Summary
- The company's recent brand acquisitions have not helped speed up growth or improve gross margins.
- The effects of coronavirus have helped cement B&G Foods’ core brands and solidify their strength, but this may prove to be short-lived.
- B&G has concerning balance sheet items that may hinder growth in the long term.
- Note: This article was amended on 12/11 to reflect clarifications to the divestiture commentary.
Investment Thesis
B&G Foods Brands, Inc. (NYSE:BGS) has a strong history and iconic brands. It has focused on acquiring new brands as its strategy to growth but faces stiff competition from competitors with greater resources as well as being significantly less leveraged than B&G Foods. For these reasons, we believe B&G Foods will continue to lag in growth despite its stellar performance during COVID-19.
Company Overview
B&G Food Brands is a holding company that was formed roughly 125 years ago. While some people might not be familiar with the name B&G, they will no doubt be familiar with a number of brands under the B&G umbrella, such as Green Giant, Ortega, Weber, and many, many more. The company manufactures its own products and has a distribution channel spanning the United States, Canada, and Puerto Rico. The company's primary operations are the sales and distributions of high-end food products to grocery stores.
Source: Bgfoods.com
B&G's strategy is focused on growth, primarily through growing sales in its iconic brands, but over the last 20 years, its focus has heavily relied on acquisitions for growth. Since 1996 the company has acquired more than 50 brands. The company has quite a few strong core brands that can trace its roots back to the 1800s, but many of its recent acquisitions are newer brands by comparison.
Industry Overview
The United States packaged food industry was estimated at $735.5 billion in 2016 and is expected to grow to $1,197.8 billion by 2025, representing a CAGR of roughly 16%. Assuming the 16% CAGR was accurate and held through 2019, this would mean B&G's 2019 revenues of $1.7 billion represents total market share of only .14%. It's important to note that this category contains many different types of foods and drinks, with soft drinks being a major leader.
