B&G Foods’ sale of Pirate Brands, including the Pirate’s Booty, Smart Puffs and Original Tings brands, to The Hershey Co. for $420 million was pivotal in efforts to reduce its debt to fuel a bold acquisition strategy.
“One of my biggest goals has been to ensure that B&G Foods remains ready and able to continue our acquisition strategy,” said Robert Cantwell, the company’s president and CEO. “By selling Pirate Brands at a very attractive multiple and using the net proceeds to reduce long-term debt, we will significantly reduce our leverage, which positions us very well for future acquisitions.”
As Hershey seeks to build its better-for-you snack portfolio, B&G saw the opportunity it had with Pirate’s Booty, which saw a net sales increase of about $9 million or nearly 55% to
$25.2 million in second quarter 2018. Despite a slow start in the first quarter, sales are now up approximately 10% for the first six months of the year, and positive long-term growth is likely for the brand.
B&G is seeing acquisition growth and base business sales, which were up more than 3%, impact its top line growth, up nearly 7.5% compared to the same period in 2017, Cantwell said. One such brand that the company has benefitted from is McCann’s Irish Oatmeal.
“It’s a small brand, but we love it, and what it stands for in the category dynamics,” Cantwell said on a second-quarter earnings call Aug. 2. “McCann’s is a great addition to the type of high- margin brands in our portfolio that we expect to continue to support our free cash flow model for years to come.”
The company will aggressively pursue well-positioned brands from the center of the store or the frozen category, Cantwell noted. “We’re always out looking for certain opportunities, but especially over the last three years or four years as more acquisitions have become available.”
B&G is increasing pricing and cutting costs to better position itself for acquisitions, expecting $12 million to $15 million of incremental benefits from its pricing initiative, said CFO Bruce Wacha.
For the full story, go to this week’s Food Institute Report.
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Chris is a business writer and market analyst that focuses on the Markets, Legal and Washington sections of the Food Institute Report. In addition, he assists in compiling data for various Food Institute publications throughout the year. He invites you to contact him via email at email@example.com to talk about anything food-related.
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