B&G Foods Inc (BGS) 2015 Q1 法說會逐字稿

Good day, and welcome to the B&G Foods first-quarter 2015 financial results conference call. Today's conference is being recorded. You can access detailed financial information on the quarter in the Company's earnings release issued today, which is available at bgfoods.com.

Before the Company begins its formal remarks, I need to remind everybody 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 all of you to the Company's most recent annual report on Form 10K and subsequent SEC filings for a more detailed discussion of the risks that could impact the Company's future operating results and financial condition.

The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. The Company will also be making references on today's call to the non-GAAP financial measures, adjusted EBITDA, adjusted net income, adjusted diluted earnings per share, base business net sales and comparable base business net sales. Reconciliations of these financial measures to the most directly comparable GAAP financial measures is provided in today's earnings release.

Tom Crimmins, the Company's CFO, will start the call by discussing the Company's financial results for the quarter. Next Bob Cantwell, the Company's CEO, will discuss various factors that affected the Company's results, selected business highlights and his thoughts concerning the remainder of 2015.

Now I would like to turn the call over to Tom Crimmins, CFO. Tom?

Thank you, Operator. Good afternoon, everyone, and thank you for joining us today. Net sales for the first quarter of 2015 increased 9.6% to $217.1 million, compared to $198.1 for the first quarter of 2014. Net sales of specialty brands which we acquired in April 2014 contributed $22 million to the overall increase.

Base business net sales, which includes the impact of acquisitions until the acquisitions are included in both comparable periods decreased 1.5% for the quarter. Comparable base business net sales, which also excludes the impact of the Rickland Orchards shortfall, increased to. 4%. The increase was attributable to a 1.9% increase in net pricing due to increases in list prices and reduced promotional activity and a 0.5% increase in unit volume.

Net sales increased by 14.4% for Ortega; 13.1% for Pirate's brands and 8.8% for Maple Grove, offset by a net sales decrease of 33.9% for New York Styles; 8.5% for Cream of Wheat; and 18.8% for True North. All other brands in the aggregate increased 0.7%. Gross profit increased 4.2% to $67.4 million in the first quarter as compared to $64.7 million for the first quarter of 2014.

Gross profit expressed as a percentage of net sales decreased 160 basis points to 31% for the first quarter of 2015 from 32.6% for the first quarter of 2014. The 160 basis points increase was partially due to customer refunds in the first quarter of 2015 relating to the Ortega and Las Palmas recall that we announced in November of 2014.

Excluding the impact of the customer refunds, gross profit as a percentage of net sales was approximately 31.7%. The remaining gross profit shortfall of 90 basis points was attributable to a sales mix shift to lower margin products, an increase in distribution costs and the negative impact in the Canadian exchange rates partially offset by the base business net price increase.

Selling in general and administrative expenses increased 1.1% to $22.8 million for the first quarter as compared to $22.6 million for the first quarter of 2014. Expressed as a percentage of net sales, our selling, general and administrative expenses decreased 90 basis points to 10.5% for the first quarter of 2015 from 11.4% for the first quarter of 2014.

Net interest expense for the first quarter increased 3.6% to $11.5 million from $11.1 million for the first quarter of 2014, which was primarily attributable to higher average debt outstanding due to the specialty brands acquisition in April 2014. The Company's adjusted net income for the first quarter of 2015 was $20.5 million or $0.38 per adjusted diluted share compared to adjusted net income of $18.3 million or $0.34 per adjusted diluted share a year ago.

Our adjusted EBITDA increased 7.5% to $49.9 million for the first quarter of 2015 compared to $46.5 million for the first quarter of 2014. Adjusted EBITDA as a percentage of net sales decreased to 23% for the first quarter from 23.4% for the first quarter of last year.

Moving on to the balance sheet, we finished the first quarter with a little more than $1 billion in long-term debt. Our net leverage was approximately 5.1 times adjusted EBITDA, and our current dividend rate is $1.36 per share per annum or approximately $73.1 million in the aggregate, based on our current shares outstanding. We are reaffirming our full-year FY15 guidance for adjusted EBITDA of $196 million to $202 million; adjusted diluted earnings per share of $1.48 to $1.55 and net sales of $860 million to $880 million.

Before I turn the call back to Bob, just let me say how excited I am to be part of the B&G foods team and I look forward to meeting many of you in the coming months. Bob?

Thank you, Tom; good afternoon, everyone.

I will now review the first quarter in more detail and then go over our expectations for the remainder of 2015. On the fourth quarter call I mentioned that 2014 had many challenges for the Company and the entire industry. I also said that on that call we learned a lot from last year and importantly we have determined what went wrong and know how to fix it. Our results this quarter have proven that we are on the right track.

The Ortega and Las Palmas recall is now behind us with no apparent long-term adverse effect on the brands. Sales of both products are performing better than before the recall. I am very proud of how the organization handled the recall and how quickly they were able to get the products back in distribution with minimal customer issues.

For the quarter, Ortega net sales were up over 14% with approximately half the increase relating to the restocking of customer shelves. In the second quarter we are launching five new innovative Ortega products, including two new tacos, Street Taco kids and Smoky Chipotle taco sauce. The new products are receiving a very positive response from our customers and we expect these to help continue the positive trends we are seeing on the brand.

Comparable base business net sales increased 2.4%. 17 of our brands increased year-over-year for the quarter and specialty brands produced increases for the quarter versus the results under prior ownership.

Pricing was a positive for the Company this quarter, up $3.6 million over the first quarter of 2014. On January 1 price increase was generally accepted by our customers and covers approximately half of our product lines. The increase averaged 2% with variations on that increase depending on the brand and we have experienced no major impact in consumer sales behavior.

We also eliminated or reduced the majority of our aggressive promotions and, in general, we are not seeing aggressive promotional activity by our competitors. We continue to expect that these two factors will deliver approximately $8 million to $10 million in incremental pricing during 2015 and continue to expect that these initiatives will more than offset any cost pressures for 2015.

Pirate's brands continued its strong performance, growing $2.7 million or 13.1% in sales for the quarter. Some of this first-quarter growth is attributable to Pirate's Booty being authorized in an additional 1,000 Walmart stores during the fourth quarter of 2014. The brand is performing well at Walmart and we expect to add additional Walmart distribution over the next 12 months.

We also improved our execution at retail across the country. Our retail activation teams, which are teams that build promotional displays in conjunction with our distribution partners, continue to be a big part of the growth we are seeing in Pirate's brands. We have also started to use these teams and this go-to-market strategy for our New York style brands and are beginning to see encouraging results.

A few other highlights I would like to point out about the first quarter and going forward, the specialty brands acquisition continues to exceed our expectations. First-quarter net sales for the business were $22 million and we anticipated additional opportunities with new Bear Creek product launches. We have owned the Bear Creek brand for almost one year and have come to appreciate the strength of the brand in the dry soup subcategory.

In the late summer we will be launching four flavors of Bear Creek hearty soup bowls, which are a new alternative for consumers who are looking for an easy, on-the-go single-serve option. We also see additional opportunities to expand distribution of the brand's core dry soup items.

We saw a strong growth in our retail and food service products under our Maple Grove brands. Sales increased 8.8% in the first quarter. We are seeing higher demand from our food service customers who use our cereal products as part of their breakfast menu and we are seeing higher consumption at retail.

Mass merchant net sales for our base business increased 5% in the first quarter. Our presence with these merchants is growing rapidly via both base business growth and acquisition growth. Our business at Walmart is up approximately 10% for the quarter and continues to grow across multiple brands. Food service net sales increased 6% for the quarter and that channel continues to show signs of firming as the economy recovers.

We saw growth at grocery retailers, except for the Northeast which continued to show softness. The good news is Northeast retailers are showing positive trends in total during the latest 24 weeks, which we expect will be good news for our brands going forward. Export net sales continue to increase, are now approximately $30 million. We estimate the weakness in the Canadian dollar will affect our Canadian net sales and profits by approximately $2 million for the full year.

We did see some softness in a few of our brands including Cream of Wheat and New York Style. In 2014 we ran aggressive promotions on Cream of Wheat that increased volume but reduced profits. We pulled back on those deals in 2015 and saw positive pricing of approximately $700,000 and negative volume of $2.3 million. We expect the rest of the year to improve and, in addition, we are launching five new items of instant Cream of Wheat cups in the third quarter to appeal to the on-the-go customer.

Net sales of New York Style were down for the quarter $2.7 million, or 34% as we moved away from some lower margin business in the US and Canada. Retail grocery net sales increased for the quarter and we expect continued growth at retail through 2015.

As we turn to cost, we expect our overall commodity packaging and ingredient costs to remain relatively flat as compared to 2014. Increases in nut prices are expected to negatively impact cost for our True North brand by over $2.5 million for the year. We have taken substantial price increases at retail for True North brand to offset this substantial cost increase. We will watch consumer purchase trends closely as the retail price increased 25%.

On the positive side, the weakness in the Canadian dollar is expected to have a positive impact and help reduce our maple syrup cost by $3 million in 2015. Distribution continues to be a challenge for the Company. We experienced an 80 basis point increase in distribution costs for the quarter, primarily the result of rapid acquisition growth and inefficiencies resulting from our integration of snack products into our distribution systems.

We continue to refine our distribution systems and during the next month, we expect to enter into a partnership with a third-party service provider to help improve our technology and develop better warehouse management systems. As a result, we continue to expect to see significant improvements in 2016 in cost, customer service, especially in the second half of 2016. Until we are up and running, we will continue to see negative cost trends in our distribution costs for the remainder of 2015.

To wrap up, we believe that 2015 is off to a good start. We are undertaking new initiatives to improve our distribution systems, we continue to be focused on developing new products that will be margin accretive and we are actively working to reposition our existing brands and products for improved performance.

In addition, our organization is poised and ready to continue our strategy of declaring center-of-the-store grocery and snack brands if and when the right opportunities present themselves. We have a lot of good news as we head through 2015 and I feel very confident about our future in achieving our full-year guidance for 2015.

Finally, we are very pleased to have Tom Crimmins join our executive team. He is an experienced and talented CFO and has already proven that he is a valuable addition to the B&G Foods team.

With that, I would like to open up the call for questions. I will turn the call back to Angela for questions. Thank you.

(Operator instructions)

First question David Palmer, RBC Capital Markets.

Thanks; good evening. I wanted to ask first a question on the promotional environment. It looks like, from the Nielsen data, like B&G Foods is leading many of its categories downward in promotion cutbacks. In other words, you're cutting back on promotions more than the industry.

Do you see that as being the case? And is that separate from the pricing actions you're talking about? What has been the response in the marketplace from some of these actions? Thanks.

David, it's part of the pricing actions we are talking about. We don't think we are being more aggressive on the downside than our competition and we're not seeing that. And we're not hearing that in the trade. We made a concentrated effort to pull back on promotions on the majority of our brands. And we really started doing that in the latter part of 2014 and have continued it here through the first quarter and certainly through the second quarter.

We are not seeing pushback. And that is part of that $8 million to $10 million price increase we're looking for this year. And half of the price increase we saw in the first half of that $3.6 million related to reduced promotional pricing, and it truly has not hurt our volume except for Cream of Wheat. We struggled with Cream of Wheat on the -- we reduced promotions dramatically on Cream of Wheat in the first quarter and we saw our volume go down $2.3 million.

And that is really the only brand we saw the real negative effect to and we're adjusting our plans on Cream of Wheat as we go forward. But we really started pulling back on promotions last year on Cream of Wheat, starting in the second quarter, so we are not going against very deep promotions as we head through the rest of the year. So we have not seen it an issue yet and we don't know of anybody in our categories who are starting to aggressively promote that could cause us some pain where we have to adjust our thought process.

Just to follow up on that with regard to Cream of Wheat. Is that it category -- is there something specific to the category where it tends to be more promotional, where there's substitutes out there or more promotional competitors? What is it about that category that (multiple speakers)?

Well, I actually think, for Cream of Wheat, it's not a true promotional category. What we did last year is we got very aggressive because we thought we needed to, much more aggressive than historically. We really dropped Cream of Wheat, basically selling boxes of Cream of Wheat for two for $3.

What it did is move volume, but we weren't making any money. That is not typical in that category. We don't get a lot of consumer pull off the shelf by promoting, but that promotion was very deep. So we knew we would have issues on volume this quarter when we pulled that back, but we don't really have that issue to us going forward. We expect Cream of Wheat that has struggled should not struggle like that as we go through the year.

So that was just a very unique, aggressive event we got into last year that was just a nonprofitable event that we made the decision that's not the way to go.

Great; thank you.

Farha Aslam with Stephens, Incorporated.

Tom, welcome. Look forward to working with you.

And me as well, thank you.

But just a first question on Ortega. Bob, if you could tell us where the brand is right now. You pulled it off the shelf. Is it now completely got 100% of its shelf space back and is the increasing we're seeing year-over-year truly organic or is it just continued sell-in? Can you share with us exactly where Ortega is now?

Ortega is pretty much 100% back everywhere. There's probably some minor stores where it's been approved in a large chain, for some reason it's not fully on shelf yet. But that's just kind of sales maintenance that has to get there. But we're back.

So the $5 million increase on Ortega for the first quarter, about $2.5 million related to the restocking. There was about $1.3 million of improved pricing on Ortega. We actually pulled back promotions from last year and also have raised list prices on certain items. The rest is pure incremental volume. We're seeing real positive trends on Ortega. We really got the restocking here back in latter part of February and really had a very strong March as consumers were looking for that product and pulling it off the shelf.

Ortega is back pretty much 100% full, and we expect Ortega to have a very strong 2015. And Ortega before the recall in 2014 was up over 3% year-over-year for 10 months. And we're seeing that-plus going forward, so there's a lot of real positive momentum on Ortega.

And if you could just talk about TrueNorth and more so the whole entire nut and kind of granola category; the drought in California; your outlook for prices on nuts and how you expect the retailer and consumer to react to these price increases that are being taken in the category.

There's three pieces there. Certainly the drought and the whole issue with nuts in this country, nuts coming out of California, has affected cost. TrueNorth is a $20 million business at a sales level. The incremental cost to produce that product, because of the nut increase for us in 2015 is going to be about $2.7 million, so substantial cost increase on the product.

We have now reflected that cost in pricing at retail level. And, again, TrueNorth -- a little over 60% of TrueNorth's business is still sold through a major club store. And we have raised prices there. Everyone has accepted the prices from a retailer level because they understand, especially club stores who sell nuts in bulk, et cetera, they're having the same issues. They've accepted it.

But we have a 25%-plus increase in the retail price to consumers. And that's very substantial and it's early in the game. Those prices went into effect here, basically, March 1. We will judge over the next few months what that does to the consumer pull off the shelf, so that is a little challenging for the brand.

But those who are buying nuts are paying more for almonds and cashews and everything else, if they're just buying them plain today. But it is something that is a concern that we're worried about the sales dynamic on TrueNorth based on the substantial price increase we had to put in place.

Understood. And if I could just sneak in one more. Could you just discuss M&A? Your leverage is about five times debt to EBITDA. Your comfort in how high you'd like to take your leverage and the opportunities you are seeing in the M&A environment?

As we've said many times, the Company could support a lot more leverage. We believe that more than five times is not the right decision for B&G. We would do acquisitions tomorrow and then go back and use the capital markets where we see fit to go back to the capital markets at some point to take leverage down.

We always look at all opportunities in the capital markets and we know at some point here we've got to go back to the capital markets to reduce leverage, half a turn or more, just to open up the ability not to kind of bump too high up against the five-times leverage with acquisitions.

From an acquisition standpoint, we're always looking. We're very willing buyers and we're truly ready to acquire things in both dry grocery and snacks. This Company is very poised to do that at this stage.

Again, we're willing sellers. We're willing buyers. You've got to have willing sellers out there. We're always looking. But we're patient. They got to be the right acquisitions for us.

Understood; thank you very much.

Bryan Hunt, Wells Fargo.

It's actually Dave Cook on for Brian. Good evening. First wanted to touch on some of the recent Nielsen data. On a volume and total sales perspective, it seems like B&G was lagging in the category, in a couple of categories: table syrup, jams, jellies, hot cereal and canned beans. Is that a brand issue or can you comment? First of all, have you seen that and can you comment on what may be going on there?

Some of them, yes. We certainly have lagged the category in Cream of Wheat. Some of it is how we have increased pricing that has affected that. That has been a difficult category for us. We're trying to fix that. But a lot of that is our adjustment on pricing there and trying to increase the price, the everyday price, and the deal price of that product and kind of move the needle.

The jam and jelly category is relatively small for us and we play in that with Polaner jams and jellies. Some of that is just our decision to kind of pull back in certain distribution areas and kind of concentrate on the core. And the core of that brand is more Northeast than other places and we tend to be losing it in other places. I think you said the baked bean category also?

Yes.

Baked beans -- for us, baked beans is a New England, New York brand. We don't really sell B&M outside of that. So the national trends on baked beans, outside of the Northeast, are kind of okay, but still declining. But the Northeast was declining a little faster, just because of the difficulty within the customer base in the Northeast.

And our numbers just look worse on a national basis because our beans are really just sold in the Northeast versus the rest of the country. As we look as our competitors in the Northeast, we feel pretty good about our brand and how it's competing in the Northeast grocers against the major competitor out there.

Okay. And then switching over to the cost side, it seems that cost-cutting and zero-based budgeting are kind of the topic of the day, given what 3G has one at Heinz and what people expect them to do with the merger with Kraft. Can you talk about where you are currently targeting cost reductions and maybe quantify savings you're seeking in the next couple of years?

We are always -- well, two things. Certainly for this year from a kind of material commodity ingredient look, we're looking at very flat cost year-over-year. We're not seeing any net increases. The net is netting to pretty close to flat.

From an ongoing improvement cycle at B&G, we are looking for projects that will generate 2% to 4% cost savings on an annual basis. A lot of those cost savings do offset increases in medical and just basic salary increases and other just general cost increases that go up. But those cost saving programs, we have been averaging kind of about a 2% savings for the last couple of years that we have used to offset other cost increases. So our expectation is we will be net flat and not really have large cost reductions, because we pretty much run a very low-cost operation today.

Okay. Kind of along the same lines, the $2 million decrease in consumer marketing year-over-year in the quarter, is there anything to that, like a change in strategy or is that simply a year-over-year decrease?

But it's a year-over-year decrease and it's timing. Most of that decrease was consumer demo spending. And most of that decrease really was going against, in the first quarter of last year, the Rickland Orchards brand that was in club distribution in the first quarter still at Sam's. And where it was sold, we were spending a substantial amount in demos, is what you do in club stores.

We don't have that business on Rickland today, so it was really more of a reallocation of where we spend as we have lost the brand volume to support that spend. But on our base businesses, our marketing plan is to basically spend what we spent last year as a percentage of sales. We would not expect to see declines in our marketing spend.

Okay, that's all I have. Thanks for your time.

Sean Naughton with Piper Jaffray.

Hi, good afternoon. Distribution -- and I think you talked about this a little bit as being a headwind to gross margin. Can you talk maybe a little more detail about the pressure you're seeing there, specifically I think you are doing something with some of your warehouses and distribution there. Maybe just give us a little bit more color and when that would come in.

And also maybe anything from a benefit from potentially lower fuel surcharges that you might be seeing there. Is that just being completely offset by some of the headwinds?

What we saw in 2014 was increasing cost in both our warehousing side and our delivery side. What we're seeing in 2015 is the delivery side is not going up on us. Any kind of just normal increases from carriers are being more than offset by the savings we are seeing in fuel surcharges now. Fuel surcharges are down. As you look at where fuel surcharges were last year versus this year, it's down about 45% versus what we were being charged last year.

So that is more than offsetting any cost increases of just pure carriers trying to increase their base cost. Where we were honestly struggling is in our warehouse system and that's really what has hurt us in a big way in 2014 and wasn't real positive for us here in the beginning of 2015.

We are moving in a direction to work with another warehouse provider and we're working diligently on that transition along with getting kind of a long-term contract signed for them to help us this process. We expect all that to be signed up, but it's moving 100% forward as we speak, but we expect all to be signed up here within the next 30 days.

But the takeover and changeover, as it relates to our distribution facilities into their structure, is going to take 9 to12 months. So we're going to be in the early part of next year before we're fully up and running. We'll be up and running a little bit as each warehouse kind of moves in transition, but it's going to take a full 9 to 12 months, if not 12 months. So we're not going to see real benefits, real positive benefits until the second half of 2016. But we expect substantial benefits once that's up and running in both efficiency and cost.

It sounds like 2016 could be -- assuming a base run rate in your business and no major acquisition to change the composition of the portfolio, that distribution alone could be a pretty meaningful increase to the overall gross profit margin of B&G?

Yes, as we head into the second half of 2016, that's correct.

Okay. And then, secondly, on the natural and specialty channels, those continue to be a little bit more important for you, I think specifically with Pirate's. Maybe just describe how you doing in that space? What you guys like about what's happening there and are some of the new product extension for Pirate's being accepted?

It's a very important channel for us with a brand like Pirate's and a few others, but certainly for Pirate's. Part of the Pirate's growth is coming at retail in those channels also. The big guys and Whole Foods and Sprouts, et cetera.

We have really worked well with creating products that -- better for you, GMO free, et cetera, that those channels want. We see a tremendous opportunity as those channels keep growing and we want to make sure our products are in there. And as we look at acquisitions going forward, hopefully some of those acquisitions are oriented to those natural food channels also.

Okay, last question for me. On Cream of Wheat, I know you've done some product introduction in the past on Cinnabon and chocolate. Does this off-the-shelf kind of opportunity or smaller cup formats that you were talking about -- I think they're going to launch in 2Q -- does that have the opportunity to be meaningful driver for Cream of Wheat or is this more trying to stabilize the decline that you guys are having at this point?

We're hoping it can be a real driver here. I think the product put-ups we tried before, such as Cinnabon and chocolate was more of a sugar put-up, and it really wasn't getting -- the Cream of Wheat consumer didn't want that sugar cereal. At the end of the day, this is more Cream of Wheat in a cup and this is really trying to get the users who use Cream of Wheat, and hopefully more users, but to be willing to use it as an instant product, take it to work potentially, have a little breakfast at work.

Use it that way and create more usage for the existing consumer and hopefully add younger, the millennials, into this Cream of Wheat franchise because it's more of an on-the-go product. It's less about adding a lot more sugar to a product that really didn't hit home with the Cream of Wheat consumer before. It's more about the convenience of selling them what they want to buy.

Okay, got it, thanks. Best of luck in Q2.

(Operator instructions)

Andrew Lazar, Barclays.

A couple of things for me. First, if I missed this, I apologize. Are we now at a sort of a constant Rickland run rate or is there -- like, have we lapped the main reductions in sales there, or is there still more to come out as we go through the next couple quarters?

The Rickland run rate is really about $1 million a quarter in sales. A little over $1 million, but $4 million to $5 million, in total, for the year. So as we head through comparisons [verse] 2014, don't have handy, but 2014 second quarter was still reasonably okay for Rickland. It was certainly less than first quarter.

And then as you get into the third quarter, we were really getting into this very low run rate. So you've still got another quarter, maybe quarter and a half of lapping much higher numbers that Rickland had last year.

Got it. And you kind of do what you did this quarter and sort of break that out --

Yes.

-- so we have a sense? Okay. It may be hard, but dimensionalize, maybe, what the cost opportunity might look like once you move ultimately to this new warehousing arrangement. Is it maybe as simple as getting back what some of the negative impact has been for you the last couple quarters?

So as an example, this past quarter I think you said it was going to be 80 or 90 basis points. Is it as simple as just, hey, at least kind of get that back? Or does the efficiency and effectiveness of this ultimately maybe, on a full-year basis, get you more than that from a (multiple speakers)?

It certainly, honestly, gets us more than that. What it should look like is our expectation is we get back to where we were kind of as we entered into 2013, before the inefficiencies we saw with snacks, et cetera, and just getting bigger hit us and affected our distribution last year and has made it even worse year-over-year this year in the early part of this year.

So real substantial savings once this is up and running, and possibly better than -- and possibly and probably better than what we were prior to all this to begin with, because this is just a more efficient, much more sophisticated, much more efficient distribution system than we were able to do even as a smaller Company.

Got it. If we think about the remainder of the year, just from a contribution to the top line on the base business, assuming you kind of get the -- if all things go as planned, the consistency of -- call it the -- around the 2% or so pricing, and then anticipating -- I guess you're expecting positive volumes, but probably still modest, so maybe a 2% pricing, 1%-ish kind of volume, more or less, as we think about it?

That's what we're hoping for. I mean, 3%, just on base, may be a little difficult. It may be a little less than that. We will be able to judge that more as we get through the second quarter. Certainly we'll see substantial positive pricing here in the second quarter and into the early part of the third quarter.

But once we get into the third quarter, we had already pulled back on the aggressive promotions in the second half of last year, starting kind of August, September, so we really lapped that piece. And then it's just a little bit of list price increasing year-over-year.

That's helpful. Two last things: One, kind of biggest wildcard sort of risks that you're watching out for as the year goes on? It sounds like one would be the extreme amount of pricing you took in snack nuts? Maybe the other is as you pull back on some of the promotion so far, it seems like that's going well from a competitive standpoint, but I guess that can always change. Would those be the things you'd call out or are there other things?

There really isn't much else. We're locked in on cost, which is very flat. We got very favorable maple syrup purchase price just because of the Canadian exchange rate. That's all locked up. And the syrup really comes into our inventory here over the next three months.

The TrueNorth issue, it's a small brand. It is concerning. We decided not to ride out the cost increase and just take an aggressive price increase and see where it lands. We may have to, as the months go on, pull back a little bit on that if consumer trends really does drop. So will have to judge that.

As of today, we're heading toward the end of April. We don't see the competition set being any more aggressive and we know what that competition is doing, at least through the third quarter, against us in the areas we sell. And none of them are being overly aggressive on anything. So we don't see that as changing.

So we don't see -- and we see just a lot of positive improvement on some of our other ways we go to market, such as food service, certainly mass, those businesses seem to be picking up at a very nice pace for us and we really seem to have turned the tide of food service, example. I think the industry has kind of turned the tide on food service, hopefully. We are seeing real positive results there.

And the hope here is also where we've struggled, which is Northeast grocery, we're actually seeing the entire Northeast, not just our products, but the Northeast in general, the traffic in grocery stores and the consumer pullout at grocery stores over the last six months is improving. It's up year-over-year, so we're hoping -- we're a very strong Northeast business. We have a lot of regional brands that sell very heavily in the Northeast. And we need the consumer trends in those stores to be very positive. Hopefully that positive should relate to our products too.

But other than that, we don't really have big -- that we see today, big risk factors in this portfolio.

Got it. Thank you for that. And then very last one would be following up on the M&A question. It is probably too early for a sense of this, but with some of the additional sort of activity in the space and portfolio change and what have you, is the hope that maybe some of these combinations, some things ultimately fall out that are either less core or what have you? And I know that's always been the hope, but is there any sense yet that maybe more of that actually happens or would you say it's still too early to really be able to judge that?

I think it's always too early until it actually happens. We believe in these combinations that have happened or just leadership changes in certain other places, that some of this will open up. And there's certainly a laundry list of those products within the companies that either have combined or leadership has changed that would fit B&G extremely well. They know we're there. We're always in contact. They got to be willing sellers.

Thanks very much.

Thank you.

With no further questions, this does conclude today's conference. We thank you for your participation. You may now disconnect.