Dynamic Marketing Communiqué

Not all monsters are bad. Munch on loads of delicious food from the “Monster” of Packaged Goods! [Monday Marketing Marvels]

October 18, 2020

Frozen and canned vegetables…

Wine vinegar…

Pickles…

Do you find these kinds of food delightful to your taste buds?

Even if your answer is “no,” this company assures you that it can make all the food products it manufactures (including the products mentioned above) delicious enough for you and your family to eat.

B&G Foods, Inc. is an American holding company for branded foods.

The brand B&G, which was founded in 1889, was named after the Bloch and Guggenheimer families, immigrants who chose to build a better life in America.

After arriving in America, the families began selling pickles on the streets of Manhattan and used B&G as the brand of their products.

In 1996, a group of New York investors formed B&G Foods to acquire the B&G brand and Burns & Ricker, Inc. (now known as New York Style). Since then, B&G Foods has been acquiring different brands as part of its growth strategy.

Today, B&G Foods consists of more than 50 food brands that include:

  • Bear Creek
  • Cream of Wheat
  • Buena Vida
  • Baker’s Joy
  • Cary’s
  • Durkee
  • Don Pepino
  • Henri’s
  • Grandma’s Molasses
  • SpringTree

“The Frankenstein’s Monster of Packaged Goods”

One of B&G Foods’ primary strategies is to achieve net sales and earnings growth by acquiring branded businesses relevant to the demands of consumers.

As stated on its website, the company is committed to acquiring and investing in “shelf-stable, frozen, and snack brands with strong brand equity, leading market positions, high margins, distribution expansion opportunities, and compelling cost efficiencies at attractive valuations.”

According to Chief Financial Officer Bruce C. Wacha, B&G Foods is on a “carefully planned course of growth” and follows a method to its “acquisition madness.”

As mentioned in an article from publication company Food Dive, B&G Foods earned its nickname, “The Frankenstein’s Monster of Packaged Goods,” due to its ownership of a wide range of “unrelated” brands―from breakfast porridge (Cream of Wheat) to puffed rice and corn (Pirate’s Booty) to butter (Molly McButter) to food spray (Static Guard) to frozen vegetables (Green Giant) and other kinds of food.

From 1997 to 2017, the company completed 20 brand acquisitions.

It doesn’t matter what brand or company it is. For B&G Foods, as long as it’s food, it’s good!

The company seeks brands that will contribute to its cash flows and return a portion of cash to B&G Foods’ shareholders.

It also targets brands with established reputation as leaders in the industry, as well as those that have a lot of opportunities left untapped by their current management teams.

One good example is the makeover of frozen vegetable brand Green Giant, which B&G Foods acquired in 2015.

B&G Foods’ initial plan was to obtain ownership of just the brand’s canned products. However, as the company discovered more opportunities in selling frozen vegetables, it decided to acquire Green Giant as a whole and enter the frozen food business.

B&G Foods reinvigorated the brand by adding 25 frozen vegetable SKUs (stock keeping units) in its lineup in 2016. The new products included riced vegetables, vegetable tots (vegetables formed into small cylinders and deep-fried), mashed cauliflowers, and roasted vegetables.

In 2018, Green Giant also added vegetable spirals into its product lineup as an alternative to pasta.

According to CFO Wacha, the brand’s makeover was made at the right time since paleo diet, low-carb diet, and other kinds of healthy-eating diets were becoming a growing trend among consumers.

Green Giant’s riced vegetable line became one of the two fastest growing brands in the frozen food industry.

Constantly improving since the 1800s

As a company, B&G Foods is committed to ensuring that consumers get only high-quality, great-tasting food that they can feed their families with, all while observing ethical standards in its operations.

Here are the core values that are crucial to B&G Foods’ operations:

  1. Passion

    B&G Foods aims to share their success by connecting its family of brands with consumers across the globe. The company is passionate about addressing consumer demands and does that by assuring them that excellence is at the heart of its operations.

  2. Integrity and Accountability

    The company encourages its employees to be good corporate citizens by always doing the right thing as well as by being responsible and accountable for their decisions and actions.

  3. Customer and Consumer Focus

    B&G Foods strives to meet and even exceed its consumers’ expectations. Aside from that, the company values and proactively seeks consumer insights and works hard to deliver on what it promised to them.

  4. Food Safety and Quality

    As a holding company of brands that manufacture different food products, B&G Foods is committed to providing not just delicious foods but also clean and safe foods for every consumer.

  5. Collaboration

    The company operates with a “Team first, individuals second” mindset. In order to succeed in all its endeavors, B&G Foods urges its employees to make it a habit to support each other professionally and personally every chance they get.

  6. Empowerment

    B&G Foods encourages its employees to grow, excel, and realize their full potential by empowering them to make the decisions they need in the present as well as preparing them for even bigger decisions they need to make in the future.

  7. Safety and Health at Work

    The company believes that one way to achieve its goals is to make sure the workplace is as safe as possible in order to prevent accidents, injuries, and illnesses.

In the past five years, B&G Foods, Inc. has recorded a revenue of:

  • USD 966.0 million in 2015
  • USD 1.4 billion in 2016
  • USD 1.6 billion in 2017
  • USD 1.7 billion in 2018
  • USD 1.7 billion in 2019

With its commitment to providing great-tasting food to every family across the world, B&G Foods’ acquisition strategy and core values have contributed to its current position in the food industry.

B&G Foods, Inc.’s Earning Power: Valens Research vs. As-reported numbers

B&G Foods, Inc. (BGS) makes for a great case study that we come back to regularly. One great reason?

The company has proven itself to be a better earning power generator than investors might think.

So, how well has BGS been growing its business in the past years?

The research doesn’t lie—nor do the results. Earning power (the blue bars) continues to show results higher on average than what traditional databases show.

The blue bars in the chart above represent BGS’ earning power (Uniform Return On Assets). BGS has seen robust, generally improving profitability. From 2005-2013, Uniform ROA expanded from 14% to 35% before contracting to 27% in 2015. Thereafter, Uniform ROA rebounded to 31% in 2017, before declining to 21% in 2019.

The global ROA is just 6%.

While BGS’ Uniform ROA maintained robust returns, as-reported ROA portrays a different story.

The orange bars are the company’s as-reported financial information. If you relied on these numbers, BGS’ profitability is understated. As-reported ROA only ranges from 5% to 8% for the past 16 years, far lower than Uniform numbers. Additionally, when Uniform ROA achieved a peak of 35% in 2013, as-reported ROA (return on assets, a measure of earning power) was only at 7%.

That’s what you’ll see in Yahoo Finance, Google Finance, and most other databases.

The company’s stock price also performed better than the rest of the stock market over the decade, which we can see in the blue line in the chart below. Its returns have been well above the market.

The numbers show that it has been doing well and making a profit.

According to Kenneth G. Romanzi, President and CEO of B&G Foods, the company’s sales performance is driven by “very strong base business volume growth, pricing, and some M&A (mergers and acquisitions) benefit.”

Even in the midst of the COVID-19 pandemic, he believes that B&G Foods is still in a good position to benefit from increased cooking and eating at home.

As a holding company of multiple food brands, B&G Foods’ growth strategy ensures consumers that even as it “changes from one day to the next,” one thing will remain constant: “Delicious food from our family [of brands] to yours.”

About The Dynamic Marketing Communiqué’s
“Monday Marketing Marvels”

Too often, industry experts and the marketing press sing the praises of some company’s marketing strategy.

…Only for the audience to later find out that their product was a flop, or worse, that the company went bankrupt.

The true ROI in marketing can’t be separated from the business as a whole.

What good is a marketing case study if one can’t prove that the company’s efforts actually paid off?

At the end of the day, either the entire business is successful or it isn’t. And the role of marketing is always paramount to that success.

Every Monday, we publish a case study that highlights the world’s greatest marketing strategies.

However, the difference between our case studies and the numerous ones out there, is that we will always make certain that the firm really did generate and demonstrate earning power worthy of study in the first place (compliments of Valens Research’s finance group).

By looking at the true earnings of a company, we can now rely on those successful businesses to get tips and insights on what they did right.

We’ll also study the greatest marketing fails and analyze what they did wrong, or what they needed to improve on. We all make our mistakes, but better we learn from others’ mistakes—and earlier, rather than later.

Hope you found this week’s marketing marvel interesting and helpful.

Stay tuned for next week’s Monday Marketing Marvels!

Cheers,

Kyle Yu
Head of Marketing
Valens Dynamic Marketing Capabilities
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