Q2 2025 B&G Foods Inc Earnings Call
Good day, everyone, and welcome to the B&G Foods Q2 2025 earnings call.
Today's call which is being recorded, is scheduled to last about 1 hour, including remarks by B&G Foods management and the question and answer session.
At this time, I'd like to turn the call over to AJ Schwabe, Senior Associate, Corporate Strategy and Business Development for B&G Foods. AJ?
Good afternoon and thank you for joining us.
with me today are Casey Keller, our chief executive officer and Bruce Waka, our Chief Financial Officer
You can access detailed financial information on the quarter in the earnings release, we issued today which is available at the investor relations section of BG foods.com.
Before we begin our formal remarks, I need to remind everyone that part of the discussion today includes forward-looking statements.
These statements are not guarantees of future performance and, therefore, should not be placed upon them under Alliance.
We refer you to B&G Foods' 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.
DG 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 Evac.
Segment adjusted EVA, adjusted net income, adjusted diluted earnings per share, adjusted gross profit, adjusted gross profit percentage based on business net sales, and segment adjusted expenses.
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 2025
Bruce will then discuss our financial results for the second quarter of 2025 and our revised guidance for fiscal 2025.
I would now like to turn the call over to Casey.
Good afternoon. Thank you, AJ. And thank you all for joining us today for our second quarter 2025 earnings call.
Today, I will cover an overview of second quarter performance.
Results.
Recent investors and portfolio shaping efforts.
and the outlook for the remainder of fiscal year 2025.
Q2 results: the second quarter demonstrated sequential improvement in trend and performance after a challenging Q1.
Q2 net sales of $424.4 million finished 4.5% down versus last year, with base business down 4.2%.
Q2 adjusted, Evita was 58 million down 5 million dollars or 9.3% versus last year.
Some of the key drivers.
Almost all of the adjusted ebit to decline was driven by the Frozen and vegetables business unit.
With segments adjusted, ebita down 6.5 million versus last year behind higher true-up costs on last year's wheat, crop specifically corn and peas.
Higher trade, spend from Easter April timing and the end of the Walmart roll back to improve core velocities.
These costs will lap and are expected to reverse in the second half.
The specialty business unit experienced significant net sales declines of 8%, primarily due to lower Crisco oil pricing year-over-year, consistent with our pricing model.
Segment, adjusted ebit, uh, improved by 3%.
The dest of the Don papino and scalp. Any Brands, during the latter, part of the quarter removed, approximately 1.4 million of net sales, and some modest profit.
Portfolio deves.
B&G Foods is making good progress in reshaping and restructuring our portfolio to sharpen Focus, simplify the business, improve margins, and cash flow and maximize future value creation.
The endgame is to create a more highly focused being G foods with adjusted ebita as a percentage of net sales approaching 20%.
Increase cash flow, generation lower leverage closer to 5 times, a more efficient cost structure.
And clear synergies within the portfolio.
During the second quarter, we completed 2 key destur.
first the dawn pup Pino and scalfani devest signed and closed in May
this is the Tomato processing business with about 14 million dollars in annual net sales with a dedicated Factory.
Second the lour US canned peas. The best served sign and close last Friday.
Lure has approximately 36 million in annual, net sales in the US with a premium positioning in canned vegetables.
Both businesses have relatively High working, capital needs.
Highly seasonal production and were isolated. In terms of the rest of the B&G Foods portfolio, particularly after the destruction of the Green Giant's canned vegetable business in late 2023.
We expect additional investors in the future to further focus the portfolio and reduce leverage.
Beyond lure, we continue to evaluate and pursue the potential of the Green Giant branded business in U.S. Frozen, and Canadian Frozen and shelf-stable.
The remaining businesses in the Frozen and vegetable vegetables, business unit.
Fiscal year. 25 out.
We expect the back half of fiscal year 2025, Q3 and Q4, to show solid improvement versus the first half trend.
Flat to slightly positive in net sales, with year-over-year growth in adjusted EBITDA.
The key assumptions behind the latest estimate.
The 53rd week is expected to add plus 2 to 3%. Net sales growth in Q4 a partial week benefit, excluding the impact of the 53rd week, based business. Net sales are projected to be down approximately 1 to 2% in the second half.
July and early August sales are consistent with that expectation, improving from the Q2 trend.
As discussed last quarter, additional savings and productivity, efforts are on track to deliver an incremental $10 million in adjusted ebitda growth in Q3 and Q4 with an annual run rate of approximately 15 to 20 million.
These include additional productivity and cogs trade in Market, spending efficiencies accelerate, the sgna savings and discretionary spending cuts.
The US frozen vegetables, business is expected to turn profitable, roughly a plus 10 8 to 10 million dollar increase in segments, adjusted ebit versus last year, behind more, favorable crop costs for an exchange benefit on the portion of the Green Giant business, manufactured in Mexico and strong productivity in the Aquatic manufacturing facility.
we have assumed tariffs at current levels with some possible mitigation through US trade, negotiation deals,
Alternative sourcing or classification of spices, as unavailable natural resources.
Execute targeted pricing to recover incremental tariffs, with some lag until fully negotiated and implemented.
The largest exposure remains China sourcing of garlic and onion.
We are also adjusting guidance primarily to reflect the impact of our $2 million recently completed investors.
Bruce will provide more detail.
Finally, we are committed to reducing leverage and balance sheet risk.
We expect to reduce leverage to 6 times within the next 12 months by using domestic proceeds and excess cash that we generate through improved adjusted EVA performance and lower working capital needs to repay or repurchase long-term debt.
Thank you. And I will now turn the call over to Bruce for more detail on the quarterly performance and outlook for the remainder of fiscal 2025.
Thank you, Casey. Good afternoon, everyone. Thank you for joining us today.
while we are not satisfied with today's results, we are pleased with the continued progress relative to our challenging starts 2025
For the second quarter of 2025, we generated 424.4 million in net sales, 58 million in adjusted. Eva 13.7, adjusted Evita as a percentage of net sales and 4 cents in adjusted diluted earnings per share.
Overall, net sales for the second quarter of 2025, decreased by 20.2 million or 4.5% to 424.4 million from 444.6 million for the second quarter of 2024.
Base business, net sales, which exclude the Don papino and sclafani brands that were sold. At the end of May decreased by 18.7 million or 4.2% in the second quarter of 2025 compared to the second quarter of 2024.
$14.3 million, or 3.2 percentage points of the decline in base business net sales, was driven by lower volumes.
$4 million or 0.9% points of the decline was driven by a decrease in net pricing and the impact of product mix.
And 0.4 million or 0.1 percentage points were driven by the negative impact of foreign currency.
Approximately 5 million dollars of the decline in net sales in the quarter was driven by Crisco and nearly half of that was driven by net pricing, which was reduced in large part to reflect lower input costs for soybean oil.
As we have highlighted since acquiring this business, our goal for Chris.
Cash flows, regardless of movements in commodity oil prices, continue to be what we have done here.
Outside of Crisco the sequential Improvement in net. Sales performance, was generally broad-based against the portfolio and the business units.
These business net sales for Specialty, which do not include net sales for the Don Pino and Andy Brands, decreased by $10.2 million, or 7.1%, during the second quarter of 2025.
If we remove the impact of Crisco based business. Net sales for specialty, decreased by 5.3 million or approximately 6.6%.
Despite the lower sales during the second quarter of 2025.
Specialty segment adjusted. I was up modestly for the quarter at nearly $1 million, or 3%.
And despite a modest inflationary environment, specialty benefited from lower raw material costs for certain brands, including soybean oil for Crisco and phosphates and cornstarch for Clabber Girl.
Similarly, meals has reasonably solid performance, despite softnet sales performance, net sales of meals declined by 3.8 million, or 3.5% disappointing. For this business unit, but still an improvement from its first quarter performance,
Nonetheless, segment, adjusted Evita was up by 1.8 million or 7.7% for the second quarter of 2025 compared to the prior year period.
Premium wheat returned to growth in the quarter after supply issues, earlier this year. And we had strong performance from some of our other unsung heroes in the portfolio such as lost Palmas enchilada sauce, skinny girl dressings as well as Spring Tree and Vermont meat. Syrups
Net sales of Frozen and vegetables. Also improved, this quarter
Double digits in the first quarter, net sales were down. Just 2.6 million or 2.8% in the second quarter of 2025 compared to the prior year.
Net sales for the lure brand in the U.S. and our entire portfolio of products in Canada increased for the quarter as compared to the prior year quarter.
Additionally, the U.S. Frozen business continues to stabilize after a tough start to the year.
We are proud to highlight that volumes increased for frozen foods and vegetables in the aggregate during Q2 2025, despite tough, but improving, category dynamics.
After a year of challenges around raw material pack costs and an unfavorable foreign exchange dynamic for frozen vegetable products made in our Mexican manufacturing facility, we are pleased to report that this year's pack appears to be significantly favorable.
When compared to last year's pack, negative foreign exchange impacts have moderated, and we are expecting a better cost environment for the business unit, as well as a return to profitability in the back half of the year.
Spices and Flavors Solutions also had a comparably strong second quarter of 2025.
Net sales for the business unit declined by a little bit less than $2 million, or 2 percentage points, in the second quarter compared to the prior year period.
About half of the decline was driven by timing, net pricing and mix within our food service business. And the remainder was driven by modestly softer volumes
Unlike our other center store businesses, Spices and Flavor Solutions faced material increases in commodity costs, particularly for black pepper and garlic.
Separately, our spices business also bore the brunt of our exposure to tariffs about a million dollars of the 1.6 million of total tariff, exposure for B&G Foods in the quarter.
as we prepare for the back half of the year, we expect to manage these cost challenges through a continued productivity initiatives in our spices and flavor Solutions Factory along with targeted pricing where appropriate
Gross profit for our overall B&G Foods business was $87 million for the second quarter of 2025, or 20.5% of net sales.
Adjusted gross profit, which excludes the negative impact of 2.1, million of acquisition to vesture related, expenses and non-recurring expenses, including cost of goods sold during the second quarter of 2025 was 89.1 million or 21% of net sales.
Gross profit was $92 million for the second quarter of 2024, or 20.7% of net sales.
Adjusted gross profit, which excludes the negative impact of 1.2 million of acquisition to vesture related, expenses and non-recurring expenses. Included in the cost of goods sold. During the second quarter of 2024 was 93.2 million or 21% of net sales,
Our material labor and overhead costs. When measured against gross sales were favorable by approximately 100 basis points. During the second quarter of 2025 as compared to the second quarter of last year.
Promotional trade spend, which is captured in our net sales line, increased by approximately 120 basis points and the second quarter of 2025 as compared to the second quarter of 2024. As we continue to invest in Our Brands and attempt to reflect lower prices on shelf for consumers.
The increase in promotional trade spend was also driven in part by the timing of Easter which was in April 2025 compared to March 2024.
Input cost inflation, as measured by raw material costs across our basket of inputs and in our factories has remained, modest, mostly modest this year.
Thus far in 2025 outside of some categories. Such as black pepper, garlic olive, oil Tomatoes, Corvette, vegetables, and cans which have been elevated.
We continue to closely monitor inflation throughout the trade and tariff negotiations.
And, as I mentioned earlier, increased tariffs cost us approximately $1.6 million in adjusted EVA during the quarter, with a little bit more than $1 million of that coming from the Spices and Flavor Solutions business unit.
And the political uncertainty regarding tariffs.
Selling General and administrative expenses increased by 4.1 million, or 9.4% to 47.2 million for the second quarter of 2025 from 43.1 million. For the second quarter of 2024.
The increase was composed of increases in consumer marketing, expenses of 2.2 million and acquisition of estra related and non-recurring expenses of 2.8 million. Partially offset by decreases in warehousing, expenses of 800,000 and selling expenses of
100,000.
Expressed as a percentage of net sales selling General and administrative expenses increased by 1.4 percentage points to 11.1% for the second quarter of 2025 as compared to 9.7% for the second quarter of 2024.
As I mentioned earlier, we generated 58 million in adjusted Eva or 13.7% of net sales in the second quarter of 2025 compared to 63.9 million or 14.4% of net sales in the second quarter of 2024,
net interest expense decreased by $0 million to 35.8 million for the second quarter of 2025 as compared to 37.8 million for the second quarter of 2024,
the decrease in interest expense was, primarily driven by a book gain on the extinguishment of debt during the second quarter of 2025
As a result of our repurchase of $20.7 million aggregate principal amount of our 5.25% senior notes due 2027 in open market purchases, at an average discount repurchase price of 89.98% of the principal amount.
Plus acred and unpaid interest net of the accelerated Amor of deferred debt. Financing costs.
Depreciation and amortization was 615.7 million in the second quarter of 2025, which is largely in line with the 17.3 million in the second quarter of last year.
We had adjusted net income of 2.9 Million or 4 cents for adjusted diluted share in the second quarter of 2025.
In the second quarter of 2024, we had adjusted net income of $6.6 million, or $0.08 for adjusted diluted share.
Adjustments to our Evita net income are described further in our earnings release.
Now, moving on to our consolidated cash flow and balance sheet.
Cash flow continues to be strong this year. We generated $17.8 million in net cash from operations during Q2 2025 versus $11.3 million in Q2 2024.
On a year-to-date basis, we generated 70.6 million of net cash from operations. During the first half of 2025 versus 46.4 million during the first half of 2024,
We have also reduced our net debt to 1.957 billion at the end of the second quarter of 2025.
Proforma for the sale of Lourn was reduced to a little bit more than $1.9 billion at the end of Q2 2025.
And as a reminder, that was $1.994 billion at the end of the fourth quarter 2024 and $2.022 billion at the end of the second quarter 2024.
as a reminder, approximately 35% of our long-term debt is tied to floating interest rates or so for
A 100 basis point reduction would be expected to reduce our interest expense by nearly 7 million annually.
As Casey mentioned earlier, we continue to make progress on our portfolio reshaping efforts. Our recent investments in the Don Pinoy brands in May and now the Lore brand in the U.S. last week are continued examples of the strategy that we believe will make us a more focused and ultimately stronger business. This will also help us to reduce debt and eliminate heavy seasonal pack businesses from our portfolio.
We think that the new owners for both of these domestic businesses will do well, they are great Brands but they are not in line with the focus that we have laid out for the B&G Foods of the future.
The dapino brands contributed approximately 14 million dollars. In net sales over the trailing 12 months, through May, 2025, and approximately 9 million dollars in net sales in June,
Through December 2024.
Although small the brand is profitable, particularly in the back half of the year.
Contributed approximately $36 million in net sales over the trailing 12 months, through June 2025, and approximately $19 million in net sales from August through December 2024.
Like the, do Andy Brands lour us is also a profitable little brand that we believe will do well for its new owner.
As a result of these destroyers, we have revised our fiscal year 2025 guidance to remove their previously expected contribution for the remainder of the year.
We now expect net sales of $1.83 billion to $1.88 billion.
Adjusted EBITDA of $273 million to $283 million, and adjusted earnings per share of $0.50 to $0.60 for fiscal 2025.
Our updated guidance continues to account for a modestly soft economic environment that is impacting consumer spending patterns. It also reflects our expectation that our top line will continue to stabilize and that our input costs will remain relatively consistent outside of any surprises resulting from the ongoing tariff negotiations.
In addition, our guidance incorporates, our cost reduction plans, which we expect will produce approximately 10 million dollars of cost Savings in the second half of the year.
Given the uncertainty in the political environment and the rapidly evolving negotiations regarding tariffs and retaliatory tariffs. Our guidance does not reflect all of the potential impacts of the recently, imposed and threatened, tariffs in the US and retaliatory, actions, taking or threatened by other countries in response or the potential for additional tariffs, trade barriers, or retaliatory, actions by the us or other countries.
As a reminder, more than 90% of our net sales are to customers in the US and the remainder are primarily to customers in Canada.
Approximately 80 to 85% of our products ingredients and raw materials are sourced in the United States, Canada and Mexico.
The majority of our non-North American source products, ingredients, and raw materials, particularly within our Spices and Flavor Solutions business unit,
Originated in Asian countries including black pepper which is primarily sourced in Vietnam, and garlic, which is primarily sourced in China.
Additionally, we expect for a full year, 2025 interest expense of 147.5 to 152.5 million, including cash interest of 142.5 to 147.5 million.
Depreciation expense of 47.5 to 52.5 million.
Amiza tax rate of 26% to 27% and CapEx of $30 million to $35 million.
We are also committed to reducing our net debt and our net leverage ratio over the next 12 months.
We expect to reduce our proforma. Net leverage ratio by at least a full turn from just under 7 times today to less than 6 times by the end or by this time next year, through the 6th, of execution of our dester strategy,
stabilization of our adjusted EBITDA, our excess cash generation, and continued improvements in working capital,
Now, I will return the call back over to Casey for further remarks.
Thank you, Bruce in closing B&G, Foods continues to remain laser focused on a few critical priorities.
Number 1, improving the bass business, net sales, trends of our Core Business, to the long-term objective of plus 1%.
2 reshaping the portfolio for future growth stability, higher margins, and cash flows as well as structuring key platforms for future acquisition growth.
And third, reducing leverage closer to 5 times through the vestures and excess cash flow to facilitate strategic acquisitions.
This concludes our remarks, and now we would like to begin the Q&A portion of our call.
Operator.
Ladies and gentlemen, at this time, we'll begin the question and answer session.
To ask a question, you may press star and then 1 using a touchtone telephone to withdraw your questions. You may press star and 2.
If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality.
once again, in order to ask a question, please press star and 1
We'll pause momentarily to assemble the roster.
With your question.
Thanks, um, Bruce. I think you, you mentioned that the Core Business uh was expected to be down 1 to 2%. I I think, is that your organic?
Sales interpretation of of what you put forward is the revenue for the second half. So down 1 to 2% versus
Um, yeah. So yeah, yeah, based business X, the best years. Um to to be kind of, midpoint of our guidance is down about 1%. After then adding, um, we call it 15-20 million dollars or pick 16 million dollars uh, as as the benefit for the 53rd week which will be in our fourth quarter.
What, what would be and we we look at current trends, the multi-year.
Versus you know, it doesn't look like the comparisons get that much easier versus what we've seen lately. In other words, it looks like we're down.
5-ish in the muo Plus data uh and I know I know you have some improvement that you're hoping to get in Frozen, maybe spices, I don't know but you know help us get comfortable with with that sort of guidance versus to the type of trend. You see now uh going forward.
Yeah, so the the low end of our guy and his like, a down 23%. Um, and if you think about where our performance has been this year, you know, we were down 10 and a half percent first quarter, which is terrible on a base business, we're down 4.2% in the second quarter. Um, we, we had pretty good stabilization towards the tail end of the second quarter in July, you know, starting right for the third quarter. So, you know, that's, that's about where we expect to come out in July and early, August are more in the minus 2% range.
Got it. And and I mean just so we're seeing we're seeing the Improvement already happening in the early part of the third quarter. But but Dave, I do agree that generally there's a correlation between the consumption data and we use Neilson, you know, when our shipments, we expect to see that, you know, continue to get less on favorably or better however, you want to view it.
I mean, we we believe that at some point we're going to lap the the the negatives and the consumer Behavior changes in in our business. Plus we know we can see on some of our business. We have pretty strong plans, so we've we've just got to see it stabilized and we're, you know, kind of
Projecting some improvement in the pack half trend.
Yeah. And I mean I'm just for what it's worth and the in the you know, the iri the the Plus data is showing minus 5% in the last 4 weeks and the last 12 weeks ending, you know that we see but maybe that you're seeing more up to date data than we are.
Um we also have a custom database. We would be a little better than that. Yeah, got it. Um, all right I'll pass it on. Thank you very much.
Our next question comes from Scott Marks from Jeff, please. Go ahead with your question.
Hey, good evening guys, thanks for taking questions. Um, first thing I want to ask about, you mentioned some, uh, targeted pricing actions and and other kind of tariff, mitigation efforts. Um, just wondering if you can kind of give us a sense of how much of those um, tariff impacts. Uh, you you think you'll be able to mitigate through some of those actions and how retailers have been responding to to some of these, um, price increases
Yeah. So we we have not disclosed the dollar amounts, um prop the vast majority of our area of exposure on tariffs is our spices and flavor Solutions. So you think particularly garlic and black pepper, anybody who's buying black pepper and garlic in the world or buying them from China and Vietnam. So B&G and all of our competitors and people will take price against those. Um, there may be some risk on an interim, you know how much tariffs slip through your p&l before you got the benefit of that. Um but you've also seen other people in the space talk about taking price the the other primary area of concern for us is is kind of Steel cans. Um and like everybody else.
You know, our expectation is, we're going to have to take price.
I think in this fiscal year we, you know, we are implementing in negotiating pricing actions to recover the tariffs, there will be some lag between when we start paying the, you know, the Tariff costs in our input costs and when the pricing becomes effective, just because of retailer lead times on price changes. But uh, you know, we expect a price for most of the Tariff impact. And, and some cases will offset a little bit of in with productivity and cost savings.
Okay understood and then maybe I guess asked me to think about um I guess the the guy down for the year and then obviously implied H2 um maybe how much of the guy down was driven by some of those divestitures versus expectations? Yeah it's primarily the investors it's almost all the investors
Okay, so then so then the outlook for H2 is still kind of in line with how you were thinking about it I guess after the q1 results.
Yes.
Okay, got it. All right, very good. Uh, thanks, I'll pass it on.
Our next question, comes from William, reuter from Bank of America, please go ahead with your question.
Good afternoon. Um, I've got a couple. So, the first, I don't think I explicitly heard any EBITDA. Given that I heard the $36 million of sales for the sour, did you provide an EBITDA number that I didn't hear?
We did not.
Okay. And I guess that's something you're not going to be providing.
Yeah, this is a sale to a private company, and you know, typically, we don't end up giving that out.
Okay, did I hear correctly that your net debt went from $1.936 billion to a little over $1.9 billion? So, I guess the proceeds there are somewhere in the $30 million to $35 million range. Is that right? No, no, I think you may have misheard that. Actually, if you go into our queue, there's a subsequent event where it walks through the net proceeds. It's about $50 million, $59 million with the benefit of a small working capital adjustment in our favor.
okay, um, I guess I hadn't seen the uh, the queue yet and then I just came out
Okay cool and then just lastly for me um in terms of your availability today. Um or at the end of the quarter on your abl including any sort of financial covenants that may exist for maintenance. Um can you share with us what that number would be?
So, we don't have an ADL. We've got a cash flow revolver, and the primary covenant on that is, um...
Is a maintenance leverage test, uh, which is now 7.5 times.
Yeah, sorry, that's the second quarter in a row. I've used the wrong term. Um, but yeah, no, I guess I was wondering if you include that, um, interest coverage as well as the leverage covenant, what the availability would be.
Yeah, it's just it's just math. I don't have it. I don't have it in front of me, but you should just be able to run where we finish the quarter, which is probably just under
7 times probably closer to 6868 and change performer for louras. 7 turns of Leverage of cushion.
Perfect. All right.
Thank you.
Our next question comes from Robert Moscow. From TD Cowen, please go ahead with your question.
Hi, thanks. Um, I I might have missed it but, uh, could you have any comments about, um, uh, the, the, the flavor Solutions part of your business, uh, Spice and Seasonings like, is it in line with your expectations or a little light? Like I I would have thought that, you know, cooking at home um would be a real Tailwind for these Brands and um you know are you seeing that in the business or are you seeing somebody elasticity there as well?
You know, our spices and Seasonings business, um, or spices and flavor Solutions is what we call it. Uh, you know, I I I would say that, uh, the results are not quite in line with our expectations. Um, you know, we would expect to be seeing that business, you know, you know, stable to up, you know slightly. Um, so we're not quite seeing the, you know, the the Tailwind that we would like to see. Um, you know, there's there's a lot of pieces to that business. There's, you know, some private label Members, Mark, there's uh, some food
Service business. So there's different different performances and then there's the Branded retail business.
Um but you know I I think we should be seeing that business, you know, slightly positive um in the back half, you know, and and that would be more in line with what we would expect because we are seeing the category, getting some benefit from its tie to the perimeter and the growth of proteins fresh proteins in the store.
Um, you know, that is where we predominantly have tariff impact. So, um, you know, that's where we'll be, you know, doing some pricing, some, you know, kind of targeted pricing to recover. So I would expect to see some pricing benefit as well.
Not possible.
Um, I mean
Yes, we are doing that. So we are looking at alternative sourcing on some of the spices but honestly
Most of, uh, the spices come from countries that have tariffs on them already. It doesn't really matter where you move them. Um, so there is some work that we've done to mitigate that. Um, you know, we've tried to Source, you know, China is probably our
most vulnerable position with, you know, garlic and onion. We're trying to supply 80% of the world's garlic.
Is not a lot of other options. California doesn't even come close to meeting the needs. Um, and there's really no other available sourcing in, in the United States.
But you know, we have found like some other small sources of onion and garlic that we've been able to move outside of, you know, China 30% tariffs which is kind of our our highest right now.
Um, but I'm not sure that we can really get out of most of these tariffs will will need to to price for them. There will be some mitigating actions that we could do, but there will also and there are also probably be some offsetting productivity, but at the end of the day, you know, spices are grown in the climates where they can be grown and it can't be grown in the United States. They're really unavailable natural resources in the United States. And so I'm hoping over time that, you know, that that realization will will help, you know, the sum of the trade negotiations. And that, you know, just like coffee and cocoa, can't be sourced in the United States spices at the same, you know, footprint
So, we'll, we'll see, um, over time. But right now we're just counting on what the prevailing tariffs are and and building that into our models.
All right. Thank you.
Our next question comes from Hail Holden from Barclays. Please go ahead with your question.
Hi. I got, um,
2 or 3 really quick ones, um,
Can you remind us the lore? Canada brand is that smaller or larger than the US brand?
Smaller.
Uh, and following up on the spice size comment. Um,
Would that be the expectation? Can you catch up to pricing in the fourth quarter to get back to sort of historical margins, or do you think it'll take you into 2026?
I think it'll take us in at 26 to get back the to a fully recover the impact of tariffs, but I think we will partially cover them in, um, in the Q4 time frame.
It's just a lead time of, you know, retailer pricing actions.
That we'll have to manage.
and some of our and by the way, some of our food service and
Uh, private label contracts also have only specific windows where we can price, so we'll have to kind of work through those timelines.
And then, um, last question, I had was, um, in the, uh, disclosure in the queue around the store, uh, and the expectation for a potential right down on the third quarter, seems to imply that, um, we could get more asset sale announcements.
by the end of the third quarter, is it is that the right interpretation
Yeah. Yeah, at some point this year and look, we we made a point of talking to a strategic review last year. Um, and and that in our mind was always expectation. Probably happened 2025. Um, lore is the first piece, right? And, and we're in, you know, conversations with with some logical strategic buyers for each of the pieces and and we're moving along but m&a takes time and it's you know it's not always easy to predict the timing but we're sort of moving forward in these. Um if that's your question.
Uh, thank you very much. I appreciate it.
Our next question comes from kourou Martinson from Jeffrey's, please. Go ahead with your question.
Good afternoon um just for a mathematical housekeeping. So if Green Giant was or frozen vegetables was 396 million of sales, last year we take out the lour. It's what we're looking at for potential domestic or is about 36060 million kind of remaining of sales.
Give or take.
Give or take and how much of that is just in Canada. You said Lor's smaller. Uh the Green Giant in Canada. I would assume is smaller as well. No no green giant. Yeah, Green Giant is the number 1 brand in Canada. So it's kind of disproportionately larger than the US business know, on. On the so it's about 100 plus million dollars of sales in Canada.
And a Canada by the way, includes both. It's frozen and shelf stable. Yeah. So canned vegetables cans are still up there. So as this Frozen, the Frozen bit in it, they're it's the number 1 brand. In both in both those categories, you know in the US we are just us Frozen and under Green Giant and you know where the number 2 brand.
Closed.
Um, that was done on Friday cash in the bank.
Thank you very much, guys. Appreciate it.
Yep.
Once again, if you would like to ask a question, please press star and then 1 to withdraw your questions. You may press start and to our next question, comes from Carla Carla cassella from JP Morgan. Please go ahead with your question.
Um, hi. Thanks for taking my question on. Um, you mentioned trade spend and timing with Easter in general. Are you seeing this? A dramatic change in trade, spend as you look to planning for a third quarter and back half and or any categories, particularly um, either promotional or, or asking for more trades then.
I think, I think there's a
We will probably see an increase in trades and spend in the back half of the year, but not anywhere near the levels of the first half increase. Um, we've seen, you know, promotional spend become a little bit more competitive and merchandising become a little bit more competitive out there. And we've, you know, done what we need to, to stay competitive. Some of that trade spend is also reflecting lower prices, like on Crisco and some other things, you know, where we have year-over-year declines in the commodity, and we price to that.
But I, I would expect that, you know, we have much smaller and much smaller increase in trade, spend year-over-year in the back half because we had started to kind of kick up our promotion efforts back to kind of preco levels last fall. And so we'll be lapping that this year. So I think you'll see it. You know, if we were up I don't remember like 130 140 basis points in the first half, we'll we won't be up anywhere near that level in the second half.
Okay, great. And then the inventory related to lure that comes out in third quarter. Is that the 59 million
No. So 59 million was effectively the purchase price which in included, we haven't disclosed it. But in included a favorable working capital adjustment and so part of, you know, we we've talked about this over time, like these are 2, nice little businesses, both stomp, a pinot and
Okay, that's great. Um and then just given the changes in the business and the asset sales. How's your mix of food service overall changed dramatically
Food Service versus retail.
Only in the sense that lore was a all branded retail business. Um and then relatively small give me the portfolio. Yeah. And and then Don papino was probably a split but it's like 15 million a sale. So it probably doesn't really move the needle. But yeah, we'd be lower service today than slightly lower in. But but not
Certainly not anything that we change our competitiveness in that category, right? Very, very little change overall.
Okay. And then your commentary about the asset sale um when it was announced um in the proceeds can you just talk about the flexibility you have in terms of uh reinvesting the proceeds if it's a working capital adjustment is it still considered proceeds under the definition of? Yeah this is this is all going to. It's all going to
Yeah, it's all going to go to debt reduction.
Okay.
Great. Thank you.
and ladies and gentlemen,
All right, go ahead.
I was just going to say ladies and gentlemen, that this concludes today's question and answer session uh, as well as our conference call, we thank you for attending today's presentation. You may now disconnect your lines.