B&G Foods, Inc.(BGS)Q1 2026 法說會逐字稿

Good day, and welcome to the B&G Foods, Inc. First Quarter 2026 Financial Results Conference 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. I would now like to turn the call over to AJ Schwabe, Senior Associate, Corporate Strategy and Business Development for B&G Foods. AJ, please go ahead.

Good afternoon, and thank you for joining us. With me today are Casey Keller, our Chief Executive Officer; and Bruce Wacha, 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 bgfoods.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, undue reliance should not be placed upon them. 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. B&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, segment adjusted EBITDA, adjusted net income, adjusted diluted earnings per share, adjusted gross profit, adjusted gross profit percentage, base 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 2026 and beyond. Bruce will then discuss our financial results for the first quarter of 2026 and our revised guidance for fiscal 2026. I would now like to turn the call over to Casey.

Good afternoon. Thank you, AJ, and thank you for joining us today for our first quarter 2026 earnings call. Today, I will cover an update on our portfolio reshaping, including the recent divestiture and acquisition, an overview of first quarter performance, Bruce will cover more detailed financial results; and finally, the outlook for fiscal year 2026. Portfolio divestitures. The first quarter witnessed major progress in our efforts to reshape the B&G Foods portfolio. We completed the divestiture of the Green Giant U.S. frozen business to Seneca Foods Corporation on March 2. This is the largest piece in our portfolio transformation that is resulting in stronger focus, simplification, greater synergies and higher margins across the B&G Foods portfolio. The first quarter includes the final 2 months of the Green Giant U.S. frozen business within B&G. In addition, we completed the acquisition of the College Inn and Kitchen Basics broth and stock businesses from Del Monte Foods on March 19. These key brands are a much stronger fit with our current shelf-stable portfolio and play in a growing category that is driven by the expansion of the fresh store perimeter. The impact of these two transactions will create positive EBITDA and higher margins on our portfolio, replacing the low-margin Green Giant U.S. frozen business with a more profitable and stable broth and stock business. These transactions were also critical in reducing our pro forma net leverage ratio in Q1 to almost 6x. Further, we previously announced the divestiture of Green Giant Canada, the final component of the Green Giant divestitures. That transaction requires Canadian regulatory approval and remains under review. Subject to regulatory approval and other customary closing conditions, we expect to close during Q2 of fiscal year '26. Q1 results. The first quarter demonstrated significant improvement in base business net sales trends relative to a lower Q1 in fiscal year '25, impacted by some trade inventory reductions. Quarter one base business net sales grew plus 2.8% versus last year. Some of the key drivers. The Spices & Flavor Solutions business unit grew Q1 net sales plus 9.1% versus last year, benefiting from the growth in fresh food and proteins as well as strength in the club and foodservice channels. Segment adjusted EBITDA was up plus 13.1% versus quarter one fiscal year '25 behind strong volume and pricing growth. The Frozen & Vegetables business unit in the first 2 months of Q1 delivered a recovery in segment adjusted EBITDA from a net loss in segment adjusted EBITDA in Q1 last year behind higher volumes, lower trade spend and lower manufacturing costs. Quarter one continued to benefit from the implementation of our cost savings and restructuring initiatives. Unallocated central overheads were down almost $2 million from last year. We will continue to remove direct costs associated with the Green Giant business and restructure central costs to reflect divestitures. Fiscal year '26 outlook. The updated guidance range for fiscal year '26 is increased to $1.735 billion to $1.775 billion in net sales and $275 million to $290 million in adjusted EBITDA. The key assumptions. The current outlook for fiscal year '26 reflects the addition of the College Inn and Kitchen Basics brands. The impact of the Green Giant U.S. Frozen divestiture was built into our previous guidance as well as the year-over-year impact of the Don Pepino and Le Sueur U.S. divestitures in fiscal year '25. We expect fiscal year '26 base business and net sales trends on the remaining core meals, Spices & Flavor Solutions and specialty businesses to modestly improve versus last year. Quarter one trends were a strong start for the year against a lower base in quarter one fiscal year '25, but are expected to be flat to slightly down for the remainder of fiscal year '26, recognizing the impact of the 53rd week in quarter four of fiscal year '25. A key financial risk we are watching closely is the price of oil, which impacts both transportation costs and the price of soybean oil given its market relationship to biofuels. We expect these costs to come down from current highs but remain elevated year-over-year. If oil and fuel costs continue at high levels, we will evaluate pricing actions to cover significantly higher input costs. Finally, the pending divestiture of Green Giant Canada has not been reflected in our guidance. We will update fiscal year '26 guidance when that transaction closes, but expect the divestiture of Green Giant Canada to be relatively neutral from an adjusted EBITDA impact. Looking forward, fiscal year '26 is poised to be a transformational year with a more focused, higher-margin and stable portfolio once divestitures and closing transition services have been completed. We expect continued improvement in base business net sales trends towards the long-term algorithm of 1%. Further, we will also become a less complex, more efficient and leaner company behind a simplified portfolio, restructuring operations to rightsize overheads and focus resources and investment behind the core categories and brands in spices and seasonings, meals and baking staples. 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 2026.

Thank you, Casey. Good afternoon, everyone. Thank you for joining us today. As we highlighted on our last call, we had a fast start to the year. Our financial performance was very strong in January as we lap prior year inventory destockings, and we then demonstrated continued momentum in the business throughout the remainder of the quarter, particularly within our Spices & Flavor Solutions business unit. Meanwhile, we remained active on the M&A front with the divestiture of our Green Giant U.S. frozen business and the establishment of our Green Giant U.S. frozen contract manufacturing business at our frozen vegetable manufacturing facility in Mexico with about a month to go in the quarter. And then the closing of our acquisition of the College Inn and Kitchen Basics broth and stocks business with about 2 weeks to go in the quarter. I will provide more details on the transactions later in the call, but in effect, we used the net proceeds from the divestiture of the marginally profitable Green Giant U.S. frozen business to partially fund the acquisition of the more profitable College Inn and Kitchen Basics business. And we are very pleased with our divestiture and acquisition counterparts on both of these transactions. I'm happy to report that both transitions are proceeding relatively smoothly. As we review our first quarter 2026 results, we will highlight the comparative differences that result from this 2026 activity as well as from the divestitures of the Don Pepino and Le Sueur brands, which we own for only parts of fiscal 2025. Because the divestiture of Green Giant Canada has not yet closed, there was no impact to our net sales or adjusted EBITDA. However, because Green Giant Canada is classified as an asset held for sale for accounting purposes, the pending divestiture does impact how the Green Giant Canada assets are carried on our balance sheet and within certain line items of our P&L. For the first quarter of 2026, we generated $408.9 million in net sales, a net loss of $32.5 million or $0.41 per diluted share, adjusted net income of $6.8 million or $0.08 per adjusted diluted share, adjusted EBITDA of $57.6 million and adjusted EBITDA as a percentage of net sales of 14.1%. The company's net loss for the first quarter was primarily attributable to a $36.3 million noncash loss on sale of assets, a $5.8 million noncash loss on disposals and impairment of PP&E as well as certain acquisition divestiture-related and nonrecurring expenses. Details regarding the impairments and other adjustments are included in our earnings release issued today and our 10-Q that will be filed later this week. Net sales for the first quarter of 2026 decreased by $16.5 million or 3.9% to $408.9 million from $425.4 million for the first quarter of 2025. The decrease was primarily attributable to the Green Giant U.S. Frozen, Le Sueur U.S. and Don Pepino divestitures, partially offset by an increase in base business net sales, 1 month of net sales from the contract manufacturing agreement the company entered into on March 2, 2026, with the acquirer of the Green Giant U.S. frozen business and a partial month of net sales for the College Inn and Kitchen Basics brands. Net sales of our Green Giant U.S. frozen business, which we owned for only 2 months during the first quarter of 2026, contributed $27.2 million less net sales during the first quarter of 2026 compared to the first quarter of 2025. Net sales of the Don Pepino and Le Sueur businesses, which we divested in 2025 and are therefore not part of our first quarter 2026 results were $10.6 million during the first quarter of 2025. Partially offsetting the impact of these divestitures were 1 month of sales for the new Green Giant U.S. frozen contract manufacturing agreement, which contributed $8.5 million of net sales in the first quarter of 2026 and a partial month of net sales for the College Inn and Kitchen Basic brands acquired on March 19, 2026, which contributed $2.9 million to the company's net sales for the first quarter of 2026. Base business net sales for the first quarter of 2026 increased by $9.9 million or 2.8% to $365.1 million as compared to $355.2 million for the first quarter of 2025. The increase in base business net sales was driven by increases in volume that contributed $6.6 million or 1.9%, an increase in net pricing and the impact of product mix of $1.6 million or 0.5% and the impact of foreign currency of $1.7 million or 0.5 percentage points. Gross profit was $79.9 million for the first quarter of 2026 or 19.5% of net sales and adjusted gross profit was $84.6 million or 20.7% of net sales. Gross profit was $90.1 million for the first quarter of 2025 or 21.2% of net sales, and adjusted gross profit was $90.6 million or 21.3% of net sales. The first quarter of 2026 marked a somewhat different story than our experiences in 2025. Today, we are seeing resiliency in our volumes with modest recovery in many of our brands as compared to the more negative sales trends that we experienced in 2025. Across our internal manufacturing network, our factory employees are working hard with seven of our 10 internal manufacturing facilities increasing output during the first quarter of 2026 when compared to 2025 volumes. Additionally, two of the three facilities that did not increase year-over-year volumes during the first quarter are currently ahead of our budget volumes for those factories for the year-to-date period. However, input costs, which excluding the impact of tariffs were largely benign in 2025, are beginning to show some signs of inflationary pressure in recent months. We will be watching these trends for any signs of sustained inflationary pressures and when appropriate, we will consider implementing pricing actions to protect our profitability. Selling, general and administrative expenses increased by $1.1 million or 2.2% to $50.2 million for the first quarter of 2026 from $49.1 million for the first quarter of 2025. The increase was comprised of an increase in acquisition, divestiture-related and nonrecurring expenses of $6.4 million, inclusive of an increase of $1.9 million for disposals and impairments of PP&E, partially offset by decreases in general and administrative expenses of $3.9 million and warehousing expenses of $1.4 million. Expressed as a percentage of net sales, selling, general and administrative expenses increased by 0.7 percentage points to 12.3% for the first quarter of 2026 as compared to 11.6% for the first quarter of 2025. We are following these costs closely, and we are proactively taking steps to reduce our ongoing SG&A commitments to better reflect the size of our business going forward as we work to minimize the impact of any stranded costs on our ongoing overhead structure due to the impact of the recent divestitures. We generated $57.6 million in adjusted EBITDA or 14.1% of net sales in the first quarter of 2026 compared to $59.1 million or 13.9% in the first quarter of 2025. The Le Sueur, U.S. and Don Pepino businesses contributed nearly $1 million to segment adjusted EBITDA during the first quarter of 2025. Net interest expense decreased by $2 million or 5.1% to $35.8 million for the first quarter of 2026 from $37.8 million for the first quarter of 2025. The reduction of net interest expense was primarily attributable to a reduction in average long-term debt outstanding during the first quarter of 2026 relative to average long-term debt outstanding during the first quarter of 2025. Depreciation and amortization was $15 million in the first quarter of 2026 compared to $16.8 million in the first quarter of 2025. We had a net loss of $32.5 million or $0.41 per diluted share for the first quarter of 2026 compared to net income of $0.8 million or $0.01 per diluted share for the first quarter of 2025. The net loss for the quarter of 2026 was primarily driven by a loss on sale of assets of $36.3 million in connection with the divestiture of the Green Giant U.S. frozen business, $5.8 million for noncash disposals and impairments of PP&E as well as an increase in acquisition, divestiture-related and other nonrecurring costs. We had adjusted net income of $6.8 million or $0.08 per adjusted diluted share in the first quarter of 2026. In the first quarter of 2025, we had adjusted net income of $3.4 million or $0.04 per adjusted diluted share. Adjustments to our EBITDA and net income are described further in our earnings release. I would now like to touch on results by business unit for the first quarter. Net sales for Spices & Flavor Solutions increased by $8.3 million or 9.1% in the first quarter of 2026 to $100.1 million from $91.7 million in the first quarter of 2025. The increase was primarily due to higher volumes across Spices & Flavor Solutions business unit, coupled with higher net pricing and product mix. Spices & Flavor Solutions segment EBITDA increased by $3.4 million or 13.1% in the first quarter of 2026 compared to the first quarter of 2025. The increase in segment adjusted EBITDA was largely driven by increased volumes and to a lesser extent, by increased pricing that largely offset the impact of increased tariff costs and other input costs as well as increased allocations to spices cost of goods that were driven in part by the divestiture of the Green Giant U.S. frozen business. Net sales for Meals increased by $0.9 million or 0.9% in the first quarter of 2026 to $107.1 million from $106.1 million for the first quarter of 2025. The acquisition of the College Inn and Kitchen Basics brands added approximately $2.9 million of net sales during our first 2 weeks of ownership in the business. Meals net sales also benefited from the higher net pricing and improved product mix, which were offset in part by modestly lower volumes across the business units. Meals segment adjusted EBITDA decreased by approximately $5 million, primarily driven by the impact of unfavorable cost comparisons in certain raw materials and manufacturing expenses as well as increased allocations to Meals cost of goods that were driven in part by the divestiture of the Green Giant U.S. frozen business. These incremental costs were offset in part by increased net pricing and the impact of product mix. We also made investments in certain brands in the Meals portfolio, such as Ortega, where we increased trade spending and marketing expenses during the first quarter of 2026 to help drive improved sales performance throughout the remainder of the year. Net sales for Specialty decreased by $3.6 million or 2.7% in the first quarter of 2026 to $130.8 million from $134.4 million in the first quarter of 2025. The decrease was primarily due to the divestiture of the Don Pepino business, which generated $3.5 million of net sales in the first quarter of 2025. Base business net sales for Specialty were essentially flat for the quarter. Specialty segment EBITDA decreased by $7.4 million in the first quarter of 2026 compared to the first quarter of 2025. The decrease was primarily due to the Don Pepino divestiture, unfavorable cost comparisons in certain raw materials, manufacturing expenses, the impact of tariffs and increased allocations to specialty cost of goods that were driven in part by the divestiture of the Green Giant U.S. frozen business. Financial performance for the Frozen & Vegetable unit during the first quarter of 2026 and the first quarter of 2025 are not comparable due to the impact of the Le Sueur U.S. and Green Giant U.S. frozen divestitures and the impact of our new contract manufacturing agreements for the Green Giant U.S. frozen business. We are pleased to report that net sales of Green Giant Canada remained strong and increased by $4.2 million or 16.4% to $30.1 million for the first quarter of 2026 compared to $25.9 million for the first quarter of 2025. Separately, the new contract manufacturing agreements for Green Giant U.S. Frozen generated $8.5 million in net sales for the quarter during its first month of operation following our sale of the Green Giant U.S. frozen business. This contract manufacturing arrangement has a cost-plus structure and is expected to provide a modest but stable profit stream going forward. Now I will spend a little time on our balance sheet, which has also improved in the first quarter of 2026. Net debt to pro forma adjusted EBITDA before share-based compensation and extraordinary tariffs was 6.07x at the end of the first quarter of 2026 compared to 6.57x at the end of the fourth quarter of 2025. As discussed on previous earnings calls, we are continuing to reduce leverage. We expect to remain on track to reduce net debt to pro forma adjusted EBITDA before share-based compensation and extraordinary tariffs to approximately 6x or less by the midpoint of this year, supported in part by the divestiture of the Green Giant Canada business, which subject to regulatory approval in Canada, we expect to be completed during the second quarter and which we expect will reduce net leverage by another 0.25 of a turn or so once it closes. Additionally, as announced by press release today, beginning with the dividend declared today and payable on July 30, 2026, to record holders as of June 30, 2026, our Board of Directors has reduced our dividend by 50% to $0.095 per quarter or $0.38 per share per annum. In our 21 years as a publicly held company, we have proven our commitment to creating stockholder value by consistently returning a meaningful portion of our excess cash to stockholders in the form of a cash dividend. Following the completion of the Don Pepino, Le Sueur U.S. and Green Giant U.S. divestitures and the College Inn and Kitchen Basics acquisition, our Board has concluded that an adjustment to our intended dividend rate was appropriate. On an annualized basis, the reduction in dividend is expected to provide an additional $30 million or so, which we intend to use to repay long-term debt and for other business purposes, which we expect will further accelerate the reduction in our leverage ratio. Before I get to our updated 2026 guidance, I would like to remind the audience that we continue to live in unpredictable times. Our 2026 guidance reflects what we know today and for example, does not factor in significant changes in inflation, tariff policies or the potential impact of escalation in the conflicts in Eastern Europe, the Middle East or Latin America could have on our results. Please note that our guidance reflects the expected impacts only of acquisitions and divestitures that have already closed. In other words, our guidance reflects the expected impacts of the Don Pepino, Le Sueur U.S. and Green Giant U.S. frozen divestitures, the commencement of the Green Giant U.S. frozen contract manufacturing agreement and the College Inn and Kitchen Basics acquisition. But our guidance does not reflect the expected impact from the pending Green Giant Canada divestiture because that divestiture has not yet closed. Our guidance also does not take into account any upcoming potential refinancing or other capital markets transactions. Also, as a reminder, our guidance reflects that fiscal 2026 has 1 fewer week than fiscal 2025, which had a 53rd week. While we love the benefit of the 53rd week in our fiscal 2025 results, we will lap that benefit or approximately $18 million of net sales during fiscal 2026. As a result and as noted in our earnings release, we expect fiscal 2026 net sales in the range of $1.735 billion to $1.775 billion, adjusted EBITDA in the range of $275 million to $290 million and adjusted EBITDA as a percentage of net sales in the range of approximately 15.8% to 16.3%. And based on this guidance, we expect adjusted diluted earnings per share to be in a range of $0.575 to $0.675 per share. Additionally, we expect for full year 2026, interest expense of $152.5 million to $157.5 million, including cash interest of $145 million to $150 million, depreciation expense of $40 million to $45 million, amortization expense of $17 million to $19 million, cash taxes of approximately $5 million or less, an effective tax rate of 26% to 27% and CapEx will likely be at the lower end of our $30 million to $35 million target. Now I will turn the call back over to Casey for further remarks.

Thank you, Bruce. In closing, B&G Foods is making real progress against our long-term goals, improving the base business net sales trends of the core business to the long-term range of flat to plus 1%, reshaping the portfolio through divestitures and acquisitions for future growth, stability, higher margins and cash flows and reducing our net leverage ratio below 5.5x through divestitures 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?

Operator provides instructions on how to ask questions. The first question comes from the line of Andrew Lazar with Barclays.

First thing, excluding the portfolio changes since the last time you provided guidance, curious how the outlook changes for the year, if at all, because it's harder to track that. And then it still seems like underlying consumption for the tracked channel data was down close to maybe mid-single digit in the quarter. And I think you mentioned you're expecting it to be flat to slightly down for the rest of the year. So just trying to get a sense for those things first off.

Yes. So basically, our guidance is updated just to reflect the College Inn and Kitchen Basics acquisition. Our prior guidance included the other divestitures around Green Giant U.S. Frozen, Don Pepino, Sclafani and the Le Sueur brand. So really, the only change is the result of adding in the College Inn and Kitchen Basics acquisition. When we talk about base business net sales or organic net sales, it's not just the tracked consumption data, it's our total portfolio, which would include our business in foodservice and private label brand business, in Canada, our Canada business untracked. And that's probably our tracked channels now represent less than 60% of our portfolio. And we've seen pretty strong growth in our spices private label business, our spices foodservice business, our other foodservice businesses, Canada is growing. Our industrial business has performed well. We also have private label business in baking powder and other things. So when we say our organic business is going to be roughly flat, we mean the composite of both our measured channels and our unmeasured channels.

Yes, okay. And then do the portfolio changes you've made in the past few quarters, do you think make it harder or easier or neither to sort of execute pricing if and when needed, should the industry have to deal with another round of inflation going forward? And maybe you can get into a little bit where you're sort of covered and for how long on some of your key inputs?

Yes. So we don't break out all of that publicly. I mean we're covered for a decent portion of this year on input costs just through our normal forward purchases. From an ability to take price, the divestitures, we've eliminated the Green Giant U.S. frozen business, which we think is a great business, just not the right one for us. It doesn't really impact one way or the other the rest of the business. It was a different business for us. We still have about 50 brands. We're still very relevant. We think our brands are relevant, and we'll continue to take action as needed.

I think, Andrew, the key input we're watching is oil and soybean oil because there is a real relationship between soybean oil and crude oil because of its use as a biofuel. So that's the one we're watching pretty closely. It's up north of $0.70 a pound. So very high. And we are covered reasonably long. But obviously, if oil prices stay where they are, we're going to need to take some action as I expect the industry will just because of the rising input costs.

Next question comes from the line of Scott Marks with Jefferies.

I wanted to just follow up quickly on something that Andrew asked just in terms of the kind of flattish outlook for the rest of the year. Can you just help us understand a little bit how you're thinking about that in terms of price versus volume versus mix and across the different segments, just what we should be thinking about?

Yes. We haven't really broken out price mix on a forward basis before. We're encouraged with the progress that we made in the first quarter in terms of stabilizing volumes, whether you see that in our net sales with a little bit of net sales growth driven by volumes or even in our consumption data where the portion that does track those channels has improved. We think this year is going to be a little bit less forgiving from a top line standpoint than the prior year.

Okay. Understood.

Next question comes from the line of Robert Moskow with TD Cowen.

I just wanted to make sure I understood the comments on cost. It sounds like soybean oil is really the only thing that's really jumping on you. But are there other elements? You mentioned oil costs. Does that flow through your logistics, your packaging? And is your pricing power on those elements of your structure less clear?

Yes, it does flow through both on logistics and on some packaging. And just like everybody else in the industry, we're waiting and watching to see these higher, more elevated costs for energy stick, right? And probably just like everybody else in the industry, we're evaluating and determining whether or not it makes sense to protect margins with pricing initiatives to offset that.

I think our biggest concern right now is the price of soybean oil. It's quite elevated on a historical level. So that's the one we're watching closely because it is largely—and from a Crisco oil standpoint, it is the majority of the cost.

I think you've changed the business effectively to be able to price up and down for that. But the other elements, I think, are a little trickier because passing through logistics cost is sometimes tougher, I think, with retailers historically, maybe that's changing. But is there any way to put some numbers to this, Bruce, where like if you have $100 per barrel oil, like how much inflation would you expect to be incremental to your business? And if you can tell to me without soybean oil, maybe that's even simpler?

We don't provide that level of granularity. I would point out, despite some skepticism, in prior cycles when transportation costs spiked, we took price based on fuel cost and transportation and then again more recently. It won't be perfect. We're also looking deep into productivity initiatives and continuous improvement to help cover costs. But yes, our expectation would be if these costs stay elevated permanently or relatively permanently, we would expect to take price to cover a significant portion of that.

Okay. Last question. You have the College Inn business now and Kitchen Basics. Any surprises in your first couple of weeks of owning it, positive or negative?

So far, we've been very focused on ensuring that the plans in the business are solid. We had some visibility of that before, but we've taken over most of the selling of that as quickly as possible, even within the first month now. It's key that we have the right plans for promotion, customer support in the fall, and that's what we've been really focused on. You can imagine that the Del Monte bankruptcy and transition probably didn't get the highest attention from the business. So we're just trying to shore that up. I don't think there are any big surprises. We're also launching a couple of SKUs that were sort of holds in the portfolio and trying to accelerate that process as well. But so far, so good. Getting our hands around it quickly is really our goal.

When we first looked at this business, College Inn is a number two Northeast regional brand, generates cash, stable. That was what intrigued us. As we spent time on the acquisition, we learned more about the category dynamics. This is actually a category that's been doing pretty well despite some center store trends. The expansion of the perimeter is helping drive sales here. Kitchen Basics is a grower; it continues to innovate and travel down that path and grow. We're excited to get both of these businesses into the portfolio.

Next question comes from the line of William Reuter with Bank of America.

So on the price increases that you potentially would take, I'm wondering if you've kind of alerted some customers that this may have to take place. And I guess I feel like when we are in a situation like this where the conflict is unlikely to go on in perpetuity. When a price rises for a short period of time, those discussions maybe are a little more challenging. So I guess, have you started to alert them? And what has the feedback been?

We certainly have discussed soybean oil. We've had those discussions with customers given the volatility in that commodity over the last five years. We have agreements with the marketplace about how we move cost of soybean oil and vegetable oil up and down with the price. In terms of fuel and transportation logistics, we're not really having those conversations yet. Customers are feeling it themselves. We will start having those conversations, but we wanted to see where this played out before we would have further conversations because these fuel costs move a lot on a spot basis and we want to make sure we've got a longer-term trend before doing anything. We have covered some of that increase in our forecast and outlook. We're watching how high fuel stays.

Got it. Does your guidance imply that raw materials kind of remain where they are? Or does it imply that they come down to more reasonable or rational levels over a longer period of time?

For fuel, we've assumed it comes down a little bit from where it is today, but certainly remains higher than what we initially entered the year with in our assumptions.

Got it. I guess just one last one for me. Your organic sales growth, which has been solid. I guess how much of this is driven by new product innovations versus just underlying growth of some of the products or the categories that you're participating in there?

We don't have a specific split. There is some innovation contributing, for example on Cream of Wheat we've launched protein varieties. There's also growth coming from volume increases and category growth. Our foodservice business has been growing, and private label in spices and baking powder has been performing well. So it's a combination of product innovation, category growth, channel performance and our manufacturing capacity supporting growth.

Also, on spices, we're seeing category and channel growth, and we've invested in our spice manufacturing capabilities. We have incremental capacity now that we didn't have a couple of years ago that's helping support some of this growth. So it's not necessarily product innovation only, but the ability to manufacture and produce product and sell it.

Next question comes from the line of David Palmer with Evercore ISI.

I just wanted to ask you a follow-up question on consumption data versus what you are seeing in your all channel consumption and maybe what we should be assuming to see in the - what we use in terms of if we use Circana includes supposedly Costco and Amazon, pretty broad set. Right now, I see down 4% for the quarter, down 7.5% for April for B&G Foods. And I'm just wondering like when we're looking forward and trying to match up this consumption, what would equate to your flat consumption assumption, what sort of gap should we be thinking about there? And do you need this consumption that we're tracking to get better to get to that? How should we think about that?

The post-Green Giant divestiture, we're even less measured than we were before. Tracked measured data from Circana, Nielsen or IRI probably covers less than 60% of our universe now. There are large swaths that are untracked channels. Our foodservice business is roughly 13% to 15% of our portfolio and has been positive. Private label is well over 10% of our portfolio and has been growing. Our Canadian business is also growing. When projecting out, we need our measured channels to get better by some amount, but we don't need them to flip totally to positive. We expect gradual improvement over time while continued strength in unmeasured channels like foodservice and private label helps.

Just roughly speaking, maybe the decline rate in the consumption that we see would be down low single digits and you can get a few points from nonmeasured? Or do you think the gap...

We're probably getting mid-single-digit growth from the non-measured channels.

And by the way, when you're saying mid-single digits from the non-measured, are you talking about mid-single-digit contribution to growth from the 40%? Or are you talking about that non-measured 40% growing at mid-single-digit rate?

I'm talking about the non-measured 40% growing at a mid-single-digit rate.

That's pretty good. And then one of the philosophical things you've seen multiple cycles before, in periods of energy-related inflation it was particularly tough when it came to pricing power. It felt different that retailers were dealing with the same pressures. Do you think that's the case this time? Should we brace for a different type of pricing discussion with that type of inflation?

It's never easy and those discussions are tough. To date we've covered much of the increase through productivity, cost savings and other efforts. If oil stays north of $100 a barrel, it's going to become a serious issue industry-wide and we would expect to consider pricing actions. Our hope is oil comes down over time, but we will continue to monitor closely.

Next question comes from the line of Karru Martinson with Jefferies Company.

One of your competitors talked about the consumer, especially on the low end, running out of money by the end of the month. I'm wondering how do we square that with the ability to take price in this environment?

We may see some pressure on consumers, but our portfolio is mass mainstream and affordable. We may see some trade-down, but we also could see consumers trade down from eating out to cooking at home, which benefits our categories. We would only consider pricing related to energy and soybean oil if those costs stay elevated for an extended period. We believe we can cover planned increases with internal cost savings and productivity. Soybean oil is a different conversation; if it remains significantly higher, the industry will likely need to take price.

Okay. And just lastly, in terms of the portfolio, pruning some here and adding stronger performers. Do you feel like we're where we want to be with the portfolio? Are there still opportunities to take some brands out or to add others?

We will continue to evaluate portfolio opportunities. As we reshape the portfolio, we want strong businesses with higher margins and stronger cash flow. We'll look to take actions similar to recent transactions—divesting brands that are a better fit for others and acquiring businesses that generate higher cash flow and fit our capabilities.

We have time for one more question. The next question comes from the line of Carla Casella with JPMorgan.

I know you've got a lot of questions on soybean costs. Back in 2022-2023 when we saw spikes, you talked about a resistance level where consumers really change their buying behaviors. I think it was like a $5 level that you gave at retail. I'm wondering how close we are to that now? Are you seeing any resistance already? Or is this more just a concern as we go into the back half?

We haven't taken any pricing moves yet. If we take pricing, we would try to stay below key price thresholds and work with customers to manage those thresholds to avoid high elasticity effects. We are watching where soybean oil stays; current levels are close to the spikes we saw in 2022.

On the 2027 bond maturity, how far ahead of maturity do you typically like to be in terms of refinancing? Are you okay going current? Do you think that could hurt your ratings? Any thoughts there?

Typically, we expect to refinance our debt before it goes current. Our approach to refinancing maturities is consistent with prior cycles; we expect to manage this maturity in a similar way.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Thank you.