B&G Foods, Inc. (NYSE:BGS) Q1 2024 Earnings Call Transcript

B&G Foods, Inc. (NYSE:BGS) Q1 2024 Earnings Call Transcript May 8, 2024

B&G Foods, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and welcome to the B&G Foods First Quarter 2024 Earnings Call. Today’s call, which is being recorded, is scheduled to last about 1 hour including remarks by B&G Foods management with a question-and-answer session.

I would now like to turn the call over to AJ Schwabe, Associate Corporate Strategy and Business Development for B&G Foods. AJ?

AJ Schwabe: 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 conditions.

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 and base business net sales. Reconciliations of these financial measures to the most directly comparable GAAP financial measures are provided in today’s earnings release.

Casey will begin the call with opening remarks and discuss various factors that affected our results, selected business highlights and his thoughts concerning the outlook for the remainder of fiscal 2024. Bruce will then discuss our financial results for the first quarter of 2024 and our guidance for fiscal 2024. I would now like to turn the call over to Casey.

Kenneth Keller: Good afternoon. Thank you, AJ, and thank you all for joining us today for our first quarter 2020 earnings call.

In my remarks, I will address 3 topics on the call today. First, an overview of first quarter results. Bruce will provide more detail and color later in the presentation. Second, the reporting of segment results for the first time by our 4 business units. And third, an update on our portfolio reshaping plans and activity.

Quarter 1 results. First quarter net sales of $475.2 million and adjusted EBITDA of $75 million were slightly below expectations. Base business net sales adjusted to exclude the year-over-year impact of lower Crisco oil pricing decreased by approximately $17 million or 3.4% compared to the year ago period. Much of the decline within our food service and industrial businesses across spices and seasonings, Maple Grove Farms syrups, baking powders and oils and Ortega cheese and other sauces. The declines reflect an overall slowdown in out-of-room traffic and volumes compared to fiscal year ’23 trends.

Net sales to retail customers across the business units were slightly down, approximately 1.5%, with relatively flat volumes, offset by a modest increase, 90 basis points in trade and promotional spending. Adjusted EBITDA for the first quarter decreased by $7.4 million compared to the first quarter of 2023. The divestiture of the Green Giant U.S. shelf-stable product line was responsible for approximately $1.5 million of the year-over-year decline. Adjusted EBITDA as a percentage of net sales for the first quarter was 15.8%, largely in line with the 16.1% achieved in the prior year period.

On a consolidated basis, gross profit as a percentage of net sales for the quarter was up 60 basis points versus last year. We continue to see moderating inflation and some favorability in transportation and warehousing. Although, these were offset by increased G&A costs for insurance and salary wages as well as higher advertising and marketing investment in the quarter versus last year.

Segment reporting. This is the first quarter of B&G Foods is reporting results by operating segments, providing greater visibility into the underlying performance of the company’s business units. The segments represent the 4 operating business units that we recently reorganized the company’s structure into. Business units are now fully established, running their businesses and actively managing the business unit P&Ls. Across the 4 business units, we maintained a lean corporate structure, approximately 4% to 5% of net sales to maintain oversight and efficiency and trend and shared transactions and operations, i.e., sales distribution and order processing, et cetera.

The 4 business units are spices and flavor solutions. This segment represents approximately 20% of our consolidated net sales and has our highest segment adjusted EBITDA as a percentage of net sales at 30%.

B&G Foods is a leader in the spices and seasoning category with key brands, Dash, Weber grilling, Spice Islands, Ac’cent, et cetera.

During the first quarter, Spices & Flavor Solutions net sales were depressed by a significant decline in food service business with key distributors and customers. Sales to retail customers were up slightly in the quarter. We are also launching a new line of licensed seasoning and grilling blends under the 4 6s brand, which is the new show and ranch featured in the Yellowstone Television franchise.

Meals. The Meal segment represents approximately 25% of our consolidated net sales, with segment adjusted EBITDA as a percentage of net sales of 21.4%. The key components of this business unit are Mexican meals, Ortega Las Palmas and hot breakfast, Cream of Wheat, McCann’s, Maple Grove Farms, Syrups. We see growth opportunities in Mexican meal preparation as consumers expand their Mexican cuisine options at home. The first quarter meal segment net sales decline was driven by lower food service sales while net sales to retail customers were roughly flat.

Specialty. The Specialty segment represents approximately 33% of our consolidated net sales, with segment adjusted EBITDA as a percentage of net sales of approximately 24%. The primary focus of this business unit is baking staples, about 70% of business unit sales with leading #1 brands such as Crisco oil and shortening, Weber grill baking powder, Grandma molasses, et cetera. Baking both from scratch and mix has remained relatively stable over time with more consumers learning to bake from scratch during COVID lockdowns. The Specialty segment’s key objective is to maintain strong, stable cash flow and margins. Specialty segment adjusted EBITDA was up slightly in the first quarter.

Frozen and vegetables. The Frozen and vegetables segment represents approximately 22% of our consolidated net sales, with the lowest segment adjusted EBITDA margin as a percentage of net sales of 7.5%. The Frozen and vegetables business unit includes the U.S. Green Giant Frozen business, the Canada Green Giant frozen and canned businesses, a major portion of our company’s consolidated Canada sales and the Le Sueur canned vegetable product line. The primary focus of our Frozen vegetables business unit is to improve gross profit margins, strengthen the innovation pipeline, streamline the frozen distribution network, and grow volumes in our [indiscernible], Mexico and [indiscernible], Arizona manufacturing facilities.

First quarter Frozen vegetables segment net sales reflect overall softness in the frozen vegetables category, with much of the segment adjusted EBITDA decline year-over-year attributed to the divestiture of the U.S. Green Giant can business last November. Portfolio shaping. B&G Foods has continued and will accelerate the reshaping and restructuring of our portfolio to sharpen focus, improve margins and cash flow and maximize future value creation. The divestiture of the Green Giant U.S. canned vegetable business was completed last fall, following the sale of the Back to Nature brand in January 2023.

As previously disclosed, we have been evaluating and working on divestures that represent between 10% to 15% of total company net sales. That process on smaller brands is proceeding and we expect to possibly sell some assets before the end of fiscal year ’24. Beyond those efforts, the larger decision on whether to remain in frozen long term has been an open question. After careful analysis, we are placing the frozen and remaining canned vegetable businesses under strategic review and are evaluating a possible divestiture and sale of some or all of the assets in the Frozen and Vegetables business unit.

Green Giant remains a strong brand with broad awareness and distribution, and the frozen vegetables category is on trend with long-term health and dietary trends. However, I believe the frozen vegetable business may not be the right fit with B&G Food’s focus and capabilities, particularly since we have no plans to add more assets in the frozen portfolio, given the opportunities in our core shelf-stable businesses and overall capital constraints. More to come as we further evaluate our options and plans. Thank you. And I will now turn the call over to Bruce for more detail on the quarterly performance and outlook for the year.

Bruce Wacha: Thank you, Casey. Good afternoon, everyone. As a reminder and before I get into our results, we sold our Green Giant U.S. shelf-stable product line last fall. And so we are lapping the first quarter 2023 results that had that business. The Green Giant U.S. shelf stable line had $14.6 million of net sales and approximately $1 million to $2 million of contribution in last year’s first quarter. In the first quarter of 2024, we generated $475.2 million in net sales, $75 million in adjusted EBITDA, adjusted EBITDA as a percentage of net sales of 15.8% and $0.18 in adjusted diluted earnings per share. Base business net sales, which excludes the Green Giant U.S. shelf-stable product line, decreased by $22 million or 4.4% in the first quarter of 2024 compared to the year ago period.

The decrease in base business net sales was driven by approximately $5 million from the execution of our Crisco pricing model that reflected a decrease in soybean oil costs and allowed us to pass this benefit back to consumers in the form of lower pricing. Approximately $10 million was from lower food service and industrial net sales across multiple business segments and brands. And the remaining $6-plus million of the decrease was partially driven by lower net sales to our retail customers that were largely the result of modest increases in promotional trade spend and relatively flat volumes.

Gross profit was $108.9 million, for the first quarter of 2024 or approximately 22.9% of net sales. Adjusted gross profit, which excludes the negative impact of $1 million of acquisition, divestiture-related expenses and nonrecurring expenses including the cost of goods sold during the first quarter of 2024 was $109.9 million or 23.1% of net sales. Gross profit was $114.2 million for the first quarter of 2023 or 22.3% of net sales. Adjusted gross profit, which excludes the negative impact of $0.7 million of acquisition, divestiture-related expenses and nonrecurring expenses included in the cost of goods sold during the first quarter of 2023 was $114.9 million, or 22.4% of net sales. While we are continuing to see input cost inflation with regards to material goods and our factory production, the cost increases have been modestly flat thus far this year and offset in part by continued moderation in certain costs like soybean oil and tomatoes that saw the greatest increases in 2022 and 2023.

Separately, we are also continuing to see favorability in our logistics costs. Although these benefits are much more modest on a rate basis than they were a year ago. Selling, general and administrative expenses increased by $1.9 million or 4% to $48.6 million for the first quarter of 2024 from $46.7 million for the first quarter of 2023. The increase was composed of increases in general and administrative expenses of $2 million. Consumer marketing expenses of $1.6 million and acquisition divestiture and nonrecurring expenses of $0.1 million, partially offset by decreases in selling expenses of $1 million and warehouse expenses of $0.8 million.

Expressed as a percentage of net sales, SG&A expenses increased by approximately 110 basis points or 10.2% for the first quarter of 2024 as compared to 9.1% for the first quarter of 2023. The increase in general and administrative costs was largely driven by modest inflation in wages, insurance and other professional services. As I mentioned earlier, we generated $75 million in adjusted EBITDA or 15.8% of net sales in the first quarter of 2024 compared to $82.4 million or 16.1% in the first quarter of 2023. Approximately $1 million to $2 million of the decrease in adjusted EBITDA was the result of the divestiture of the Green Giant U.S. shelf-stable product line, which we sold last fall. The remainder was largely driven in proportion by a decline in our net sales.

Net interest expense was $37.8 million in the first quarter of 2024 compared to $39.4 million in the first quarter of 2023. The decrease was primarily attributable to a reduction in average long-term debt outstanding and the accelerated amortization of deferred financing costs related to long-term debt prepayments during the first quarter of 2023, partially offset by slightly higher interest rates on our long-term debt compared to the first quarter of 2023 partially offset by slightly higher interest rates on our long-term debt compared to the first quarter of 2023. Depreciation and amortization was $17.2 million in the first quarter of 2024 compared to $18 million in the first quarter of last year.

We had a net loss of $40.2 million or $0.51 per diluted share and adjusted net income of $14.4 million or $0.18 per diluted share in the first quarter of 2024 compared to net income of $3.4 million or $0.05 per diluted share and adjusted net income of $19.1 million or $0.27 per diluted share in the first quarter of last year. The net loss and diluted loss per share in our GAAP results were driven by a write-down of goodwill that was allocated to our frozen and vegetable business unit as part of our reorganization into 4 operating segments and as described further in our press release and 10-Q. Casey already described the units, and I recommend investors to review our press release and 10-Q for additional information.

I would like to now touch on the results. Net sales for the Specialty segment decreased $7.9 million or 4.9% for the first quarter of 2024 to $154.7 million from $162.6 million in the year ago quarter. The decrease was primarily due to lower Crisco pricing, driven by softening commodity costs, coupled with declines in food service and industrial sales. Specialty segment adjusted EBITDA increased by $0.7 million or 1.9% for the first quarter of 2024 compared to the first quarter of 2023. Net sales for the Meal segment decreased $1.9 million or 1.6% for the first quarter of 2024 to $120 million from $121.9 million for the first quarter of 2023. The decrease was primarily due to lower net sales in Food service.

The Meals segment adjusted EBITDA decreased by $0.6 million or 2.3% compared to the first quarter of 2023, which was in line with the decrease in net sales. Excluding the impact of the divestiture of the Green Giant U.S. shelf-stable product line, which we sold last fall, net sales of the Frozen and vegetables segment decreased by $6.7 million or 6%. Although increased promotional trade support help grow our bag-in-a-box or BIB product line during the quarter, some of the other parts of the frozen business fared less well.

Frozen and vegetables segment adjusted EBITDA decreased by $2.7 million compared to the prior year period. Approximately $1 million to $2 million of that decline was due to the divestiture of the Green Giant U.S. shelf-stable product line, with the remainder driven by the decline in net sales. Net sales for the Spices & Flavor Solutions segment decreased by $5.4 million or 5.4% in the first quarter of 2024 to $95.6 million from $101 million in the first quarter of 2023. The decrease was primarily due to lower net sales in food service. The Spices and Flavor Solutions segment, adjusted EBITDA decreased $2 million or 6.6% in the first quarter of 2024 compared to the first quarter of 2023.

Now I’d like to spend some time on our cash flows and balance sheet. We generated $35.1 million in net cash from operations in the first quarter of 2024 compared to $69.5 million in net cash from operations generated in the first quarter of last year. Our net cash from operations was actually quite strong despite the year-over-year decrease when compared to the first quarter of 2023. While we are continuing to bring inventory down, our net cash from operations benefited from a more modest decrease in inventory of $8.2 million during this year’s first quarter, while net cash benefited from a decrease in inventory of $28.2 million in the year ago period.

As a reminder, last year’s first quarter benefited from a sell-down of the seasonal pack for the Green Giant U.S. shelf-stable business that we divested last fall. We finished the first quarter of 2024 with approximately $560.6 million of inventory compared to $569 million in inventory at the end of 2023 and $700.9 million at the end of the first quarter of 2023. The timing of interest payments also affected our cash flows for the quarter. The new senior secured notes that we issued last fall had an interest payment in Q1 of this year, while the 2025 unsecured notes, which were then partially refinanced, have an interest payment in Q2. We reduced debt by a little bit more than $10 million during the first quarter of 2024, and we have now reduced net debt by approximately $250 million since the end of the first quarter of 2023.

Our pro forma adjusted net leverage ratio as defined in our credit agreement was approximately 6.35x at the end of the first quarter of 2024, in line with our year-end results and significantly better than the 7.2x at the end of last year’s quarter. We expect to continue to reduce our net debt and pro forma adjusted net leverage ratio throughout fiscal 2024 and beyond as we diligently work towards achieving our long-term target of 4.5x to 5.5x. As noted in our earnings press release, we are revising our fiscal 2024 guidance to $1.955 billion to $1.985 billion for net sales. $300 million to $320 million for adjusted EBITDA and $0.75 to $0.95 for adjusted diluted earnings per share.

We believe that the revised guidance better reflects the emerging challenges in food service and a more gradual recovery in net sales to retail customers with improvement expected in the second half of this year. We do expect continued volume improvement throughout the year in our sales to retail customers and less of a drag on net pricing, as we will lap our increased trade promotional spending efforts beginning in Q3 of this year.

Additionally, we expect for full year 2024, interest expense of $145 million to $150 million, including cash interest expense of $138 million to $143 million. depreciation expense of $47.5 million to $52.5 million, amortization expense of $20 million to $22 million; an effective tax rate of 26% to 27% and CapEx of $35 million to $40 million. We expect to use approximately 50% of our excess cash to pay our dividend and the remaining 50% to pay down debt. Now I’ll turn the call back over to Casey for further remarks.

Kenneth Keller: Thank you, Bruce. In closing, our first quarter results demonstrated consistent margins and moderating inflation with declines in net sales driven by food service trends and increased promotional spend. We expect food service trends to be soft through the first half of the year, with a corresponding pickup in at-home consumption trends in the back half. We are also accelerating efforts to reshape and clarify the portfolio through the reporting of business unit segments and the strategic evaluation of the remaining Green Giant frozen and canned vegetable business in the U.S. and Canada. This concludes our remarks. And now we would like to begin the Q&A portion of our call. Operator?

Operator: [Operator instructions] And your first question is from William Reuter from Bank of America. Please ask your question.

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Q&A Session

William Reuter: My first question, it sounds like really the majority of the weakness is in the food service components of the business. What percentage of that does — what percent does food service represent of total sales?

Kenneth Keller: About 14% on average, an average quarter would be about 14% of our sales food service.

William Reuter: Okay. And I guess you made some commentary about expectations that we’ll kind of see improving trends in retail as the year goes on. Is that on a unit base or on a dollar basis? And I guess, is that from conversations with retailers or just expectations about economic recovery?

Bruce Wacha: So there’s a couple of things going on, on the retail side of the business. The first one is volumes have stabilized, right? And so we’re seeing in consumption kind of flattish volumes. We believe there will be a pickup over time, particularly if you see continued softness in food service. And so that’s part one. And that’s probably not as strong as we initially expected it to be at this point, but it’s hanging in there fine. And then the other part, pricing, which, in this case, is promotional trade spend and people are re-layering that spend back into the business. It’s still below pre-pandemic levels, but it’s inching higher. And we really started to dial that up last year beginning in the third quarter. And so we’re lapping a first quarter and second quarter this year where we had very big pricing benefits last year and now a higher level of trade spend, but we’ll be lapping a lot of that activity that we layered in last year as we work towards the back half of this year.

William Reuter: Got it. And then just lastly for me, I don’t think you’ve disclosed this thus far, but the frozen and canned veggie businesses that remain in the U.S. and Canada, that you’re now evaluating, can you share what the sales or EBITDA of those are?

Kenneth Keller: It’s essentially — it’s in the segment reporting. It’s essentially the — almost the entire frozen and vegetables business unit.

Bruce Wacha: A little bit less than $400 million in annual net sales. We haven’t disclosed profits for the full year yet. We’re just rolling on the segment profit as we execute quarter-by-quarter.

Kenneth Keller: So we reported basically $105 million of net sales for the Frozen vegetables business unit in the first quarter.

William Reuter: Got it. I guess were the first quarter margins representative of what they are for the year, or is there seasonality?

Bruce Wacha: We disclosed the first quarter margins. We haven’t disclosed for the remainder of the year yet. And part of this is we’re not — we haven’t operated the business on a full year on these business units. And so this is an evolution for us, and we share the quarterly information as the year rolls through.

Kenneth Keller: Yes. It’s not too far off being reasonably represented within a certain range.

Operator: Your next question is from Michael Lavery from Piper Sandler.

Michael Lavery: Just was curious how to think about Canada if hypothetically, you were to divest frozen and vegetables, is there enough scale excluding that piece of the business? Is there some way that how you think about one gets tied to the other? Where does sort of Canada get left after a potential set?

Bruce Wacha: We’ve had a Canadian business that predated Green Giant. We continue to have one after this transaction. Obviously, Green Giant is a significant portion of the sales in Canada, but we still expect that as a Canadian business.

Kenneth Keller: We would probably not maintain the same infrastructure.

Michael Lavery: Okay. Makes sense. That’s helpful. And just at a high level on the portfolio, you’ve historically had a good track record of buying cash-generative businesses that seemed at least a little bit category agnostic. You’ve identified now how frozen may not fit, and you’ve got a segment view that’s a little bit different. Maybe just at the total portfolio high level, is there sort of an end game of how you want to evolve? Is it taking on a little bit more of a growth focus, or still sort of value cash generative focus or somewhere in between, but maybe just the latest on just the strategy of the portfolio in its entirety.

Kenneth Keller: Yes. So of the 3 remaining business units, if we were to sell off the frozen vegetables business unit, I mean, I think there’s 3 different profiles here. So spices & seasonings, we said we wanted that to be a high-margin low single-digit growth business. And we believe that we can get there. The issues this quarter were really more around the food service business. But we think for the year, we’re going to be on track to driving growth in that business and maintaining strong margins. The Meals business, we also want to see some lows — we want to see low single-digit growth on the top line. And we’re getting there.

Again, it was a little bit hampered by the food service trends this quarter, but our goal is to get that into low single-digit growth as well. The Specialty business, which is largely focused around baking staples, we want to just — we want to — that business is largely in a maintain mode and making sure that we maintain cash flows, stable margins, et cetera, not expecting a lot of growth out of that portfolio, but stability over time. And if you think about those 3 business units they fit our capabilities. We’ve got some scale, whether it’s in spices & seasonings, meals with the Mexican focus or baking.

We’ve got some scale. I think we could add acquisitions to those platforms and do good things with them and maintain strong cash flow and in the cases of the spices business unit and the meals business unit, I think we can drive growth even with acquisitions over time. So it’s a little bit of a mixed bag, but that’s how we think about those 3 business units. Frozen vegetables, in the long term, I think frozen vegetables is a decent category to be in. The frozen category has historically been a good category hasn’t not recently, the trend has recently been a little tougher, but it is on trend. It Is vegetables. I just don’t believe that frozen is the right fit for our capabilities and focus going forward.

Operator: Your next question is from Karru Martinson from Jefferies.

Karru Martinson: We look at the flat volume with a modest step-up in promotion. Is that the consumer just kind of coming to expect the promotional cadence to increase looking for value? And kind of what’s the private label response been for you guys?

Kenneth Keller: I think the step up in promotion and as Bruce said, it’s really going to be probably more of a first half phenomena because we did begin to step up promotion activity or promotion spend in the back half of last year. I think it’s 2 things. One is a little bit more competitive promotion environment out there. I think you’re probably hearing that from other players, too. It’s not higher than it was pre pandemic. but it’s getting back to kind of a normal cadence of where it was there. And some categories there and some categories still a little bit lower than it was pre-pandemic. But we’re seeing the resumption of normal promotion activity that’s been kind of gradually building over the last 18 to 24 months.

The second thing is that in that extreme pricing environment, we’re also trying to manage in a couple of our categories, the gap to private label. So like in for instance, in Green Giant frozen vegetables, our core bags and bag-in-box, we want to maintain a certain kind of gap or price gap to private label. So we’ve been kind of refining and honing that and largely that — we’ve been doing that with a little bit of trade spend to get to the right price points, either in promotion or in everyday price. So, I think it’s really those two things, kind of a resumption of normal promotion activity in the environment; and second, just managing our price gaps in a couple of categories, principally Green Giant frozen vegetables and Crisco, although Crisco we’re kind of just passing through the change in oil price up and down. But we watch that gap pretty closely in Crisco as well, particularly on the shortening side.

Karru Martinson: Okay. And when we look at the other potential divestitures that 10% to 15% of sales, what’s the kind of the time horizon you mentioned, hopefully, you get some of those done. Just wanted to get a sense of the scale or magnitude that you’re looking at here.

Bruce Wacha: Yes, I think, probably less is more here. We’re working on a couple of things with M&A, it;s just always tricky to predict from a timing or exactly what. So it’s a little bit of stay tuned, and it’s probably things that would make sense after announce assuming that there were anything just like the back of the nature and the canned Green Giant business in the U.S.

Kenneth Keller: But we are working on it. 1 or 2 smaller divestitures that we would like to move along at some point. But that’s a much smaller scale, not even the 10% to 15%, probably even less than that, beyond the larger Green Giant discussion we had today about putting it under review.

Operator: Your next question is from Robert Moskow from TD Cowen.

Robert Moskow: I just want to clarify that the back half of the year, you’re assuming just easier comparisons on your pricing. You’re not expecting any kind of change in the consumer behavior, like a stronger consumer that will boost volumes I just want to make sure.

Bruce Wacha: Yes, Rob, on the margins, maybe yes, but not in a big way.

Robert Moskow: Okay. and the follow up.

Kenneth Keller: For the most part, we expect easier comps we are — historically, what’s happened when food service traffic has gone down. You see a little bit of the in-home consumption pick up, but we’re not counting on very much.

Robert Moskow: Right. Okay. And then the other question was, I thought I heard you say that frozen is $400 million in sales, maybe I misheard. But then the divestiture that you’re evaluating is 10% to 15% of sales, which is less than $400 million.

Kenneth Keller: Two different things. I think before we were talking about smaller divestitures that represented about 10% to 15%, which would have been things like Back to Nature, et cetera. And we’re still working on a small list of those within that 10% to 15%. The news today is that we’re considering a larger divestiture beyond that 10% to 15% pruning that would be the green China or the frozen and vegetables business.

Robert Moskow: Okay. So I mean, when you’re said and done, like it could be as much as 30% of the portfolio that you exit.

Kenneth Keller: [indiscernible].

Robert Moskow: Okay. And 1 last question.

Kenneth Keller: Probably a little less than that, Rob, but yes.

Robert Moskow: Okay. And the last question within are there any specific channels to kind of call out restaurants versus institutions or schools that are causing the decline? Or is it just kind of a broad food service decline?

Kenneth Keller: We’re just seeing a broad decline in traffic in orders coming from. We largely go through distributors. We do have 1 or 2 direct customers that we — I don’t want to specifically talk about some of our customers that we know they’ve had traffic declines and other things. But we’re kind of following the general industry trend that you’ve probably seen about foot traffic being down a lot of out-of-home establishments.

Robert Moskow: Yes. I agree. Okay, Thank you.

Operator: Your next question is from Carla Casella from JPMorgan.

Carla Casella: A couple of follow-ups. On the food service is one of your segments more concentrated in food service than another? Or are there any that don’t really participate in food service?

Kenneth Keller: I think spices & seasonings is probably our largest concentration, but we also have some concentration in the meal segment where the Ortega sells cheese sauces, enchiladas sauces, salsas et cetera, and that peppers. And then in our Specialty segment, we do sell oils, baking powders and other things into food service. But the largest concentration would be in spices, followed by these other 2 business units.

Carla Casella: Okay. And so not much to frozen isn’t so much?

Kenneth Keller: Not so much. No, not very much.

Carla Casella: Okay. Are you going to recast your recast sales on the website? Or I mean we can kind of, I guess, sum them up, given the brands that you broke out in your old reporting, but — have you or will you recast it?

Kenneth Keller: So this would be going forward, we would be disclosing the segment results, sales and actually profitability, but not the brand sales.

Carla Casella: Okay. But it looks to me like if I just add up the different brands that are included in frozen, you said just under $400 million of net sales for the year. I’m only getting like $365 million. I’m wondering if you’re going to recast like the historical into the new segment reporting.

Kenneth Keller: Sorry. So Green Giant is just — really the Green Giant brand plus the sort…

Carla Casella: Okay, yes it’s 365.

Kenneth Keller: The U.S. Frozen plus Canada, so Canada frozen and canned vegetable business and the Le Sueur business.

Carla Casella: Okay. Okay. Great. And then on the trade spend, you mentioned that it’s kind of getting back to more normal levels. Is that retailers crossing more for it? Or is it being more driven by competition from the brands trying to get that are [space], new products, et cetera.

Kenneth Keller: I think it’s a little bit of both. I think everybody is kind of going back to normal competitive levels from where they were in a pandemic so the price is higher. So there’s a little bit more pressure to have some promotional discounts to help consumers get back in stores and drive volume. So that’s a little bit of both.

Carla Casella: Okay.

Kenneth Keller: And we kind of expected that. We also expected that was going to happen at some point because we’ve been seeing it gradually increase over time. And I think we’re saying that over the last couple of quarters, yes.