B&G Foods, Inc.

Good day and welcome to B&G Food fourth quarter and fiscal 2024 earnings call. Today's call, which is being recorded, is scheduled to last about one hour, including remarks by B&G Foods management and the question and answer session. I would now like to turn the call over to AJ Schaub, Senior Associate, Corporate Strategy and Business Development for B&G Foods. Please go ahead.

Good afternoon and thank you for joining us. With me today are Casey Keller, our Chief Executive Officer, and Bruce Wacca, our Chief Financial Officer. You can access detailed financial information on the quarter and full year in the earnings release we issue today, which is available at the Investor Relations section of bgfoods.com. Before we begin our 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, under-reliance should not be placed upon them. We refer you to B&G Foods' most recent annual report on Form 10-K and subsequent SEC filings for a more detailed discussion of the risks that could impact our company's future operating results and financial condition. B&G Foods undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. We will also be making references on today's call to the non-GAAP financial measures, adjusted EBITDA, segment adjusted EBITDA, adjusted net income, adjusted diluted earnings per share, adjusted gross profit, adjusted gross profit percentage, 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. Casey will begin the call with opening remarks and discuss various factors that affected our results, selected business highlights, and his thoughts concerning the outlook for fiscal 2025 and beyond. Bruce will then discuss our financial results for the fourth quarter and fiscal 2024 and our guidance for fiscal 2025. I would now like to turn the call over to Casey.

Good afternoon. Thank you, AJ. And thank you all for joining us today for our fourth quarter and fiscal year 2024 earnings call. Today, I will cover an overview of fourth quarter results. Bruce will cover more specific financial results. Perspective on full year 2024 performance. guidance moving into fiscal year 2025, and an update on our portfolio shaping efforts. Quarter four results. The fourth quarter results showed sequential improvement versus prior quarters in fiscal year 2024. Fourth quarter net sales of $551.6 million and adjusted EBITDA of $86.1 million were in line or slightly above expectations. Excluding Crisco, whose net sales were impacted by lower net pricing to reflect a decrease in soybean oil costs, base business net sales decreased by only 0.4% compared to the year-ago period, an improvement from prior quarters. The strongest sales performance was in our spices and flavor solutions business unit, with fourth quarter net sales up 5% versus the fourth quarter of last year. Margins were also relatively improved in quarter four. Adjusted growth profit percentage for the fourth quarter was 22.2% compared to 21.9% in the fourth quarter of 2023. Adjusted EBITDA as a percentage of net sales improved to 15.6% from 15% in the fourth quarter of 2023. This reflects modest or no inflation on most input costs, with a few exceptions in black pepper, olive oil, et cetera. Margins are also benefiting from increased efforts on productivity and cost savings across our business teams. Fiscal year 24 performance. Fiscal year 24 was a more difficult year for both B&G Foods and the packaged food industry, with consumers continuing to adjust purchase patterns in the wake of higher inflation in recent years and prices for food and other consumer goods that remain elevated. The exception has been our spices and seasoning business, which has shown positive trends in the last several quarters, influenced by the growth of fresh produce and proteins in the perimeter of the grocery store. In fiscal year 24, base business net sales declined 3.3% versus fiscal year 23, or approximately 2.5%, excluding the net effect of approximately $15 million of lower Crisco oil pricing to reflect lower soybean oil costs with no gross profit impact attributable to the Crisco commodity pricing model. Adjusted EBITDA was down minus 7.1% versus fiscal year 23, but down only 2%, excluding the approximately $8 million impact of the green giant U.S. shelf-stable divestiture in fiscal year 23, and the approximately $8.5 million foreign currency impacts related to the Mexican peso in fiscal year 24 relative to fiscal year 23 on the green giant frozen vegetables produced and packed in Mexico and shipped into the U.S. Fiscal year 25 guidance. We continue to see uncertainty in the near term on center store trends with sales and consumption declines in January and February 2025 relative to last year. but we fully expect to eventually lap the impact of changing consumer behaviors in food purchases. For fiscal year 25, we are projecting a net sales range of $1.89 billion to $1.95 billion. This assumes some improvement in our base business net sales trend, with the bottom of the range consistent with the base business trend in fiscal year 24. We expect that trend to be lower in the first half and improve in the second half as we begin to lap the consumer reactions to the inflationary food environment. Net sales will also benefit from the partial impact of a 53rd week in fiscal year 25. Fiscal year 25 adjusted EBITDA is expected to be in the range of $290 to $300 million, reflecting flat to slightly down net sales, the partial impact of a 53rd week, and the possible recovery of foreign exchange from the Mexican peso. Portfolio shaping. B&G Foods remains committed to reshaping and restructuring our portfolio to sharpen focus, simplify our portfolio, improve margins and cash flow, and maximize future value creation. This is a very high priority for the company and critical to our future strategic direction and risk profile. The end game is to create a more highly focused B&G Foods with adjusted EBITDA as a percentage of net sales approaching 20%, increased cash flow generation, lower leverage closer to five times, a more efficient cost structure, and clear synergies within the portfolio. And ultimately, to build a stable platform that can be the foundation for future focused M&A growth. As previously discussed, we are finalizing the strategic review of the frozen and remaining canned vegetable businesses for a possible divestiture and sale of some or all of the assets in the frozen and vegetables business unit. Green Giant remains a strong brand with broad awareness and distribution, and the frozen vegetables category is on trend with health and dietary trends. It may not be the right fit with B&G Foods' focus and capabilities, particularly since there are no plans to add more assets in the frozen portfolio given the opportunities in our core shelf-stable businesses and overall capital constraints. Thank you, and I will now turn the call over to Bruce for more detail on the quarterly and full-year performance and the outlook for fiscal 2025.

Thank you, Casey. Good afternoon, everyone. Thank you for joining us today. As you can see, we had a reasonably strong finish to a challenging 2024 fiscal year. For the fourth quarter of 2024, we generated $551.6 million in net sales, a net loss of $222.4 million, or $2.81 per diluted share, adjusted net income of $24.6 million, or $0.31 per adjusted diluted share, $86.1 million in adjusted EBITDA, and adjusted EBITDA is a percentage of net sales of 15.6%. For fiscal 2024, we generated $1.932 billion in net sales, a net loss of $251.3 million, or $3.18 per diluted share, adjusted net income of $55.7 million, or 70 cents per adjusted diluted share, $295.4 million in adjusted EBITDA, and 15.3% of adjusted EBITDA as a percentage of net sales. The company's net loss for the fourth quarter and fiscal 2024 were primarily attributable to pre-tax non-cash impairment charges to intangible assets. During fiscal 2024, the company recorded pre-tax non-cash impairment charges of $320 million related to intangible trademark assets for Green Giant, Victoria, Static Guard, and McCann's brands in the fourth quarter, and $70.6 million related to Goodwill for the company's frozen vegetables reporting unit in the first quarter. More details regarding the impairments are included in our earnings release and 10-K. As a reminder, we divested the Green Giant U.S. shelf-stable product line in November 2023. and we are thus lapping a partial quarter of results for that product line in the fourth quarter of 2024. The Green Giant U.S. Shell Stable product line generated $15.9 million in net sales during the period of time that we owned it in the fourth quarter of 2023. It generated net sales of $64.4 million and approximately $8 million or so in contribution for us in fiscal 2023. Net sales for the fourth quarter of 2024 decreased by $26.5 million, or 4.6%, to $551.6 million, from $578.1 million for the fourth quarter of 2023. The decrease was primarily attributable to the green giant U.S. shelf-stable divestiture, a decrease in unit volume, and the negative impact of foreign currency, partially offset by an increase in net pricing and the impact of product mix. Our base business net sales, which excludes the green giant U.S. shelf-stable product line, decreased by $10.7 million, or 1.9%, in the fourth quarter of 2024 compared to the fourth quarter of 2023. The percentage decline in base business net sales is an improvement from the trends that we had seen during the first three quarters of the year. $4 million of the decline in base business net sales or 2.2 percentage points of the decline was driven by lower volumes and $0.4 million or 0.1 percentage points were driven by the negative impact of foreign currency. These impacts were offset in part by the benefit of $2.1 million or 0.4 percentage points of positive net pricing and product mix. Net sales for our Crisco brand decreased $9 million for the fourth quarter of 2024 as compared to the fourth quarter of 2023 as a result of our commodity pricing model for the brand, which resulted in net pricing decline of approximately $5 million, largely to reflect lower soybean oil and canola oil commodity costs, as well as a decrease in volume of approximately $4 million. Excluding the Crisco brand, our base business net sales decreased by $1.7 million, or 0.4%, in the fourth quarter of 2024 compared to the fourth quarter of 2023. Gross profit was $118.7 million for the fourth quarter of 2024, or 21.5% of net sales. Adjusted gross profit, which excludes the negative impact of $3.7 million of acquisition divestiture-related expenses and non-recurring expenses included in our cost of goods sold during the quarter of 2024, was $122.3 million, or 22.2% of net sales. Gross profit was $125.2 million for the fourth quarter of 2022, sorry, 2023, or 21.7% of net sales. Adjusted gross profit, which excludes the negative impact of $1.6 million of acquisition divestiture related expenses and non-recurring expenses included in the cost of goods sold during the fourth quarter of 2023 was $126.7 million, or 21.9% of net sales. While we have continued to see input cost inflation with regards to raw material costs across our basket of inputs and in our factories, the cost increases remain mostly modest in 2024. However, we are still seeing elevated costs and even inflationary pressures in some categories, such as black pepper, garlic, olive oil, tomatoes, and core vegetables, all of which are expected to remain elevated throughout 2025. Meanwhile, foreign currency, which negatively impacted costs at our green giant manufacturing facility in Mexico during the fourth quarter and throughout fiscal 2024, has begun to ease as the unfavorable U.S. dollar Mexican peso exchange rate moderated during the course of 2024 and is now in line with its long-term historical averages. Helping to mitigate these cost increases are continued favorability in some areas that saw the most extreme input cost inflation in 2022 and 2023, such as soybean oil in cans or normalized rates for logistics, as well as our continuous improvement productivity efforts and cost savings initiatives at our factories. Selling general and administrative expenses decreased by $2.9 million, or 5.5%, to $50.3 million for the fourth quarter of 2024 from $53.2 million for the fourth quarter of 2023. The decrease was composed of decreases in consumer marketing expenses of $1.7 million, general and administrative expenses of $1.1 million, warehousing expenses of $0.7 million, and selling expenses of $0.2 million. partially offset by an increase in acquisition divestiture related and non-recurring expenses of $0.8 million. Expressed as a percentage of net sales, selling general and administrative expenses improved by 10 basis points to 9.1% for the fourth quarter of 2024 as compared to 9.2% for the fourth quarter of 2023. As I mentioned earlier, we generated $86.1 million in adjusted EBITDA or 15.6% of net sales in the fourth quarter of 2024 compared to $86.8 million or 15% in the fourth quarter of 2023. In the fourth quarter, our ability to deliver improved margins despite modest inflation and the negative impact of foreign currency relative to the impact in the year-ago period on our cost of goods sold for the portion of our green giant frozen vegetables that are produced in our manufacturing facility in Mexico, allowed us to generate similar adjusted EBITDA, despite the divestiture of the Green Giant U.S. shelf-stable product line and lower net sales. Net interest expense decreased by $0.6 million, or 1.4%, to $39.6 million in the fourth quarter of 2024, compared to $40.2 million in the fourth quarter of 2023. The decrease was primarily attributable to a reduction in average long-term debt outstanding during the fourth quarter of 2024 as compared to the fourth quarter of 2023. This was partially offset by higher blended interest rates on our long-term debt during the fourth quarter of 2024 compared to the fourth quarter of 2023, as well as non-cash lost on extinguishment of debt during the fourth quarter of 2024 of $0.2 million, net of accelerated amortization of deferred debt financing fees related to the redemption in full of our then remaining outstanding five and a quarter notes due 2025. Depreciation and amortization was $16.9 million in the fourth quarter of 2024, which is in line with $17 million in the fourth quarter of last year. We had adjusted net income of $24.6 million or $0.31 for adjusted diluted share in the fourth quarter of 2024. In the fourth quarter of 2023, we had adjusted net income of $23.5 million or $0.30 for adjusted diluted share. Adjustments to our EBITDA net income are described further in our earnings release. I would now like to touch on the results by business unit for the fourth quarter. Net sales for specialty decreased by $10.5 million, or 4.6% in the fourth quarter of 2024, to $216.7 million from $227.3 million in the fourth quarter of 2023. The decrease was primarily due to lower CRISCO pricing driven by decreased commodity costs, coupled with modest declines in volumes across the specialty business unit in the aggregate. Specialty segment adjusted EBITDA increased by $2.7 million, or 4.8% in the fourth quarter of 2024 compared to the fourth quarter of 2023. The increase was primarily due to favorable costs in certain raw materials, partially offset by a decrease in net sales. Net sales for meals decreased by $2.4 million or 1.9% in the fourth quarter of 2024 to $122.9 million from $125.3 million for the fourth quarter of 2023. The decrease was primarily due to lower volumes across the meals business unit, partially offset by a modest increase in net pricing and improved product mix. Meal segment adjusted EBITDA increased by approximately $0.2 million as improved margins offset lower net sales. Net sales for frozen and vegetables, excluding the impact of the green giant U.S. self-stable product line divestiture, were down by $2.5 million or 2.2% in the fourth quarter of 2024 compared to the fourth quarter of 2023. Frozen and vegetables segment adjusted EBITDA decreased by $4.7 million in the fourth quarter of 2024 compared to the fourth quarter of 2023. Approximately $3.5 million of the decline was due to the negative impact of foreign currency relative to the prior year period on our cost of goods sold for the portion of our green giant frozen vegetable products that are produced at our manufacturing facility in Mexico. Increased pack costs on core vegetable products, including corn on the cob and peas, contributed approximately $1.5 million to the decline. Investments in trade reduced segment adjusted EBITDA by another $625,000. These declines were offset in part by improved performance in our Canadian operations of approximately $1 million compared to the fourth quarter of 2023. Net sales for spices and flavor solutions increased by $4.8 million, or 5% in the fourth quarter of 2024, to $101.8 million from $97 million in the fourth quarter of 2023. The increase was primarily due to higher volumes across the spices and flavor solutions business unit coupled with higher net pricing and product mix. Spices and flavor solutions segment adjusted EBITDA increased by $0.6 million or 2.5% in the fourth quarter of 2024 compared to the fourth quarter of 2023. The increase in segment-adjusted EBITDA was largely driven by a combination of increased volumes and improved net pricing and product mix, which were offset in part by increases in raw material costs such as black pepper and garlic. Now moving on to our balance sheet. We reduced our net debt to $1.994 billion at the end of the fourth quarter of 2024 compared to $2.05 billion at the end of the third quarter of 2024. And as we highlighted on our last earnings call, we also redeemed in full the remaining $265 million of senior notes due April 2025 back in October of 2024. As a result, we no longer have any near-term maturities, with our closest maturity now being our senior notes due September 2027. Approximately 35% of our long-term debt is tied to floating interest rates, or SOFR. A 50 basis point decrease in rates would reduce our interest expense by approximately $3.5 million on an annualized rate. 100 basis points in rate reduction would be expected to reduce our interest expense by approximately $7 million. We also continue to reduce our inventory. Our inventory was $511.2 million at the end of the fourth quarter of 2024. compared to $618.1 million at the end of the third quarter of 2024 and $569 million at the end of the fourth quarter of 2023. And as a reminder, before we get into our fiscal 2025 guidance, we are still living in unpredictable times. Based on current information, we expect continued volume challenges for the industry and for us in the first half of 2025. and slow improvement with flat to modest increases in our volume during the second half of the year. We also expect a net sales benefit of approximately $10 to $15 million in the second half of the year from a 53rd week in fiscal 2025, which will occur in the fourth quarter. As Casey and I mentioned earlier, we had a tough 2024 with regards to foreign currency, primarily driven by movements in the US dollar to Mexican peso exchange rate. This is largely reversed, but because we carry most of these costs in our inventory, we won't begin to see benefit until we begin to hit the second half of the year. Our model assumes that there are no major upticks in inflation. As a result, and as noted in our earnings release, we expect 2025 net sales of $1.89 billion to $1.95 billion. adjusted EBITDA of $290 to $300 million, and adjusted EBITDA as a percentage of net sales to remain approximately 15 to 15.5%. And based on this guidance, we expect adjusted diluted earnings per share to be in a range of 65 to 75 cents. Additionally, we expect for full year 2025, interest expense of $147.5 to $152.5 million, including cash interest of $142.5 to $147.5 million, depreciation expense of $47.5 to $52.5 million, amortization expense of $20 to $22 million, an effective tax rate of 26% to 27%, and capex of $35 to $40 million. And now I will turn the call back over to Casey for further remarks.

Thank you, Bruce. In closing, B&G Foods is laser-focused on the few critical priorities. One, improving the base business net sales trends of the core business to the long-term objective of plus 1%. Reshaping the portfolio for future growth, stability, higher margins, and cash flows, as well as structuring key platforms for future acquisition growth. And finally, reducing leverage below 5.5 times through divestitures and excess cash flow to facilitate strategic acquisitions. This concludes our remarks, and now we would like to begin the Q&A portion of our call. Operator?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. you may press star two if you would like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. The first question comes from the line of Andrew Lazar, Barclays, please go ahead.

Great, thanks so much. Good afternoon, everybody. Hey, Andrew. Hi, Andrew. I guess first off, I'm curious, what the impairment charge on Green Giant Frozen either implies or doesn't imply about sort of the value, I guess, potential suitors may ascribe to the business, you know, now that you've been kind of put it under strategic review.

Yeah, it's really driven by accounting, Andrew, and business performance, as opposed to us highlighting what we think the expected value in a potential sale would be. We were carrying the value of this at something north of $600 million at some point, which, you know, obviously we're probably not going to achieve that in a sale.

Yeah, yeah, got it. And then I think you said $10 million to $15 million benefit full year from a 53rd week. Typically, just like by calendar math, it's usually closer to like a 2% benefit on the top line, but I think the $10 million to $15 million is only like 0.6% or so. I'm just curious.

Yeah, I think for us it's about three days.

Okay, got it. Based on the calendar, based on the actual calendar, yeah. Yep. Got it. Got it. And Casey, just stepping back for a minute, like from an industry perspective, I guess, you know, the packaged food industry over time has gone through plenty of cycles where there have been, you know, challenging headwinds. And, you know, the group has always sort of found its way back to, you know, a better place. And it takes some time and there's always sort of winners and losers and all of it. But generally speaking, the group's been able to sort of pivot. The way I think a lot of these food stocks are trading today, it sort of feels like investors are thinking that this time is somehow different and that the headwinds that the group's facing today are more structural or enduring. And I guess I know no one's being dismissive of the current headwinds, but I'm curious your take on that. Do you think the headwinds this time around are different and somehow more enduring or that it may just take more time? for the group to sort of figure out the way forward, if you sort of get my thinking.

Yeah, I mean, this is, you know, my personal opinion looking at a lot of data that I think we're dealing with, you know, a temporary reaction by consumers to higher prices that have remained elevated and people reacting in their budgets and making decisions about, you know, food purchases and sizes and trading down. And I think we're going to lap that. Eventually, And if I look at kind of the trends and the categories in our business, I think we should lap that in the next several months. You know, the reaction of that, because I don't think I think people react one time to these higher prices and make adjustments in their purchase patterns. But I think once they've done that, they've done it. And I think we'll eventually lap it. And so then we'll go back into a more stable pattern year over year and I'm not saying we're going to go back to where we were before, you know, the adjustments, but I think we'll go back to a more stable pattern. I don't necessarily see, you know, prices, you know, coming down a lot without, you know, some significant reductions in inputs. You know, we'll do it on Crisco. We won't, you know, we haven't really seen it on a lot of other products. So even oils come down, so we've dropped price on Crisco. But I think once consumers make these adjustments, they stick with them and they go back to normal patterns. So that's what I think. Our portfolio, I think, is more meals-based. It doesn't have a lot of the, you know, I don't think it has a lot of, you know, the risk around excess snacking or anything else. I think we're really about meals. And so I don't see anything from the GLP-1 phenomenon that necessarily is a big watch out unless people really, you know, dramatically reduce the consumption of calories and meals, which we haven't necessarily seen so far. So I think these are more temporary headwinds that we just need to get through lapping them. And that's what I see in our portfolio, and that's what I see if I look at the year-over-year consumption data across the industry.

Thanks for your thoughts. Yep.

Thank you. Next question comes from the line of Michael Levery with Piper Sandler. Please go ahead.

Thank you. Good afternoon. Hey, Michael. Good afternoon. Just wanted to follow up on some of the top line momentum. You said a couple times, even in the response to Andrew's question, how it's probably mostly just a question of consumers adjusting. But a lot of the elevated prices have been in the market for a while. There's been, at the grocery level and across all food, something close to modest volume declines for over two years now. What drives that? Is there, you know, how sure of an inflection point can you be? I mean, a little bit of just how you kind of mapped out the year from the consumer standpoint.

I mean, I think what we're looking at is, you know, what are we lapping? Like, when do we see the consumption trends? You know, when do we start lapping the negative consumption trends last year? Because we really saw it more pronounced. And I'm talking about, you know, dollars. I'm not actually looking at unit volume because Obviously, unit volumes, when the prices first went up, we had a little bit decline in unit volumes. But I think then there was a delayed reaction from the consumer about how they continued to react to those. So I'm looking at when do we have consumption trends begin to go negative and we lapped those a year ago period. We didn't actually have that in January. In January and December, our consumption trends a year ago were relatively stable. So we're just looking at that pattern and seeing when do we hit it to determine when we think we might have, you know, more, more stabilization on the top line.

Okay. That's helpful. And it's hard, hard to know, you know, just in the political regulatory world, there's not that much certainty these days, but it seems like just today or yesterday, Trump reiterated the Mexican tariffs set to go. And who knows if that happens or not, but can you just, touch on what, if any, contingency planning you can do, how impactful that might be if you've run those numbers, and just how to think about, you know, what some of that might mean?

Yeah, so tough for us to predict what's going to happen in politics, especially on that topic. I think the big thing where we would look and have looked is in certain categories, are we different from the competition? So for example, if we're importing something from Asia and everybody's importing something from Asia, that's probably more of a macro than a B&G specific. When we think about something like Mexico and our manufacturing facility there, there are probably offsets. It's hard for me to say with certainty that they're linear, but if there were a tariff And I think you started to see this the day that we thought tariffs were going to go into effect. You start to see a pretty significant weakening in the currency. And so we might end up having tariff impact bad, currency impact better. And I think that's not getting too far into the politics. That's probably where the U.S. has some leverage. But I think it's a case by case. Are we impacted from an industry perspective and all of our peers or something unique to us? Hard to predict.

Our impact would really just be Mexico. We source and sell in Canadian products right now. We source our vegetables in Canada and sell them in Canada. It would be the vegetables that we grow and produce in Mexico and then send it to the United States. And I think it's less, you know, we obviously are doing some modeling around what that could look like. Bruce has talked a little bit about what the offset in currency could be, some other things. So we have modeling on this, but I think it's really early to speculate on what's going to happen because, you know, last time it kind of pulled back and I'm not sure that agricultural products will be in the tariff. So we don't know anything yet. You know, we need to kind of watch it to see what the impact could be or what the resolution could be of this. But, you know, we are doing some modeling to make sure that we're prepared.

And as far as it ties to guidance, would there be any of these scenarios or is guidance, does that reflect just status quo as it is today?

Our guidance largely reflects status quo. Okay. Thanks so much.

Thank you. Next question comes from the line of Rob Dickerson with Jefferies. Please go ahead.

Great. Thanks so much. I guess, you know, just a kind of first question is around trade spend. You know, clearly, you know, volumes of impression in the industry now for a couple of years feels like what you're saying, your expectation would be, you know, still maybe a little softer in the next quarter or two. You know, just in terms of the relationship with the retailer, because I thought you had a comment in the prepared remarks around trade spending. I kind of half missed it. I'm just curious, like, as we think about 25, you know, are there any other, you know, or let's say, you know, any other costs that you're, you know, kind of absorbing or you need to deploy, right, to try to, you know, kind of, you know, keep velocities going? And I'm speaking not just to marking dollars or innovation or what have you, but just sort of anything that's kind of broadly happening, right? kind of with your overall retail customers that you're trying to support?

So I think our lever for the most part is trade to move volumes, right? It's all part of pricing. Crisco, as we've talked about, is one of the few areas where we actually lowered the list price per se. But it's really this combination of trade and list gets you your net pricing. Some of the trade looks wonky as we've moved around some of the list pricing for Crisco. And then for us, if you think about the cadence, and we talked about this during the course of most of the quarters last year, is we took price down through trade beginning really like in the fourth quarter of 2023. And so as we were lapping... The first three quarters of 24 against 23 was higher trade, and then fourth quarter was kind of like-for-like because we had already moved. It's very different on a brand-for-brand basis, but there's some give and take there. And then, obviously, in some of our other areas, historically, when we've seen price increases on black pepper or garlic, we've moved price, and when we've seen price decreases, we've moved price. But generally speaking, it's trade that we're moving price around with, not necessarily lists.

Right. Okay. Okay. Perfect. That's helpful. And then I guess just in terms of price, maybe I just have two kind of qualifying questions. The first one is, you know, for the year in terms of organic sales growth, you know, when you're speaking to the improvement and, you know, back half maybe a little bit better than first half, you know, should we be kind of assuming like flat-ish pricing, right? I mean, it's kind of more of a, you know, these are more comments clearly around volumes.

I mean, I think it's flat to just slightly up. We do have a couple of areas where we've got some input cost increases, but I think for the most part, we expect to use productivity and cost savings to offset any modest inflation of kind of maybe 1%. And that 1% would be skewed towards a couple of categories where we've seen increases like black pepper, garlic, olive oil, And we may or may not use pricing there, but we'll also use productivity and cost savings to help offset. So I think we're back to kind of a low inflation environment where, you know, you try and cover a good deal of inflation with productivity.

And the other call out when we're talking about price and trade and inflation, you know, we've seen with Crisco now in the four going on five years since we've owned it, we have managed that business for margins. And so when costs skyrocketed, we were able to take pretty astronomical price increases. It wasn't perfect on a monthly basis, but on an annual basis, it worked. And as price came down, we took, you know, input costs came down, we took price down. Over the course of 24, it was relatively stable compared to the moves that we had in 23. And then, like I said, you know, we would manage that business for margin like we have.

And actually, actually for gross profit dollars, you know, margins would move up and down, but we would manage to maintain gross profit dollars from the.

Yeah. And, and that's, that's how we would do that. Again, if price moved up or down, you know, it'd be great if we get continued relief there and consumers would love it.

Yeah. Yeah. Okay. Okay. All makes sense. And then just quickly look, you know, sales, I think kind of came through maybe a little bit better in Q4 and, that maybe, you know, some had thought. It kind of feels like kind of what's implied in the guide and the commentary that maybe Q1, you know, could be like a little bit down versus Q4 before it gets better. So I'm just curious kind of what you've seen so far, you know, in Q1 given your March quarter end. I mean, also kind of given we heard, you know, a number of companies speak last week where it kind of felt like maybe you know, January and kind of the kickoff of the year was just a little bit, maybe softer coming out of the holidays and that's all. Thanks so much.

I think that's, that's how we, that's how we see it too. We, you know, I, you know, we're not obviously through the Q1 period, but we know that January was a little bit softer than we anticipated, just like the rest of the industry saw. I mean, I think we know some retailers took down kind of holiday, you know, holiday and seasonal merchandising faster. Um, so, you know, we, we, um, we think January was a tougher month. But January was a tougher month. And so that's kind of how we see Q1 shaping up, although we expect to see some improvement as we get out of there. But just like the rest of the industry in January, we saw lower shipments than we expected in January.

Yeah, and I would continue to remind folks to look at the consumption data as it comes in. We're generally pretty close to where consumption comes out, absent something that happens either in Canada food service or we do have a partner brand with a leading club store. And so we think about last year, we probably underperformed in food service in that first quarter. We probably had pretty good performance in the fourth quarter for food service, for Canada, and for some of our partner brands. But by and large, if it's a tough consumption environment and you see that in the tract channels, that's gonna dictate reality. We're optimistic that that turns, but I was wrong every quarter last year.

It's okay, Bruce.

Thanks so much, guys. Really appreciate it.

Thank you.

Thank you. Next question comes from the line of William Reuter with Bank of America. Please go back.

Hi. Good afternoon. Not asking you to predict what's going to happen with tariffs, but what is the dollar amount of vegetables and other products that currently are shipped from Mexico to the U.S.?

We haven't disclosed, but generally speaking, the products that are manufactured or produced and packed in Mexico, it's green giant frozen. It is largely our core product. frozen vegetable offerings, think about like bag-in-a-box and bag, and some frozen IQF that's used in other parts.

Got it. That's helpful. And then in terms of your conversations with your retail partners, were there any changes in shelf space recently, or have there been any changes in their interest in private label? I know you compete a lot with private label. Whether you're seeing any changes there?

I mean, from a B&G overall standpoint, the answer is probably not really. If you went across 50 brands, I'm sure we could think of some positive examples and some negatives.

But nothing, no macro trend that we've seen necessarily.

Got it. In our major categories.

Great. That's all I had. I'll pass to others. Thank you.

Thanks. Thank you. Next question comes from the line of Robert Moscow with TD Corbin. Please go ahead.

Hi, thanks. Good evening. Hi, I was wondering if you could comment on free cash flow in 2024. I didn't hear it, and I don't think the cash flow statement is out yet. So how did you end up for the year, and how should we think about 2025? like is working capital a use of cash again in 2025 or not?

So you actually can find the cash from operations on page 13 of our press release. We don't have the full statement, but we do have the line item. And we had, yeah, we probably had a, if you look just in the fourth quarter, pretty comparable to what we did in last year's fourth quarter. 2023, our cash from operations were turbocharged because we brought inventory down so much. 24 wasn't going to replicate that. 2025 isn't going to replicate that. I'd like to think 2025 could be comparable to 24, maybe a little bit better.

Part of the 23 was the investor of the canned vegetable business, yeah. Yeah. Yeah, yeah.

Okay.

And so just think about like big inventory moves are going to boost us in a cash from operations. We right now, without the canned business, we're not as extreme from an inventory build in the third quarter or, you know, that quarter being not a great cash from operations quarter. But there still is a fair amount of seasonality just with some of the other pieces of the business, whether it's the frozen green giant or whether it's things like Crisco and Claver that, you know, participate in a big season. or Bear Creek in the super season. So we generally generate a fair amount of cash in the fourth quarter.

OK. But at the end of the year, Bruce, debt was kind of the same as it was at the end of 2023. So I thought there'd be a little more left over after the dividend to pay it down. Or am I doing the math wrong? Is that pretty much where you expect it to be at the end of the year?

From a leverage standpoint, we are not as low as we expected to be when we began 2024 because we expected much higher EBITDA. From a net debt standpoint, we are probably down $30 million during the course of 2024 from where we started the year. Would have liked that number to be 50, 60 million. So down, not flat, but probably not as down as much as we'd like.

Got it. Okay. Thank you. Yep.

Thank you. Next question comes from the line of David Padma with Evercore ISI. Please go ahead.

Thanks. Just have a question about your segments, your three focus segments going forward, spices and specialty meals. I'm wondering how, you know, they're all fairly healthy EBITDA margin businesses all in the twenties, you know, a little higher for spices, for example, but you know, how are you going to manage these businesses differently? How are we, how do you think of them in terms of a focus on your growth spending or the potential to respond to growth spending? Um, ones that you might not even really manage to the top line very much. I would imagine the specialty segment that has Crisco, you might be thinking about managing to EBITDA on that segment, but maybe not so much managing to EBITDA on the others. So any color about how you're thinking about that?

Yeah, I think we've talked about this before, but I think the spices and seasoning or spice and flavor solutions business unit, we see good Good trends there. We see some tailwinds with the growth of the perimeter of the store where the seasonings and flavorings are actually enhancing the fresh proteins and vegetables that people are buying and the growth of the perimeter store. So that's a business with strong margins, a good market position, and we would look at that as a business we would expect to grow a couple percent. in line with a category, a category of 2% to 3%. So we would do some investment there to grow. We want to make sure we have the right capital structure, the right assets, the right capacity. We're doing some things with our brands. We've launched some licensing brands to get into different segments. So that's a business that we expect growth from longer term, and we are getting it. We are getting it in 2024. The fourth quarter, we were up 5% in that business unit. So I feel like, you know, that one's where it needs to be. I would also expect some growth in our meals business unit, which is essentially two things. One is, you know, Mexican, you know, taco categories. So our Ortega brand, Las Palmas, enchilada sauces. You know, we think those categories continue to grow behind Hispanic meal trends. We would expect to grow there. We've invested in excess capacity in our taco sauce category. um, production, you know, we're, we're starting to do a little bit more, you know, with the consumer on the, on those businesses. Um, there's also hot breakfast, which, you know, for a while really kind of took off after COVID, um, but probably has settled down a little bit. We also, we still see that business as a good business, um, you know, with our, you know, McCann's oatmeal cream of wheat business, those businesses have done performed pretty well. So I would expect to get, you know, like at least 1% growth longer term from that business unit, given the categories that it's competing in. Um, The specialty business, which is largely baking staples, you correctly identified, you know, we kind of see that as flat over time. And we would want to manage that business for margins and cash flow and EBITDA. And so we do look at those businesses. They're not categories that we expect to grow, you know, shortening, oil, baking powder, molasses. I mean, these are businesses that we want to maintain consistently. you know, good, strong financial performance on, but not necessarily top-line growth. And they also have very strong margins. So, just maintaining those margins, maintaining that EBITDA cash flow is important. You know, Green Giant is a little bit more of a struggle. You know, it's not, you know, we struggle with high costs in that business because we don't have a lot of infrastructure in Frozen, and we're not planning to add any more Frozen assets. So, that has been a business that We do invest behind innovation on things because you need to do that in the frozen business, but it's our lowest margin business in the portfolio, as you can see, and it hasn't been the place that we would want to put the most investment in, and it's probably not. It's under strategic review, so we're looking at whether or not that's really part of our future portfolio.

Is there – of the three that you – you're not under review – is there one that you think it's going to get the most improved award in 25 that you think is that, you know, you look back at 24 and you left something on the table or there's, there's trends that are, or innovation that you think is going to get that segment going more than the others.

You know, I, I think, um, you know, our spices business has been performing. So I think it's, it's where it needs to be from a top line performance standpoint. You know, I think our meals business unit, um, Our meals business unit is probably the one where I see good innovation coming in our Mexican platform. And I think we're poised to get back into growth on that one by the end of the year. So that one is the one I'm encouraged by the plans. We put some additional stuff in place. We've got innovation. We've got additional marketing. I think that's a place that we would expect to see a little bit of growth instead of a decline like we saw in 24. I think that especially... The specialty area, you know, we just want to get that more flat. I mean, as Bruce said, a lot of the impact was from the pricing that, you know, from Crisco because we had lower oil costs. We reflected that through. You know, we're happy with the performance of that business in 24, but most of the decline in the sales was due to the pricing impact in the Crisco pricing model. I mean, we've been pretty clear that our long-term algorithm for, you know, particularly the three businesses that aren't under strategic review is that, you know, we want, you know, at least, you know, 1% growth. You know, we said 1% to 2%, but 1% growth on that group of assets, and we think we can get there. You know, once we get through kind of the consumer reaction to all the inflationary environment, consumer purchasing behavior changes, we think we've got a portfolio that should be able to drive that kind of low growth. It's not huge expectations, but it at least grows on a stable platform that we can build on.

Thank you.

Thank you. Next question comes from the line of Karu Martinson with Jefferies Company. Please go ahead.

Good afternoon. When you guys talked about consumer spending shifts and sizing and so forth, is there any thought or changes when we look at the guidance here of package size shifts for you all?

I don't think there'll be package size shifts. We may emphasize different sizes in the portfolio, um, in terms of, you know, what we're, you know, you know, different sizes, containers that just, you know, where we promote, what we promote, um, But we don't have any specific plans now to downsize. We did a downsizing on our Crisco business about a year and a half ago, I guess, where we moved from 48 ounces to 40 ounces when the price of soybean oil skyrocketed. That was one we made a deliberate move, and I think some of our competitions followed that. But we don't have plans to do that necessarily on other businesses right now.

Seems like a lot of that was in that 2022, 2023 time period. But as Casey said, no major plans across the portfolio.

Yeah. But we will look at, you know, like the smaller size in our portfolio. How do we emphasize those for consumers that might be looking to trade down?

And then when you look at the cost and productivity saves, you know, is this more of just kind of the continuous improvement or Or is there a target of what you want to achieve in 2025?

Yeah, we've set targets for each of our businesses to get between 2% to 3% productivity or savings on a COGS basis. So they're actively working on kind of a 3% target.

All right. Thank you very much. On our COGS, yeah. Appreciate it. Yep.

Thank you. Next question comes from the line of Hale Holden, Barclays. Please go ahead.

Thank you. The first one I have is just to circle back on tariffs. The exposure to maple syrup or syrups from Canada, is that something we should think about as just not material enough to be a driver if that comes into play?

I think sales on that business overall are probably something around $70 million. So could there be an impact? Yeah. Do we want there to be an impact? No. But think about it in that context. And then as Casey mentioned earlier, we think about our green giant Canadian business. That is a largely sourced in Canada and sold in Canada business. And so there really wouldn't be any tariff on that business that could be material in any way. that business, we've got like currency risk at translation, but not really transaction. It's kind of a margin neutral from those things.

Great. Thank you, Bruce. And then the second question I had was not to ask another political one, but do you have any examples of how the portfolio does if there's material reductions to SNAP or any thoughts at a very high level if that materializes, how much risk that could cause for you? So

We probably don't have as good SNAP data as some of the retailers have it because they get it direct. We believe, and I've seen it in some of the public research out there, that we've got less exposure to SNAP than some other businesses. I mean, at the end of the day, if it's a low-end consumer and you're reducing their cash to spend on things, they've got less money. So I wouldn't be naive and say no impact. I still am of this belief that in a challenging environment, center store packaged food companies do well, will eventually do well. As I said earlier on the call, I was wrong for like four straight quarters on when we were going to see an inflection point. But typically, you know, our industry does well in, you know, modest inflation, soft economies. We are a mass-oriented buyer or seller of products. And so, you know.

I mean, the other thing I'd say about SNAP is, you know, You know, I don't think we have a lot of risk around that we would be targeted in terms of being excluded from SNAP because our portfolio is really about traditional meal preparation. I don't think that we would be viewed as excess calories or, you know, quote-unquote junk food under the MAHA movement. So we're probably not, we don't have a risk from that, from SNAP benefits being kind of more directed towards certain categories. We'd probably be fine. Yeah. If the overall level of SNAP comes down, probably there's some impact. There's some impact. But, you know, if it becomes targeted against certain categories, then I don't think we'd be in there.

I was trying to spin Maha in my head to make BNG great again. Oh, yeah, yeah.

Sorry.

I crossed my fingers for you guys for this year, but thank you.

I've been reading too many newspapers.

Fair enough. Thank you.

Yep. Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your