B&G Foods CEO on record March results, innovation piepline and dividend

🎥 Jun 03, 2020 📺 CNBC Television ⏱ 8m 👁 5226 views

B&G Foods CEO Ken Romanzi joined Jim Cramer on "Mad Money" to discuss emerging from the coronavirus pandemic.

About Kenneth Keller

In a September 2020 interview on CNBC's "Mad Money," B&G Foods CEO Ken Romanzi discussed the company's performance during the coronavirus pandemic. Romanzi stated that the company had a record sales week in March, with consumption increases of 90% in the last weeks of March versus the prior year, and consumption up 50% over the prior 11 weeks. He noted that while the company did not expect 60% growth to continue, he believed the portfolio was well-suited for a period of reduced dining out and increased remote work. Romanzi also addressed the company's dividend and leverage, stating that management and the board were committed to paying a significant portion of free cash flow as dividends and had a plan to reduce leverage. Romanzi highlighted the growth of the Green Giant brand, which he said accounted for about a third of the business and was expected to be the fastest-growing brand, with new plant-based offerings such as veggie rice and cauliflower gnocchi. He noted that B&G Foods was present in over 80% of households with at least one of its brands and was exploring cross-promotion, such as Green Giant vegetables made with Mrs. Dash seasoning. Romanzi said the company would focus on driving growth in about half a dozen brands, including Green Giant, Ortega, Mrs. Dash, and Back to Nature, while other brands remained steady cash generators.

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Transcript (16 segments)

Jim Cramer0:05

How powerful is this rotation out of the safety stocks and into the awaken America place? Look at B&G Foods, which is a house of packaged food brands you might recognize: Cream of Wheat, Cream of Wheat, Vermont Maid, B&M Baked Beans, B&G Pickles, Pirate's Booty, or Green Giant canned and frozen vegetables. This is a stock that's been on fire for months as part of the COVID-19 stockpile trade. Then B&G announced some incredible sales numbers this morning with 50% plus revenue growth year over year, and they got it from much higher than expected numbers in the whole second quarter. Yet what happened is after rallying this morning, the stock actually closed down once today. Hey, that's the rotation speaking. But does it really make sense to sell after such astonishing numbers and with a big yield? Let's take a closer look. Ken Romanzi is the President and CEO of B&G Foods to get some more color on how his business is doing and where it's headed. Mr. Romanzi, welcome to Mad Money.

Kenneth Keller0:59

Jim, thanks so much. It's such a pleasure to be here. I'm a big fan.

Jim Cramer1:04

Oh, thank you, Ken. Okay, so you had an incredible period. You basically pre-announced today, and you had the best single March, the last week of March, in history.

Kenneth Keller1:14

It was a record sales week for us. It came after the last half of March generating 90% consumption increases in the last few weeks of March versus the prior year, and it really has continued. Not quite at 90%, but over the last 11 weeks our consumption, as measured by Nielsen, is up 50% versus prior year. And as you can see, it's continuing into the second quarter with the first two months off to a great start at plus 57%. So our portfolio is just responding very well and is right there for consumers as they're cooking and eating more at home.

Jim Cramer1:57

All right, so Ken, we gotta figure out how much is sustainable. People just saying, you know, it's fun to be at home. How much is you know, I'm looking at these new Green Giant products like the cauliflower, which is quite delicious, and I want to pivot to those. And how much of it might go away just because it is for people to have a night out?

Kenneth Keller2:13

Well, first of all, we don't expect 60% growth numbers to continue forever. But we do look to the industry experts that are talking about how fast will consumers go back to restaurants. I would say as long as people are going to eat out a little less, as long as people are going to stay home a little bit more and work from home, our portfolio is perfect. From Green Giant vegetables to breakfast more at home, the more people are at home, they're eating more at breakfast. So our Cream of Wheat hot cereal and our McCann's Irish oatmeal are still growing even as we entered the warm spring and summer months, still growing at 30 and 40%. So as long as people are going to eat out a little less and work at home a little bit more, we believe there will be better post-COVID trends than there were trends coming into the COVID crisis.

Jim Cramer3:02

Okay, so Ken, I was reading the verbiage, some of the stories ahead of what happened with the pandemic. There were some people who questioned whether you could maintain that large dividend. Had you not had this spurt, would it have been under consideration that maybe the dividend had to be cut?

Kenneth Keller3:17

Jim, as you know, this company was built to grow through creative acquisitions of high margin, good cash flow brands and used a significant amount of that cash flow to return to shareholders. So management and the board, and as I became CEO, believe you me, the board made sure I was totally committed to the company's strategy of paying a significant portion of our free cash flow out as a dividend. So while we ran into a little tightness last year because of working capital investments, we had a plan to not just more than cover our dividend but also begin to chip away at our leverage level because we got a little higher than what most people were comfortable with.

Jim Cramer4:03

Yeah, it's interesting. As you said, I studied the company for a long time, and the Green Giant acquisition I always thought was a steal. But what's happened with these line extensions that you've done, and I know you're gonna do more frozen, maybe keep can, but this is such, it can be such a dominant brand. I wonder whether you need so many other brands. Do they take up too much of your mental time?

Kenneth Keller4:27

Well, you know, that's a question that people have been asking me ever since I arrived at B&G. And you know, we have a great stable of steady Eddy brands that are so consistent in performance and generate a lot of cash flow. So we don't see many of them distracting us. And you know, we're a serial acquirer, we don't have that hang out the for sale sign all that much. But Green Giant now is a significant portion of our business, a third of our business, and it's our largest brand, and we plan for it to continue to be our fastest-growing brand. And as you can see, these new products, and you know we love cauliflower, we think it's the magic ingredient. We're line extending and offering new products not just to reinvent frozen vegetables but to take plant-based, vegetable-forward products and go after carb replacements. So our veggie rice and our cauliflower tots and now our new veggie hash browns and cauliflower gnocchi, these are all not just new vegetable products but new products made from vegetables, and we're very excited about that pipeline.

Jim Cramer5:29

Hats off to B&G. I wasn't here, and they did it when they really bought Green Giant in the fall of 2016 and launched those new products. Those first new products since 2016 have cumulative leading dollars in retail sales, and that's just the first three segments. So our innovation pipeline as far as the eye can see is something we're very excited about, and the Green Giant brand can really carry it off.

Kenneth Keller5:53

Now some of them, I mean I happen to love the old London because I was growing up and that's what my mom served, and I love all the different flatbreads that you have. But I thought that this Back to Nature was very much in keeping with what I'm seeing with Beyond Meat. So you've got whole ends of the supermarket now that you have a good placement.

Jim Cramer6:14

You know, Jim, we are actually in over 80% of households with at least one B&G brand. We are in actually every food aisle of the store and actually one non-food aisle. We actually have Static Guard, that's our one non-food product. So we're in every aisle of the store, we're in a lot of households, and we're just beginning to scratch the surface of how we can cross-promote products. So for instance, we'll be launching a line of Green Giant frozen vegetables made with Mrs. Dash inside, so you don't even have to add it on your own. So there's so much more we can do with this great portfolio of brands. And not all brands are going to be treated equally. We're gonna really lean in on about a half a dozen of our brands to drive growth, like Green Giant, Ortega, Mrs. Dash, Back to Nature. And then there's a whole bunch of brands that are just steady Eddies that are maintenance, that turned into very high consumption during this crisis, and we're open now to show a little bit more organic growth in the future than they had in the past because we are seeing that new households are entering into our franchise and they're repeat purchasing. So what we've seen, other than that little blip in March, we're not seeing pantry loading. We're seeing car loading, refrigerator and pantry loading, and then consumption and back for more.

Well, I like that stock. Hit a high today, that 8% yield. Ken, so great to have you. And we had so many people ask you about the stock for a long time. We didn't know enough. Now we know, and it's great to see you. Thank you so much. Ken Romanzi, President and CEO of B&G Foods. Good to meet you, sir.

Kenneth Keller7:43

Thank you so much. It's a real pleasure.

Jim Cramer7:47

Well, guys, look, it's in my house, it's in my executive producer Regina's house, and I think that some of these products are here to stay. Many of them, and many of them I've always been using. Their buddies back in.