over [25] (technical difficulty) $4 million of improved pricing and the more we return to more normalized promotional levels in the third quarter, we expect most of our year-to-date pricing to stick this year. Going forward, our new trade promotion management system will allow us to continue to optimize promotional price points for better efficiency and effectiveness. And our last strategic imperative of our vision for growth is, of course, making accretive acquisitions. As I mentioned before, this is why B&G Foods is built, and we have a great track record of building value for our shareholders with this strategy. Clabber Girl was a terrific addition to our portfolio. And the Crisco brand is yet another perfect fit with our strategy. With strong cash flows from these acquisitions, plus a healthy base business, we expect to continue to reduce our net leverage post-acquisition to ensure our balance sheet is in shape, to continue to add accretive businesses. And lastly, before I turn the call back over to the operator, I wanted to acknowledge and thank the entire B&G Foods organization of almost 3,000 people for their tireless efforts to produce the results we shared today. All (inaudible) take care of one another to stay safe and healthy, yet remaining extremely productive as we do our part to keep our nation's food supply flowing. Our frontline employees are showing that they continue to be heroes throughout this pandemic, and I cannot thank them enough for their efforts. I would also like to take this opportunity to publicly welcome the Cincinnati-based Crisco employees that we expect will join the B&G Foods Family later this year, subject to the closing of the pending acquisition. This concludes our remarks for today. And now we'd like to begin the Q&A portion of our call. Operator? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) And our first question today comes from Brian Holland with D.A. Davidson. -------------------------------------------------------------------------------- Brian Patrick Holland, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [2] -------------------------------------------------------------------------------- Congratulations on the continued strong performance this year. Maybe first question, shipments up, I think base business up low 20s, 21%, something like that. I believe I heard in the prepared remarks, consumption up 29%. So can you help triangulate sort of going forward? Because it feels like -- I think you talked about some supply issues that you were managing as well. So as we kind of go forward here, are inventories pretty tight with retailers? Are you going to -- are we going to see a setup there where you're going to have to grow shipments ahead of consumption in subsequent quarters to kind of catch up for that? And maybe help us understand maybe the progression of that over the next few quarters? Like how quickly you can make that up, if you will? -------------------------------------------------------------------------------- Bruce C. Wacha, B&G Foods, Inc. - CFO & Executive VP of Finance [3] -------------------------------------------------------------------------------- Yes. I mean certainly, if you look at our inventory, this is definitely the quarter where we increase inventory. So on a broad basis, we are building our own inventory on a specific basis, obviously, we're operating, call it, 7, 8 months into a pandemic, and there's always on occasion certain brands and categories that are in heightened demand, therefore, really need to uptick our efforts from a supply standpoint. I think we're just going to continue to watch it. I think you have seen certainly distortion from time to time around holidays and other things where buying patterns look a little bit different. We're certainly in the holiday buying area today as we speak in November heading up towards Thanksgiving. But we also have seen periods like we talked about earlier in the year after the second quarter where you didn't see a big lift for 4th of July. So some of those are a little bit tougher to predict where they're going to be. As Ken mentioned earlier in the call, we're dealing really everything we can to maximize supply and make sure that we've got product on the shelf throughout and continue to react to the needs of the retailers and ultimately, the consumers. -------------------------------------------------------------------------------- Brian Patrick Holland, D.A. Davidson & Co., Research Division - Senior VP & Senior Research Analyst [4] -------------------------------------------------------------------------------- Okay. Fair enough. And then maybe just taking a step back here. Obviously, your portfolio effectively positioned within COVID where the consumer is migrating to from a category standpoint, baking, frozen, et cetera. But your share in the aggregate has improved through this. So I'm wondering if you could kind of just take a step back here and maybe help us understand where you think your -- consumption is improving across grocery, obviously. But where are you guys taking share right now? Where is either the execution improving? Or where is kind of the connection with the consumer? Where is that most acute right now? Because I think it's worth noting that your share has improved in this dynamic. It hasn't worsened. -------------------------------------------------------------------------------- Bruce C. Wacha, B&G Foods, Inc. - CFO & Executive VP of Finance [5] -------------------------------------------------------------------------------- Yes. I appreciate your recognizing that I'm pointing out. Sorry, Ken, do you want to answer that? -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [6] -------------------------------------------------------------------------------- Well, I was just going to say, some of our biggest share gains are baking pattern, molasses, frozen vegetables and green and shelf-stable vegetables. I mean, you just go by category, some of those larger share gains. But 2/3 of our brands have gained or held share. So it's kind of hard to pinpoint. But big swings, baking powder, shelf-stable vegetables even some late gains in some segments of our seasonings business still. -------------------------------------------------------------------------------- Bruce C. Wacha, B&G Foods, Inc. - CFO & Executive VP of Finance [7] -------------------------------------------------------------------------------- And one of the -- Brian, one of the key things to remember on that, too, is just what we've been saying for some time is just the ability to execute and owning as much or the right amounts of your supply chain and having good relationships with your co-packers for the manufacturing that you don't own is just crucial at this point in time. And our ability to execute and keep the factories running, has been a key factor in terms of keeping product on the shelf as it's moving in really heightened levels to the consumers. -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [8] -------------------------------------------------------------------------------- I'd say certainly the supply chain, we have been getting. While we had our issues as well, we have been getting great feedback from our customers that were on hold. We're executing well and in very important categories, keeping them in stock, which I think is the driver, certainly a contributor to driving share gains. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- Our next question comes from David Palmer of Evercore ISI. -------------------------------------------------------------------------------- Kevin John Lehmann, Evercore ISI Institutional Equities, Research Division - Director [10] -------------------------------------------------------------------------------- It's actually Kevin Lehmann on for Dave. Ken, in the past, you guys have talked about the opportunity to expand some of the smaller regional brands B&G's acquired over the years. It's more mainstream or national retailers. You mentioned just a few minutes ago, Victoria, for example, sales up, what was it, 55% in the quarter. If you look at the scanner data, ACV distribution for that brand is up almost 600 basis points. Clabber Girl saw a similar ACV increase. So we're all wondering how sticky consumer trial will be, but is the pandemic demand also bringing forward some ACV gains that may have otherwise taken several years to actually achieve? And if so, how sticky do you think those distribution wins will be in '21 and going forward? -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [11] -------------------------------------------------------------------------------- Yes. It's a good point. It does help. I mean, certainly, a (inaudible) help because, again, that's another one where we were doing very well on supply and some competitors were having some issue with supply. So it gained distribution. And then if the product do well, it can be very sticky. I mean distribution is only sticky if the product turns well. So we expect that some of those distribution moves we've seen in pasta sauce, in seasonings, in [pop] cereal we've seen some gain. So -- can vegetables, we've actually seen some gains. So we were there ready to supply customers (inaudible) and with the product performing well. Let's just say we're very focused on distribution, and we don't want to give any of it up. So the COVID has helped that as well. -------------------------------------------------------------------------------- Operator [12] -------------------------------------------------------------------------------- We'll go next to Michael Lavery of Piper Sandler. -------------------------------------------------------------------------------- Michael Scott Lavery, Piper Sandler & Co., Research Division - Director & Senior Research Analyst [13] -------------------------------------------------------------------------------- You mentioned how important the relationships are with your co-packers and co-manufacturers. But do you have a sense of how much -- if -- even though growth is looking like it's continuing at elevated levels, it's showing some deceleration, it's moderating a bit certainly from the Spring. Do you have a sense of how much you may be able to lessen your dependence on co-packers next year? And if there's a margin benefit we should expect that would come from that? -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [14] -------------------------------------------------------------------------------- Yes. I'm not really sure if the COVID situation is going to make a big difference in lessening our dependence. You have to remember that about half of our volume is done internally, manufactured and half co-package. It's really the result of -- we're an amalgamation of the businesses we purchased. Some came with manufacturing, some didn't come with manufacturing. So -- and for the most part, our co-packers came through really well through COVID and (inaudible) with them. There were a handful, less than a handful that actually weren't able to keep up and we've started to now either add more or actually (inaudible) repatriate the product in our own facility to expand our [product] not necessarily give up the co-packer, but expand the capacity because they were tapped out. And we don't -- we certainly don't want their fill rates to be -- continue to be low. So in some cases, we're actually making some product that were traditionally dedicated to co-packers. The biggest driver of whether we produce or don't produce is going to be based on cost. And part of our cost savings initiatives will include where it makes financial sense for us to move product from co-packers to internal manufacturing. And that is part of our cost savings going forward. But we're not going to dramatically change the mix overnight. If we're 50-50 today, we'll be moving a few percentage points every now and again, internally. It will be a product line by product line decision. So I hope that answers your question. -------------------------------------------------------------------------------- Michael Scott Lavery, Piper Sandler & Co., Research Division - Director & Senior Research Analyst [15] -------------------------------------------------------------------------------- Yes, that's helpful. And it sounds like it hasn't been a big shift in favor of [co-mans] during the surge. You've handled it on both internally and externally managing capacity up. -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [16] -------------------------------------------------------------------------------- Yes. For the most part, our [co-mans] have come through. It's not like you haven't had any issues. But if you look at the drivers of our lower fill rates, it was really 2 or 3 product lines, most of which was in our house, and there wasn't a lot of excess capacity to be had. So we're in the process of building more. -------------------------------------------------------------------------------- Michael Scott Lavery, Piper Sandler & Co., Research Division - Director & Senior Research Analyst [17] -------------------------------------------------------------------------------- That's great. And just a quick follow-up on canned corn. Any sense of how that supply looks like you'll be positioned for the next year? And if you feel like there's any constraints that might come there? -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [18] -------------------------------------------------------------------------------- We believe that the entire canned vegetable category is going to be tight because we have to make the decision on how much volume we need. Well in advance of the way the business works for everyone is you got to let the farmers know early in the year what you need them to plant in the spring to be harvested in the summer and the early fall. So all of those demand plans were put together -- kind of put to bed by January and then COVID hit in March. Now we went back out to look for more in May and got more but didn't get nearly as much as we needed. And then COVID demand was even stronger and longer than what we even thought back in May. So and we're starting to see an uptick of some stockpiling in the fall on that category. So it's going to be a tight category to the next [pack] season next summer. -------------------------------------------------------------------------------- Operator [19] -------------------------------------------------------------------------------- We'll go next to Karru Martinson of Jefferies. -------------------------------------------------------------------------------- Karru Martinson, Jefferies LLC, Research Division - Analyst [20] -------------------------------------------------------------------------------- Just a quick housekeeping. I thought I heard you say with Crisco, pro forma, you're expecting 5x to 5.1x leverage. Is that correct? -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [21] -------------------------------------------------------------------------------- Correct. -------------------------------------------------------------------------------- Bruce C. Wacha, B&G Foods, Inc. - CFO & Executive VP of Finance [22] -------------------------------------------------------------------------------- Yes. -------------------------------------------------------------------------------- Karru Martinson, Jefferies LLC, Research Division - Analyst [23] -------------------------------------------------------------------------------- Okay. And then in terms of the welcome delay giving you guys more time to formulate the product innovation pipeline here. Has that changed in terms of the cadence of where you're rolling out? You constantly hear the stories of -- we're focused on the core. We're not adding new stuff. How are you getting new stuff on the shelf and when should we kind of expect that to flow through the upcoming year here? -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [24] -------------------------------------------------------------------------------- It's a retailer by retailer decision, whether or not they're going to reset their shelves. So it's a very, very hard thing to generalize because it's been retailer by retailer. So some retailers, depending on the category, change from second to third quarter rollout to 2020 to fourth quarter and some change it to next year. And some said, in some categories, they said, we're not even going to reset the category next year. So the good news is we've got the product developed, and we're ready to launch when the customer is ready to launch. -------------------------------------------------------------------------------- Karru Martinson, Jefferies LLC, Research Division - Analyst [25] -------------------------------------------------------------------------------- And then when you look at the new product development, how are you tying that into kind of the online shopping experience? Or can you formulate your product such that it can be more easily accessible to kind of -- hearing a lot of grocery stores putting in kind of online shopping centers to the store. Are you finding placement in those locations? Or are you participating in that? -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [26] -------------------------------------------------------------------------------- Not to a great extent. We do -- when we do launch something, we are making sure now that a lot of the requirements and online have certain package requirements, not necessarily product formulation. So we are keeping in mind the case pack and to be able to be sold online. We're certainly using some of the online retailers for early marketing because it's a great way to get out there and get some buzz behind the product. -------------------------------------------------------------------------------- Operator [27] -------------------------------------------------------------------------------- We'll go next to William Reuter of Bank of America. -------------------------------------------------------------------------------- William Michael Reuter, BofA Merrill Lynch, Research Division - MD [28] -------------------------------------------------------------------------------- I guess my first question, I assume, given the big -- relatively large acquisition that you'll pause on share repurchases going forward. I guess, is that the case? -------------------------------------------------------------------------------- Bruce C. Wacha, B&G Foods, Inc. - CFO & Executive VP of Finance [29] -------------------------------------------------------------------------------- I think, obviously, our focus right now is the acquisition and the integration and depending on where sales, EBITDA, cash flow, leverage all shake out over time, share repurchase is one consideration, but I think you're highlighting something appropriately that focus right now is on acquisition and integration. -------------------------------------------------------------------------------- William Michael Reuter, BofA Merrill Lynch, Research Division - MD [30] -------------------------------------------------------------------------------- Okay. And then my other one, given some capacity constraints and challenges with regard to supply chain, I think you guys manufacture about half your product. Have you thought about changing that mixture of self-manufacturing versus third parties? -------------------------------------------------------------------------------- Bruce C. Wacha, B&G Foods, Inc. - CFO & Executive VP of Finance [31] -------------------------------------------------------------------------------- I think the biggest driver on how that could change in a big way is just resulting to M&A. But certainly, as Ken mentioned on the call earlier, we want to be more efficient where it makes sense and where it makes sense for us to bring in manufacturing to do it in-house. That makes sense. And in some cases, the asset-light model works well from a co-packer standpoint. Real big thing is to be important within our co-packers as opposed to being a small player with a large co-packer. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- We'll go next to Carla Casella of JPMorgan. -------------------------------------------------------------------------------- Carla Casella, JPMorgan Chase & Co, Research Division - MD & Senior Analyst [33] -------------------------------------------------------------------------------- [I have one question on the capital structure and one on the business.] With the big acquisition in, you've got a callable debt in your structure. Any thoughts of doing refinancing? And potentially using longer term financing for the acquisition rather than your revolver? -------------------------------------------------------------------------------- Bruce C. Wacha, B&G Foods, Inc. - CFO & Executive VP of Finance [34] -------------------------------------------------------------------------------- Yes. I think that's certainly something that we're going to look to evaluate over time and be opportunistic within the market context. -------------------------------------------------------------------------------- Carla Casella, JPMorgan Chase & Co, Research Division - MD & Senior Analyst [35] -------------------------------------------------------------------------------- Okay. And then when we look at the brand -- I have a couple on brand categories. Is any of the strength in this quarter? Is anything driven by timing where the shipments came in third quarter this year versus fourth quarter next year? -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [36] -------------------------------------------------------------------------------- No. In fact, we got off a good start in October. So our shipments and consumption were pretty close in the third quarter. So it really wasn't negatively affected at all. -------------------------------------------------------------------------------- Carla Casella, JPMorgan Chase & Co, Research Division - MD & Senior Analyst [37] -------------------------------------------------------------------------------- Okay. And as we go into holiday, where I'm assuming cans will make it some refocus. Are you seeing a tick up in promotional activity? Or can you just talk about the cans category in general and what you see in competition there? -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [38] -------------------------------------------------------------------------------- I'm sorry, what category are you asking about? -------------------------------------------------------------------------------- Carla Casella, JPMorgan Chase & Co, Research Division - MD & Senior Analyst [39] -------------------------------------------------------------------------------- Green Giant shelf. I think I called it cans, yes sorry. -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [40] -------------------------------------------------------------------------------- Oh, I'm sorry, yes. So yes, I mean, Thanksgiving and Christmas and Hannukah holidays are big, but it is the season for canned vegetables. So we expect kind of normal, normal activity. We do expect, as it has been all year long, we do expect elevated pricing in the category versus a year ago, but still it's still going to be promoted. -------------------------------------------------------------------------------- Operator [41] -------------------------------------------------------------------------------- Our next question comes from Hale Holden of Barclays. -------------------------------------------------------------------------------- Hale Holden, Barclays Bank PLC, Research Division - MD [42] -------------------------------------------------------------------------------- I just had 2 quick ones. On the Crisco acquisition, when you guys bought Green Giant, it took probably about 9 months or into the following fall before you got your own innovation into the brand. Is that something we should expect for Crisco? Or is there an innovation pipeline that's coming faster than that with the brand? -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [43] -------------------------------------------------------------------------------- I would say that we don't see as much innovation with Cisco as we did in the frozen vegetable category, but there is some things that are on the books that are intriguing to us. But I don't -- right now, we want to focus on integrating the acquisition really well. It's a big business. And we don't see it needing quite the level of innovation that Green Giant needed. Having said that, I'm sure within the first year, we'll start to share with customers the most attractive (inaudible) innovation that Smucker company has developed, if there is some nice ideas in there that they would have loved to have launched if it was a higher priority for them. But we'll certainly take a hard look at them, given it's going to be a very important brand in our portfolio. -------------------------------------------------------------------------------- Hale Holden, Barclays Bank PLC, Research Division - MD [44] -------------------------------------------------------------------------------- Sounds good. And then, Bruce, you gave 2 things. You gave a pricing increase year-to-date. And I heard around $23 million, $24 million that you guys had realized through price increases? And then also outlined a bunch of new tools to try to, I guess, go to consumer better and have better consumer insights. So I was wondering, when you combine those what your confidence level on holding that pricing increase into a more normalized environment, potentially in 2021 when demand becomes a little bit more flatter than what you're seeing right now? -------------------------------------------------------------------------------- Bruce C. Wacha, B&G Foods, Inc. - CFO & Executive VP of Finance [45] -------------------------------------------------------------------------------- Yes. I think the real thing to follow. There's a couple of things. So one, obviously, as an organization, we're smarter today than we used to be. And that new tool was really part of the program that we started to put in place last year with pre-COVID, a trade spin optimization program and how we are looking at things. So that definitely was a part of the gain and benefit that was truly in the business that we expect to hold on to as was the list price increase that we took in the spring of 2019 that we lapped in the beginning of this year. And so that truly is -- there certainly was in the March, April, may time period, even probably still into June, July, a good amount of trade spend programs being canceled, put on hold as the grocery stores were dealing with COVID and trying to just keep product on the shelf. I think we've probably started to see a little bit more of a normal environment or a less abnormal environment in the third quarter, fourth quarter than we did earlier in the year. And so I think it's starting to settle a little bit, but a lot of the benefit that we took we have in place, and we expect to continue to keep some of that [in place]. -------------------------------------------------------------------------------- Operator [46] -------------------------------------------------------------------------------- Our next question comes from Eric Larson of Seaport Global Securities. -------------------------------------------------------------------------------- Eric Jon Larson, Seaport Global Securities LLC, Research Division - Research Analyst [47] -------------------------------------------------------------------------------- Just a couple of questions. I think, Ken, you alluded to -- and I think all the companies are talking about this. And if you can maybe put some quantification on it. The total marketing spend, consumer -- you're trying to increase your spending at a time when your household penetration is up, you want to retain as many of those customers as possible. So can you give us a sense of either in a dollar number or a percentage of sales or in some measurement, how much your marketing spend is actually going up in total? -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [48] -------------------------------------------------------------------------------- Yes. Year-to-date, Bruce gave it, it's in our numbers. So for the first half of the year, our marketing spend actually went down because we were clamping down on spending until we were trying to get a hold of what was going to -- get a hold of what's going on with the consumer and catching up with demand. So year-to-date, our marketing spend was roughly -- it was about 10% higher than a year ago, but down as a percentage of sales. In the first half of the year, it was down in absolute and it came back. And as Bruce mentioned, we spent more in the (inaudible) in the third quarter than we did last year. We expect that to continue and spend even more in the fourth quarter versus a year ago. So all in, our marketing spend this year will be up. It will be up. It will be up at least 15%. -------------------------------------------------------------------------------- Eric Jon Larson, Seaport Global Securities LLC, Research Division - Research Analyst [49] -------------------------------------------------------------------------------- 15% absolute? -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [50] -------------------------------------------------------------------------------- 15%, yes. And that's good for us to be -- we're not -- we're not the largest spenders of marketing, but that's a nice increase for us, and especially the way we're targeting it and using it for both online, shopper marketing and then getting Green Giant back on air again is critical, given there's so much innovation we have with all the different (inaudible) we're going after. It's critical that, that innovation got some awareness and trial in accelerated fashion. -------------------------------------------------------------------------------- Eric Jon Larson, Seaport Global Securities LLC, Research Division - Research Analyst [51] -------------------------------------------------------------------------------- Got it. And then my follow-up question here is obviously, we've got -- we've all known that there is some freight inflation, actually quite a bit. I mean, $5.5 million, I think, in your quarter. It's different that -- obviously, your sales are a lot higher than they were a few years ago when it was plus $5 million to plus $10 million. But is that -- is this because home delivery -- is this a sustainable -- I mean is this a situation that could get similar to what we had kind of a hyperinflationary period several years ago? Or how should we be looking at freight costs? -------------------------------------------------------------------------------- Bruce C. Wacha, B&G Foods, Inc. - CFO & Executive VP of Finance [52] -------------------------------------------------------------------------------- Yes. It's interesting because we were actually -- we were looking for some freight increases this year throughout the year, was our model and what we were expecting. And probably the first 6 months of the year, we just weren't seeing it. We actually had some favorability. So it ticked up a little bit in the third quarter. We are continuing to watch it. Certainly, because of a lot of the moves that we made following that late 2017, early 2018 increase that you referenced. I think we're better able to deal with it today than we were back then. We're more efficient. We've taken a lot of miles out of the system. So I feel a little bit more efficient, but certainly watching it. It was something that we expected to happen this year. And then there were delays. I don't think it's hyper inflation from a freight standpoint, but certainly, it's something that that's picked up a little bit, and people will adjust to it if necessary. -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [53] -------------------------------------------------------------------------------- Yes. I would say that -- and I would say that it's basically a shortage of capacity. That's what's driving it. You even hear some of the online delivery companies saying, if you want to order something for Christmas, you better order now. Don't wait until the last minute because it's not going to arrive on time. So it's really a shortage of capacity. And to Bruce's point, we're seeing similar 8% increases, but we're offsetting that because we've got long-term logistics efficiency programs in place that, number one, are sending more from spot to contract. So spot rates have really spiked, contract rates not as much. So more from spot to contract and a lot more in truckload versus less than truckload, and that's a huge driver. On top of all the strategic moves we made to relocate some of our warehouses to take, as Bruce mentioned, a ton of miles out. So with those 3 things, we're implementing those -- a rate increase, the same rate increase doesn't seem to have the same negative effect it had a few years ago. -------------------------------------------------------------------------------- Eric Jon Larson, Seaport Global Securities LLC, Research Division - Research Analyst [54] -------------------------------------------------------------------------------- Got it. Yes. I remember when you added your West Coast distribution center, I think that took out a huge number of miles, if I recall correctly. -------------------------------------------------------------------------------- Bruce C. Wacha, B&G Foods, Inc. - CFO & Executive VP of Finance [55] -------------------------------------------------------------------------------- A huge number. And we're still saving money on that and on a little East Coast move we did as well. So and that's really helping out a lot as rates rise. -------------------------------------------------------------------------------- Operator [56] -------------------------------------------------------------------------------- I'll go next to [Ken Zaswell] of Bank of Montreal. -------------------------------------------------------------------------------- Unidentified Analyst, [57] -------------------------------------------------------------------------------- So I know it's early, but can you give us some puts and takes of how we think about 2021? Because as I see, even in the fourth quarter, the rate of EBITDA growth obviously is slowing. But how do we think about 2021 in terms of what you think are the biggest puts and takes? And how do we start framing in our mind? I know it's early to give exact guidance, but if you could give us some puts and takes, that would be very helpful. -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [58] -------------------------------------------------------------------------------- Well, I don't think we're ready to do that for 2021. I'll let Bruce comment. But I think the one thing I would say, if you need to get your head wrapped around 2021, do what we're doing. Look at 2021 versus 2019. Because that's the trend we know about. And trending versus 2020, we're still -- still 2020 is still up in the air. So there's such major changes to the business in 2021 -- 2020, excuse me, we're trying to wrap our mind around. How does 2021 look versus 2019? What's reasonable to assume of what's going to carry over. And while we look at puts and takes versus 2021, we're really versus 2020, and we're really looking to build it versus 2019, because that's the trends we know of today. Very difficult to figure out what's going to happen next March and April versus the last March and April, where we saw just sudden unexpected huge increases in demand. -------------------------------------------------------------------------------- Bruce C. Wacha, B&G Foods, Inc. - CFO & Executive VP of Finance [59] -------------------------------------------------------------------------------- Yes. And obviously, the biggest wildcard is going to be what happens with COVID. Are we still in a work from home, play from home, school from home type environment? -------------------------------------------------------------------------------- Unidentified Analyst, [60] -------------------------------------------------------------------------------- Okay. And then also freight it would obviously be a factor as well? And then I'm assuming ad spending and new innovation in (inaudible). Is that also? Because it seems like you've actually amped up the new innovation, if you kind of think about relative again to 2019 in a lot of respects, you're a whole new company in terms of your focus on innovation. It seems like it's just a greater focus. Is that -- are those the keys that I would think of? -------------------------------------------------------------------------------- Bruce C. Wacha, B&G Foods, Inc. - CFO & Executive VP of Finance [61] -------------------------------------------------------------------------------- Yes. And the other ones that I'd add to that is, obviously, as we talked about over the last couple of years, if there's inflation, and it's sustained, people should expect not just B&G but other packaged food players to take price increases. And so probably nothing different there. Certainly, you get COVID, you get massive demand. We've seen that all year. Despite predictions of maybe it goes away, it's still here. And then obviously, the last thing is it's Crisco. We've got an acquisition, and that will fit perfectly within our financials. -------------------------------------------------------------------------------- Unidentified Analyst, [62] -------------------------------------------------------------------------------- Right, I agree. And then just the last question I have is when I think about the innovation, again, I like versus 2019, I think it's a really fair way to think about it. What do you think your success rate is and the incremental from that relative to the idea that we're all talking about you're getting new customers and new customers, but part of it is the innovation of that. What percentage of your innovation or what percentage of the sales do you think is sticky? Or what percentage of innovation is something that won't go away? Do you think of that as a percentage of your sales going forward? Can you frame that for us? And I'll leave it there, and I appreciate it. -------------------------------------------------------------------------------- Bruce C. Wacha, B&G Foods, Inc. - CFO & Executive VP of Finance [63] -------------------------------------------------------------------------------- Ken, you want to get that? Or you want me to get it? -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [64] -------------------------------------------------------------------------------- Yes, sorry. I'm sorry, I will. I think what you have to think about, we're not prepared to start to talk about percentage of business from innovation for 2021. That will all be in our guidance for next year, we'll be able to lay out to you how much volume we believe we'll get from innovation and how much of it is sticky and left over. But suffice it to say, we'll do more volume in innovation in 2021 than we did in 2019 because we've got a good success rate on what we've launched. Not everything has -- not every single SKU has been successful and will stay on shelf. But for the most part, everything we launched is doing well and then we're launching new products on top of that. So it's building, and in particular, our largest brand, Green Giant, I mean, we can lay it out for you, but the brand has steadily grown over the last few years, and that's basically driven by innovation. -------------------------------------------------------------------------------- Operator [65] -------------------------------------------------------------------------------- And our final question today comes from Robert Moskow of Crédit Suisse. -------------------------------------------------------------------------------- Robert Bain Moskow, Crédit Suisse AG, Research Division - Research Analyst [66] -------------------------------------------------------------------------------- I have a question about -- you mentioned that it was a rare luxury that retailers were kind of pushing back some of the merchandising resets and -- can you elaborate a little bit more on that for me? Like is it allowing you to get more distribution than you otherwise would have expected? And if so, how are retailers making room for you? Are they expanding the overall category? Or do you think there's other brands that are being reduced? -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [67] -------------------------------------------------------------------------------- Yes. The rare luxury comment comes from my many, many years of being a marketer. What I meant -- the rare luxury is really for our marketing and R&D and commercialization people. Because they basically got a 6- to 9-month reprieve to get everything ready. So that's what I mean by the luxury. So going to the R&D and marketing people say, guess what, you have now 6 to 9 more months before you have to get everything to market. But just let's just say if I told them, move everything you're working on up 6 to 9 months, they'd bolt and say, "Oh my God, how in the world are we going to do that in a quality way." So it's really a luxury of our marketing and R&D folks. So we didn't stop our innovation pipeline, but everything just shifted. So we were working on 2020, '21, 2022 plan. And then -- and we had great ideas. So everything just shifted, meaning we're going to start the 2020 innovation later, we'll probably launch what was going to be early 2021. We'll launch that in late 2021 or early 2022. So it just made it more robust because we had a delay, and we certainly -- the luxury was that we didn't need the new product volume, and you saw everybody focused on the base business. So again, the comment was really to the folks that have to get these products successfully developed and commercialized for shipment to customers. -------------------------------------------------------------------------------- Robert Bain Moskow, Crédit Suisse AG, Research Division - Research Analyst [68] -------------------------------------------------------------------------------- And do you think that this will give you a bigger year in terms of innovation in 2021? Whether you -- than a normal year? Like is it twice as much innovation. 3x as much and (inaudible)? -------------------------------------------------------------------------------- Kenneth G. Romanzi, B&G Foods, Inc. - President, CEO & Director [69] -------------------------------------------------------------------------------- I would like to hope that, and I think that's more appropriate for our 2021 guidance because right now, we still don't know for every single customer in all the different categories when the resets are going to be because they still haven't decided. I mean last week COVID's not over, and so there's still a lot of uncertainty. And we're ready to go when the customers are ready to go, but that hasn't been all decided yet. -------------------------------------------------------------------------------- Operator [70] -------------------------------------------------------------------------------- And with no further questions in queue. That will conclude today's call. We thank you for your participation, and you may now disconnect.