When you don’t relish just being in a pickle, the key to success is diversification: both in your product line and your product distribution channels.
In 1889 Bloch & Guggenheimer started a pickle, pepper and relish business in New York City. The taste of success barreled beyond the pickle-loving metropolitan New York market to extend the now-familiar red B&G label to the point at which today there are 70 varieties of pickles and more than 40 different pepper products consumed nationwide. While most consumers recognize B&G as a leading brand, most are not aware that parent company B&G Foods, Inc. also markets baked beans, fruit jellies, hot sauces and canned meats, among other foodstuffs, under a variety of equally prominent brand names not otherwise associated with pickles.
This is the underlying crux of the B&G marketing strategy: acquire leading brands, maintain their separate distinctive identities but leverage sales through multiple local and national distribution channels. While B&G pickle products are at the core of the company’s product line, they are also part of a large extended, and growing, foods family, which includes such highly recognizable brand names as Ac’cent, B&M, Brer Rabbit, Emeril’s, Joan of Arc, Las Palmas, Maple Grove Farms of Vermont, Ortega, Polaner, Red Devil, Regina, San Del, Trappey’s, Underwood, Up Country Organics, Vermont Maid and Wright’s.
Now headquartered in Parsippany, N.J., the pickle-maker reorganized in December 1996 as B&G Foods Holding Corporation. It began acquiring new brands in June 1997 and now with its most recent acquisition, Ortega in August 2003 from Nestlé, the company has 16 different major brands. In October 2004, it became a publicly traded company and was renamed B&G Foods, Inc. At that time it announced a net increase in third quarter sales of 10.4 percent to $91.9 million compared to the previous year and an operating income increase of 12 percent to 16 million.
“It was actually our intention to keep the company private,” Al Soricelli, executive vice president of marketing and acquisitions, says, “but as we explored new funding options this seemed the best way to maximize the return to our ownership and to build on our unique business platform.”
He explains that what makes B&G Foods different is that it isn’t looking to reinvent the edible wheel. “We have no desire to create new brands, or develop new product categories,” says Soricelli. “What we are looking to do is acquire existing products with strong brand identities and sales in niche markets.” A common feature is that these products are all canned or packaged in some way to have long unspoiled shelf lives, as opposed to refrigerated or fresh foods with looming expiration dates that require quick turnover. It doesn’t matter what food category the product might be in – a sauce or a flavoring or a syrup, a bean or a pickle. “What matters is the potential to grow the product through cost-efficient distribution and creative, sales and marketing” Soricelli adds, “and thereby achieve a margin structure typically above the industry average.”
B&G Foods distributes to a variety of regional and national sales outlets, including a range of mass merchandisers, clubs, supermarket warehouses, retail grocery, food services, and specialty stores, as well as some export. There is a separate sales organization dedicated to each channel.
Doing Business Where the Business Is
Geographical coverage is both national and regional. “For example, B&M baked beans is mostly an East Coast product, while our Las Palmas line is more popular in the West Coast,” Soricelli points out. “The key is to find a stable product, anticipate trends for demand, and then do business where the business is for it.”
He adds, “A product mix ranging from salad dressings to spices to salsa and other specialty food products also protects us from seasonal buying trends, which a number of products are susceptible to. Our overall sales aren’t subject to seasonal variations simply because while one set of products may be in a down period, another set are in their high demand cycle.”
In addition, Soricelli points out, “Particularly in the market categories in which we compete, consumers frequently change their taste preferences, dietary habits and product packaging preferences. By anticipating these trends and developing and marketing suitably responsive products, we have largely been able to avoid any sales dips due to these factors.”
Equally important is that if the business model doesn’t pan out for a product, or turns out not to complement the rest of the product menu and sales channels, B&G Foods is quick to trim. “The original B&G pickle company had gotten into New York-style bagel chips,” Soricelli explains, “but we found that the bagel chip business didn’t fit our marketing approach, so we sold it off. We’re constantly evaluating potential new acquisitions; at the same time, we’ll clear away a product that isn’t performing or no longer fits into our strategy.”
He adds, “Our management team has been in place since 1990, and it has extensive experience in this industry. We have a demonstrated track record of successfully operating in a leveraged environment to introduce new products, expand niche or specialty products into additional channels, and consolidate and enhance acquired businesses. That’s what makes us different from everyone else in this industry.”
Diversity is the Key
Underpinning the business strategy is the diversity of sales channels. Says Soricelli, “Diversity is our key strength. It gives us stability by spreading growth opportunities across a range of options, providing us the flexibility to quickly capitalize on new consumer shopping trends by moving product through sales channels that, while new for that particular product, are already an established part of our distribution network. And it lets us just as easily step back and reposition the product as necessary.”
While B&G Foods is a marketing and sales powerhouse, it is also a manufacturer that has to purchase a range of agricultural products, including meat and poultry, as well as raw materials from other commodity processors, food and packaging companies. And, like any manufacturer, it has to deal with fluctuations in the cost of raw materials. “In the past six to 12 months we have seen increasing prices in certain of these commodities,” Soricelli says, “particularly in packaging materials, pork and chicken. We manage this risk by entering into short-term supply contracts and advance commodities purchase agreements from time to time, and if necessary, by raising prices.”
He adds, “As the retail grocery trade continues to consolidate and our retail customers grow larger and become more sophisticated, our retail customers may demand lower pricing and increased promotional programs. These customers are also reducing their inventories and increasing their emphasis on private label products. To date we have been able to offset these trends by using our management expertise, unique products and category leadership to maintain and increase volume and profits overall for the company.”
B&G Foods operates a number of manufacturing facilities throughout the nation. Locations include Hurlock, Md. (B&G Pickles), Roseland, N.J. (Polaner), New Iberia, La. (Trappey’s), St. Johnsbury, Vt. (Maple Grove Farms), Portland, Me. (B&M and Ac’cent) and Stoughton, Wis. (Ortega).
Soricelli believes the company’s appetite for growth and new product acquisition should continue unhampered. “Because of how we’re uniquely positioned in the market, our diverse customer base, and the experience and expertise of our management team, we’re looking to add more to our plate. Our family of products is a growing family.”