Q3 2021 B&G Foods Inc Earnings Call
[music].
Good day and welcome to the BMC Foods third quarter 2021 earnings call.
Today's call, which is being recorded is scheduled to last about one hour, including remarks by P&G food management and the question and answer session I would now like turn the call over to Sarah drilling senior director of corporate strategy and visit the business development for being Chi Foods Sara.
Good afternoon, and thank you for joining us with.
With me today are Casey Keller, our Chief Executive Officer, and Bruce <unk>, Our Chief Financial Officer.
You can access detailed financial information on the quarter in the earnings release issued today, which is available at the Investor Relations section of the seafood.
Before we begin our formal remarks I need to remind everyone that the discussion today includes forward looking statements.
These statements are not guarantees of future performance and therefore undue reliance should not be placed upon them.
We refer you to PNG food. Its 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.
P&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 adjusted EBITDA before COVID-19 expenses adjusted net income adjusted diluted earnings per share 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 the remainder of fiscal 2021.
Bruce will then discuss our financial results for the third quarter as well as expectations for 2021.
I'd now like to turn the call over to Casey.
Good afternoon. Thank you Sarah and thank you all for joining us today for our third quarter earnings call.
The company's performance in the third quarter was strong.
Base business net sales, which excludes chriscoe grew at plus nine 2% versus the same period two years ago accelerating from plus 7% in Q2.
With the addition of Chris go our Q3 2021 net sales are ahead of last year's Covid period.
Bruce will talk categories and brands later, but we are generally seeing strength across the portfolio.
Most of our key categories performed well when compared to 2019 as pre pandemic third quarter results.
Net sales of green giant and spices, and seasonings were up double digits compared to 2019.
Net sales of Ortega and Las Palmas, our two leading Mexican food brands were up high single digits compared to 2019.
Our banking brands also had a strong performance for the quarter compared to 2019 led by Chriscoe Clabber girl Bakers Joy et cetera.
While demand was strong resulting in elevated sales. We're also managing through many of the same challenges to supply chain and cost that have plagued the industry.
Inflation in full year 2021 is in the mid single digits with a second half increasing to a double digit increase across the portfolio.
As discussed last call inflation on Chris <unk> was significantly higher than the base portfolio given the major increases in soybean and canola oil.
We have responded with significant price increases where appropriate raising list prices <unk> optimizing trade to directly offset higher input costs.
While we did act early to identify and address inflationary pressures. The majority of our price increases are effective in the second half with the largest increase on Chris go effective at the end of September.
We project continued inflationary pressure into first half of 2022.
And we will price to recover a year over year cost increases. Additionally, we are driving aggressive cost optimization efforts to offset continued inflation.
Yes.
From a supply standpoint, we continue to deal with shortages in packaging materials freight delays in contract manufacturing capacity.
However, overall customer service levels are improving in recent weeks aided by lifting allocations on green giant skus with the new crop back.
Our goal is to manage our business to stable steady margins for the current portfolio. The goal is roughly an 18% adjusted EBITDA margin with pricing and productivity actions recovering cost pressures on margins.
Longer term our goal is to improve to a 20% adjusted EBITDA margin with accretive M&A efficiencies and some base business organic growth.
In the near term inflation will make that more challenging but we believe that is the right target for this business.
During the third quarter, we successfully completed the integration of Chris go and I want to congratulate our team for a smooth transition.
Chris <unk> is our second largest acquisition and we are happy with the performance year to date under our ownership despite some volatility in commodity prices.
In August we also announced that we reached an agreement to sell our Portland, Maine manufacturing facility.
We expect the sale to close during Q1 2022.
While shutting a factory is never an easy decision it became clear the 100 year old Portland facility had reached the end of its useful life and was no longer cost competitive.
The site will become the future home of the <unk> Institute at northeastern University, which is a great outcome for the Portland community.
We also continue to make investments in our existing facilities include.
Including a new high Tech automated line in the Ankeny, Iowa, spices and seasonings facility.
As well as new lines at our Hurlock, Maryland, and Yadkin avail, North Carolina facilities to increase our capacity for Ortega, Taco sauces, and Taco shells, respectively.
So finally after four months in the business I wanted to share the key priorities and choices that we the PNG team are laser focused on <unk>.
First.
Managing P&G foods effectively through the current inflationary and pricing environment.
Second improving organic growth performance beyond Covid recovery.
Third focusing on brands and categories, where we have the capabilities scale and right to win in terms of both resources and structure.
Fourth making disciplined acquisitions that are accretive to our portfolio and fit with our core expertise in center store dry distribution.
Fifth accelerating cost savings and productivity efforts to eliminate non value added cost and strengthen margins.
So more to come on those in future calls and discussions including specific plans and updates.
I will now turn the call over to Bruce for a more detailed discussion of the quarter Bruce.
Thank you Casey and good afternoon, everyone.
As Casey mentioned, we added a strong financial performance during our third quarter, despite a very challenging operating environment.
Net sales continue to be elevated and are tracking closely to the initial set of assumptions that we use to create our annual budget for fiscal 2021.
Similar to our plan for the year, we are showing an acceleration in net sales growth as we go through the year when compared to last last year in our pre pandemic 2019 numbers.
As we continue to work our way through the balance of the year. We are approaching a period that we expect to be more similar to last year still not quite normal with more Americans eating at home more frequently than they did pre pandemic.
But also no longer lapping the height of the pantry loading that coincide with the early days of the pandemic.
The result is that after adjusting for the impact of Frisco and the impact of an extra week in last year's third quarter, we not only have a net sales increase compared to 2018, but we also have sales trends that are much more similar to those during last year's COVID-19 enhanced third quarter.
Separately, but not entirely unrelated industry wide supply chain challenges and input cost inflation has served to cap some of the upside that we would otherwise be seeing as a result of this robust demand.
With some of our brands. This means that sales could be higher apps in out of stocks for certain items.
For many of our brands, we have the sales, but margins are challenged relative to what we typically expect from the portfolio.
Input costs across our portfolio generally continue to be up mid single digits for most products with extreme cases for certain products like soybean and canola oils transportation and now cans, which were all up double digits.
And like virtually everybody.
And the food manufacturing industry, we are aggressively increasing price, where appropriate plus cutting costs, where possible to protect profitability and ensure the long term viability of our margin structure.
Now for the third quarter 2021 highlights.
We reported net sales of $515 million adjusted EBITDA before COVID-19 expenses of $96 4 million.
Adjusted EBITDA of $96 $2 million and adjusted diluted earnings per share of <unk> 55 minutes.
Adjusted EBITDA, both before and after COVID-19 expenses as a percentage of net sales was 18, 7%.
Net sales of $515 million was up $19 2 million or three 9% from Q3, 2020, and up $108 $7 million or 26, 7% from pre pandemic 2019.
Frisco, which we acquired in December 2020 generated $71 2 million of net sales in Q3, Q3, 2021 ahead of our forecast for the quarter and well ahead of our understanding of 2019 net sales for the same time period under prior ownership.
Base business net sales, which primarily excludes chriscoe decreased by $52 1 million or 10, 5% in the third quarter of 2021, when compared to the third quarter of 2020.
As a reminder, when comparing to our previous performance in our base portfolio Q3, 2020, not only included COVID-19 enhanced sales, but also the benefit of an extra week due to the timing of our 50 <unk> week in 2020, which we estimate benefited net sales for the third quarter of 2020 by approximately 30.
$5 million.
Yes.
The negative comparisons to 2020 are driven by a decline of $68 $5 million in unit volume, which is offset in part by $14 $5 million benefit from increased net pricing inclusive of list price increases trade spend optimization and a little bit of mix.
Foreign exchange added $1 $9 million of benefit.
On a year to date basis, the cumulative benefit of net pricing and mix as approximately $27 3 million.
Base business net sales, which primarily excludes chriscoe were up nine 2% compared to 2019, representing a two year compound annual growth rate of four 5% over our pre pandemic net sales.
Our base business net sales growth in the third quarter of this year represents continued sequential acceleration in growth versus 2019 relative to our performance in this year's first and second quarters.
We generated adjusted EBITDA of $96 $2 million in the third quarter, a decrease of $8 4 million or eight 1% when compared to the prior year period.
But an increase of $10 million or 11, 5% compared to 2019.
The decrease in adjusted EBITDA versus Q3, 2020 was largely driven by the reduction in base business volumes, coupled with increases in input costs, including materially higher costs for raw materials factory labor and other costs transportation and warehouse spending and one fewer reporting week.
These costs were offset in part by locking in places through short term supply chain contracts.
Advanced commodities purchase agreements.
Lamenting cost savings initiatives, coupled with list price increases trade spend optimization and the addition of Chris go to the portfolio.
Adjusted diluted per share.
With 55 in Q3 2021 compared to <unk> 74 per share in Q3, 2020, and 54 per share in Q3 2019.
The majority of our key brands had declines in net sales when comparing Q3 2021 to Q3 2020.
However, approximately two thirds of the decline resulted from one fewer with 40 weeks of net sales in Q3 2021 versus Q3 2020.
The majority of our brands had substantial increases in net sales when comparing Q3 2021 to Q3 2019 and.
In some cases for brands like Ortega, and our spices and seasonings business, which were up compared to 2018, the upside was capped by limitations on production.
In other cases for brands like back to nature, and New York style supply chain constraints resulted in declines in net sales when compared to prior years.
Net sales of Ortega were $37 $6 million in the third quarter of 2021 represented increase of $1 6 million or four 2% compared to the third quarter of 2020, and an increase of $2 6 million or.
It was seven 3% when compared to the third quarter of 2019.
If we had unlimited manufacturing capacity net sales growth for our CAGR would have been even higher.
Demand for Ortega Taco sauce, Taco shells, Taco seasoning and its also remained very strong and as KC said previously this is a category and a brand that we will continue to invest in and where we believe that our recently added capacity for source shells and seasonings will lead to increased performance in 2022.
Net sales of Las Palmas were $9 1 million in the third quarter of 2021, representing an increase of $2 5 million or 37, 1% when compared to the third quarter of 2020, and an increase of <unk> 6 million or seven 3% when compared to the third quarter of 2019.
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Last year Las Palmas was an early harbinger of the industry wide supply chain was that we continue to see today and as you may recall that last year. At this time, we are unable to fully meet demand for <unk> sources.
For Las Palmas. These issues have fortunately been resolved this year, which helps to account for the large increase versus Q3 2020.
Yes.
Spices and seasonings continues to be one of the leading drivers of our portfolio net sales of our spices and seasonings, including our legacy brands, such as accident and dash and the brands that we acquired in 2016, such as tunes and Weber were approximately $92 9 million a.
A little bit less than 20% of our total company net sales for the quarter.
Net sales of spices, and seasonings were down by approximately $14 million or 13, 1% compared to Q3 2020.
The shortfall is driven primarily by capacity constraints as demand outran, our supply and manufacturing capacity.
While this phenomenon is getting better and we expect will be alleviated in part by some additional capacity that we have coming on in the fourth quarter of this year or in early 2022.
We are also lapping a massive quarter for spices and seasonings in last year's third quarter.
When comparing Q3 2019 net sales of spices, and seasonings were quite strong and it increased by approximately $10 3 million or 12, 5%.
We are now largely through the 2021 pack season, and fully cutoff on supply for Green giant.
The result is an acceleration of performance beginning in the second half of the third quarter and continuing today.
Green giant generated net sales of $141 2 million in the third quarter of 2021.
While down $17 million or 10, 7% when compared to Q3 2020.
Is up $20 9 million or 17, 4% when compared to Q3 2019.
Assuming a healthy holiday season in November and December we expect continued strength for green giant net sales through the fourth quarter of this year.
Among our other large brands Maple Grove farms, which generated $22 million of net sales for the quarter was down $5 million or two 4% compared to Q3 2020.
$2 7 million or 15, 3% compared to Q3 2019.
Similarly cream of wheat, which generated $15 2 million and net sales for the quarter was down $1 2 million or seven 4% from Q3, 2020, but up $1 2 million or eight 5% compared to Q3 2019.
We generated $105 7 million and gross profit for the third quarter of 2021 or 25% of net sales.
Excluding the negative impact of a $14 $1 million accrual for the estimated present value of a multi employer pension plan withdrawal liability that we expect to incur upon the closing of our Portland manufacturing facility.
And $2 8 million of acquisition divestiture related and nonrecurring expenses, including cost of goods sold during the third quarter of 2021.
Gross profit would have been $122 6 million or 23, 8% of net sales.
Gross profit was $136 million for the third quarter of 2020 or 27, 4% of net sales.
Excluding the impact of $1 1 million of acquisition divestiture related and nonrecurring expenses included in cost of goods sold during the third quarter of 2020 gross profit would have been $136 1 million or 27, 5% of net sales.
During the third quarter of 2021 gross profit was negatively impacted by higher than expected input cost inflation.
Including materially increased costs for raw materials.
<unk> expenses in transportation.
We have attempted to mitigate the impact of inflation on gross profit by locking in prices through short term supply contracts and advanced commodities purchases agreements and by implementing cost savings measures.
As discussed earlier on the call. We also executed list price increases and reduced trade promotions for certain products.
The short term result is that margins have been cross compressed relative to what we expect the business to generate in the short term and while this trend may continue into our fourth quarter and early 2022, we do expect our efforts to return the business to its historic margin profile over time.
Selling general and administrative expenses were $46 4 million for the quarter or 9% of net sales.
This compares to $43 4 million or eight 8% for the prior year and $38 1 million.
Dollars or nine 4% in the third quarter of 2019.
The dollar increase in SG&A compared to year ago levels is almost entirely driven by a $3 $5 million increase in warehousing costs, coupled with $3 3 million in incremental acquisition related and nonrecurring expenses, which primarily relate to the acquisition and integration of the Crystal brand and the sale of our portal.
<unk> facility.
The increase in warehousing costs was primarily driven by the <unk> acquisition and customer fines relative to COVID-19 shortages and delays.
These costs were partially offset by decreases in selling expenses of $1 $7 million.
Senior marketing expenses of $1 2 million and general and administrative expenses of $1 9 million and one fewer reporting week.
As I mentioned earlier, we generated $96 $4 million and adjusted EBITDA before COVID-19 expenses and $96 2 million and adjusted EBITDA in the third quarter 2021.
This compares to adjusted EBITDA of $104 6 million in Q3, 2020, and $86 2 million in Q3 2019.
Interest expense for the quarter was $26 6 million.
Compared to $26 4 million in the third quarter last year the primary.
The driver of the increase in interest expense was the acquisition of Chriscoe, which as you may recall was financed in its entirety with a combination of revolver draw and incremental term loans.
The revolver currently costs us a little less than 2% and interest and the term loans, a little less than 2% and three quarter percent.
Yeah.
Depreciation and amortization are also up year.
Year over year, driven primarily by Chriscoe depreciation expense was $15 3 million in the third quarter of 2021 compared to $10 9 million in last year's third quarter.
Amortization expense was $5 4 million in the third quarter of 2021 compared to $4 7 million in last year's third quarter.
We are tracking to an effective tax rate of approximately 26% to 26, 5% for the year with taxes, a little higher in this year's third quarter due to some discrete tax items at an effective rate of 26, 8% for the quarter compared to 24, 7% in last year's third quarter.
We generated 55 and adjusted diluted earnings per share in the third quarter of 2021 compared to <unk> 74 per share in Q3, 2020, and <unk> 54 per share in Q3 2019.
We remain encouraged by these trends.
Despite tough comparisons against 2020, and continuing supply chain challenges driven by the ongoing COVID-19 pandemic.
We still expect to achieve company record net sales for the year of two 5% to $2 1 billion.
Seeing a mid single digit increase in net sales compared to 2020 and a mid single mid to high single digit increase in base business net sales compared to 2019.
And while adjusted EBITDA margins will remain challenged this year due to higher than expected input cost inflation, including increased costs for raw materials factory costs transportation and warehouse costs. We also expect to generate adjusted EBITDA of $358 million to $365 million per year.
Also similar to what we discussed last quarter, we expect the following for full year 2021.
Interest expense of $105 million to $110 million, including cash interest of $100 million to $105 million.
Depreciation expense of $60 million to $65 million.
Amortization expense of $21 million to $22 million.
And an effective tax rate of approximately 26% to 26, 5%.
I'll now turn the call back over to Casey for further remarks.
Thank you Bruce.
As I said at the beginning of the call we had a fairly strong quarter. Despite lapping elevated COVID-19 demand and an extra week in Q3 2020.
We remain on track to deliver the mid to high single digit growth against 2019 that we set as a target for the year.
And we continued to implement pricing actions to offset inflation in the portfolio.
This concludes our remarks and now we would like to begin the Q&A portion of our call operator.
One thing to remember here is that we took some pretty significant pricing actions which were.
Which were fielded in Q3, but really are not becoming effective until the very end of this quarter.
September late late September for the Chriscoe, which is obviously our biggest increases in cost and pricing and also a number of our portfolio pricing actions, which are becoming effective in the middle of October. So I guess, one thing I would say is that the flow of course started coming into our P&L in Q3.
But the real big flows pricing are coming in mostly in queue for.
That's a little bit of I think a change may.
Maybe from the flow of how Q3 and Q4ego in the past.
And in terms of the supply disruptions.
Would say, we did have significant supply issues in Q3.
Our service levels went down a little bit in Q3 from Q too, but the most of our most recent weeks we've started to recover some of our supply.
Some of our customer service rates and some of them are supply issues are beginning to get better.
I'm Gonna get sense again of the flexibility right on the balance sheet from the dividend and such and how you see that thanks so much.
Yeah, and leverage not seven times based on our covenant to different calculation.
Actually close to six six.
649 times I think.
Just a couple reminders third quarter is is really the finish of the Pac man.
And so when we think about inventory and working capital and leverage it usually peaks in the third quarter.
As far as where it is for the rest of the year and.
And we mean getting heavy this year when you think about some of the issues that we suffered.
Last year, the demand was extraordinary for some of our green giant products, but we didn't have enough inventory and you had to go on allocation. The demand continues to be incredibly strong for green giant, particularly on the shelf stable side and as a result plan. This year was to <unk>.
Lean into that pack plan part one to restore some of the inventory that we didn't have.
At the tail end of last year's pack plan. So we were starting from a lower safety.
<unk> standpoint, and then lean and a little bit more so we had the capacity to satisfy the demand that were seating and that's our expectation and that's part of why the trends and green giant are accelerating particularly on the on the shelf stable side, whereas we were running on fumes at the end of last year or at the end of the second quarter.
And the only other thing I would say that Andrew or is that obviously there is a b as the higher cost higher cost flow into our inventories, where we have we have an inflationary inventory adjustment guilani Q3, because that's probably the predominant step up that we're going to have that are working capital.
So it's the green giant pack.
Which we took the pack and frankly, we're selling very nicely against that starting in the fourth quarter and it's the step up in the the evaluation of our inventory at the higher inflationary costs.
Alright, Thank you both so much.
Sure.
Your next question will come from the line of William Ruder with Bank of America. Please go ahead.
Good afternoon.
Good luck with that.
Hi, given the volatility with a lot of these.
In terms of your locking in prices for some of the next year have you started doing that I guess.
Some of these may be coming down over time, So I guess what has been your comfort with trying to I.
I guess take risk and some of them.
Really depends on the category and so there's there's some things.
Strange and Thats the goal when it comes to evaluating M&A, we've got to evaluate opportunities in that context and.
The obvious answer to your question is at current leverage and today.
If we were going to look at something in the M&A world. It would either have to be a relatively modest sized transaction.
It would have to be structured so that it wasn't increasing our leverage both from a purchase price and valuation standpoint, and then also from a mix of how we funded it.
And the answer here.
Near term the near term question, we would like to get leverage down below <unk>.
Six or below in the first and second quarter of next year.
Great very good to hear and I'll pass to others. Thank you.
Your next question comes from line of Michael Lavery with Piper Sandler. Please go ahead.
Thank you good evening.
Hey, Michael.
Just wanted to come back to some of them.
Mix dynamics and touch on the mix piece, maybe a little bit related to elasticity or.
Which categories, you are taking pricing in versus others, but any mix shifts you would expect or that you can flag and maybe what you've seen from some of the pricing so far or just.
Just anything we should be watching out for as we think about modeling the next few quarters.
Yes, I think I know, Andrew asked us and we didn't answer it but I think it is it's probably important to talk about elasticity because on the last call. We said, we're taking some sizable increases on some of these businesses based on input costs.
And it's pretty early days on the the significant increase as I talked about becoming effective in September and October, but I would say early on we are seeing.
Lower elasticity than we originally forecast.
But it is early days so in other words, we had modeled out a little bit higher elasticities, but now that we've seen a lot of industry movement in food and we've seen frankly private label and other branded businesses moving and many of our categories, where we're seeing lower elasticities than a little bit.
Sure less busy than what we originally expected.
Okay.
Okay. That's helpful.
Just back on some of the fourth.
Fourth quarter implied.
The implied fourth quarter outlook.
It's historically been.
A quarter that tends to have some of the most surprises and.
Like Andrew also touched on it clearly got some.
Unusual volatility at the moment. So can you help us understand maybe what you are okay.
I know you laid out some of the reasons youre pointing to build the numbers, but what youre sort of conservatism is or level of confidence relative to prior years and just how to think about what cushion there might be in your in your numbers.
I mean, we gave the guidance numbers for this for the year and obviously, we felt confident enough to give those numbers it implies a fourth quarter.
To answer your question to make sure there is.
We're in a uncharted territory is still in terms of the dynamics in the world and what's going on in Covid.
We hadn't had an EBITDA guidance for this year until this quarter. We felt it was appropriate to do so going into the fourth quarter.
I would say two things one is.
October is off to a good start.
In the fourth quarter.
And the other thing is I think we provided guidance, which.
Thus, we feel there is a little upside to the consensus.
Okay, great. Thanks, so much.
Your next question comes from the line of Peru, Martinsen with Jefferies. Please go ahead.
Good afternoon.
By sensing anything like our Yadkin build plan in North Carolina to get to full staffing by offering incentives and.
Some different some different.
Schedules and other things to be able to get ourselves back up to full staffing, but I think almost everybody in the industry is dealing with this right now.
And you read about the labor shortages. So it's something we have to manage through I am concerned about it but.
We don't have we don't have facilities, where I would say were severely under staff. We're just we're just not at the full staffing levels, we would like to be at.
Thank you very much guys I appreciate it.
Thanks Kurt.
Our next question comes from the line of Carla Casella with Jpmorgan. Please go ahead.
Hi, I'm, just curious how much of the inventory increased significantly sequentially as well as year over year and I'm. Just wondering can you give us a sense for how much of that is just the cost built into it or if youre actually keeping.
Extra stock.
In any products it sounds like insurance short everything but.
Any FSA any details you can give there would be great.
Yes, there is there's really three parts to that.
Just in terms of context last year through the third quarter, we increased inventory by about $7 7 million.
This year, we increased it by $177 million.
That's kind of the context for the numbers and the.
The reasons for that last year in the second quarter and really the tail end of the first quarter.
We were sitting on inventory and due to the inventory. We had we were able to fulfill most of those curve itself and not really worried about supply chain problems and so we liquidated a lot of inventory in the early days of Covid and the peak of Covid and then we had our pack plan restore some of that for green giant this year.
We had to build that inventory I don't have the specific numbers broken out in terms of what was inflation versus what was.
What was loading up on new inventory.
Certainly we've talked to the inflation that we're seeing in the full.
Full year and kind of what we expect for the back year. So that should give you some context, but we typically load up on inventory and we've got large purchases for the pack plan and then in other areas, where we think that there is inflation coming we also.
<unk>.
Bought ahead of some of those cost increases and where were concerns around supply chain. We also bought early to make sure that we have the quantity to get us through to the end of the year.
That's kind of the plan and so.
Peak level of inventory for the year in the third quarter like it normally is.
But this year.
Even higher just because of the world that we're living in.
So just to simplify that simplify that I'm.
I am sorry.
Yes. This is Casey starting to simplify that answer I would say half more than a little more than half. The increase is from the cost from cost going up inflation in terms of the value of the inventory.
So how much the out of stocks or the.
How much that took some sales.
Did you say significant but did you give any kind of quantification.
We did not.
Okay. Thank you.
Your next question will come from the line of Eric Larson with Seaport Research partners. Please go ahead.
Yeah. Thanks, Thanks for taking my question. So my question again is on Green giant and.
I guess so.
I guess the real question is you now have some inventory, but youre demanded.
It's still really strong, particularly shelf stable.
Both retail takeaway.
Is there a risk that you.
I don't have enough inventory, you're getting this year and are you rebuilding retailer inventories are they still pretty low are you shipping ahead of consumption or how should we kind of look at that whole dynamic and I guess, that's the retail demand that continues to surprise us.
So we would hate to run out of product, but it would be a nice problem to have as we sold through all of our inventory at an extra attack.
Like I said, we leaned in pretty heavy this year, we're confident that we've got the sales come into.
Sell through all of that inventory, but.
But that was a conscious bet that we made.
This is in the frozen side of the business our retailers don't have a lot of inventory.
This is in that category of product that we're really rebuilt heavily so yes, there was a little bit of repricing probably in the late September time frame.
But what we're seeing is pretty solid demand on green giant and we're shipping very nicely in the first part of the first quarter the fourth quarter.
And as Bruce said, we we always expect to sell through the inventory that we that we get in the pack.
At the end of Q3.
We sell through.
Pretty pretty consistently.
We do get some additional pack in the spring. So we'll have some some vegetable categories coming back in the spring that will do but a lot of things we're going to have to manage for the next several quarters.
Okay. Thanks.
<unk>.
Help me out on this and you may have talked a little bit about this.
I think that demand yet ortega.
Is stronger than your ability to meet that demand is that the only product line or do you have several others, where youre still.
Modestly.
Brand by brand you can find areas, where you just wish you had more product, yes, I think there's two constraints that we're working through one is kind of <unk>.
Packaging materials are.
Applies the canisters first data garden Chriscoe sprays in some cases, it's caps and capsule liners for spices and seasonings and then there is where we have real constraints.
We just took green giant off allocation, we've talked about that we have a full crop. This year. So we're able to meet that demand, but we're investing in new lines.
On Taco sauce for Tiger and on Taco shells for Tigger, So those will be coming on by the first quarter.
And then we have a new line going into our spices and seasoning facility in the <unk> line to be able to support additional capacity, where we can't support all demand now and that should be coming on in the next quarter. So we do have we have investments in new capacity, but we're also trying to work through material shortage.
To maintain full supplies.
Okay, Great. That's helpful. Thank you.
Okay.
Your next question will come from Ken Zaslow with Bank of Montreal. Please go ahead.
Hey, good evening everyone.
Hey, Kent.
When you talked about the businesses.
And I may be reading into something but I just wanted a clarification.
In the past I don't know five seven years it doesn't it never seemed like there was a thought process of really segmenting out.
Certain brands and investing behind them, a little bit more aggressively.
Branded strength.
We've gotten some procurement expertise in that area.
It's a business that I think we can grow and it's nice margin.
And I think it's a business that we can grow successfully organically, but also look in the future to where we can bring in inorganic growth so and.
Well I mean at some point, we will come out and kind of give you guys a lot more specificity around this but suffice to say that we're going to decide where we want to focus and where we're going to not only invest but put resources and structure ourselves to grow this part of the portfolio and then.
Take the parts of the portfolio that that we'd want to kind of run lean and mean and make sure that we just stabilize but not expect a lot of growth and that put a lot of resource behind.
And the algorithm of that to me, we're trying to get to some topline organic growth and then really find the platforms that we can acquire and grow value.
I think when you begin to segment and you think about this.
Do you think there's an opportunity.
<unk>.
Accelerate your topline growth more akin to other.
Other packaged food companies, rather than kind of keeping it stable.
And then the second part of that and I'll leave it here when you're thinking about your 18% to 20% EBITDA margin is 20% the plateau.
<unk>.
And it was kind of a goal that I see us getting to in the next several several years with improving our mix or growing on the right businesses.
Thinking about what acquisitions are really accretive to our margin profile. So the 20, but I would not be the end point, but I think it's a good goal for us to work towards in the next couple of years.
Okay I appreciate it thank you again.
Your next question comes from David Palmer with Evercore ISI. Please go ahead.
Thanks.
Another question on not Green giant.
The data the IRI data is looking like it's down mid teens on a one year basis in the last quarter.
Obviously, some good reasons for that and what's going to change here in the near term.
With increased shipments and the pricing that you presumably will be taking their.
If youre doing what your plan is what should we be seeing in the IRI data in the coming months, what sort of improvement.
Alright.
Yeah. So we've been look so we're seeing nice growth starting to happen on the business relative to 2019. So that's kind of how we are looking at it how do we build and grow from a 2019 base year over year is a little bit muddy, but I expect that will start showing better trends against last year as well.
But I think you should expect to see us growing verse that two a year ago base and green giant and.
In the fourth quarter.
Got it and I am seeing that and just to be fair re giant was one of the categories and brands that had the biggest benefits from COVID-19.
And so hard to lap some of those numbers.
Until we really get to the to the period, where you are on allocation.
Mmk on two years, we're seeing it down 3% frozen in the last 12 weeks, so you're you're thinking as you can get above back to positive two year versus that.
In the fourth quarter were expecting us to turn positive I think if you look at the most recent weeks, where you mean, we're just.
Getting there.
Got it and you mentioned.
Yeah.
Ladies and gentlemen, this concludes today's call. Thank you for your participation in you may now disconnect your lines.
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Yeah.
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