Great. Thanks, everybody, for joining us for our next fireside chat with B&G Foods. And with us today, our President and CEO, Casey Keller, and CFO, Bruce Wacha. Welcome, gentlemen. It's truly great to be back with you in Boston.
Good to be here.
Yeah. Maybe a good place to start off is, Casey, you've been at B&G for a little over two years now. You joined in the midst, you know, of a pandemic, broader industry supply chain challenges, historic inflation. Maybe it makes sense just to start with a little bit of a state of the union as you reflect on your sort of first two years in the role, maybe how the company has transformed since you've taken it over, and what's sort of top of mind as we finally approach what appears to at least be a more sort of stable operating environment, for lack of a better.
We hope. We hope. We hope, Andrew.
Not only that, I didn't say normalized, I said more stable operating environment.
All right, so if you think about, you know, where we are right now, I would say we're making good progress, but we're not out of the woods. So, when I joined, we had supply challenges, and I'll talk about this in a second. When I joined, we were beginning to see the first impacts of inflation, and I think B&G was probably one of the first businesses to call that out, which got much more exacerbated in 2022. And our leverage was too high. And the portfolio, in my opinion, was too complex for us to manage as kind of a single company functional silo. So let me take each one of those. So supply challenges, we worked through those, and that's our service level back up to 97%-98%.
You know, here and there, some spotty challenges on getting individual components, but for the most part, I think we're through that problem, so we're stable. Inflation, you know, we started to see it in 2021, but really, the Ukraine war just kind of sent soybean oil and corn, wheat, and everything, you know, way, way up. And so we had to respond.
And I think, you know, even in 2021, we were probably, you know, when I got there, I felt like we were too slow to take pricing, but we kinda picked our pace up and began to take pricing. And then you could see, after we went through the big increases in 2022, now our pricing has fully, is basically recovering those costs, that, you know, those inflationary costs.
So I feel like, you know, check, we're through the inflationary cycle, we, you know, restoring our margins or restoring our, you know, EBITDA and getting back to, you know, where the business needs to be in that high inflation environment. And we're also seeing inflation kind of moderating a little bit. I wouldn't say it's completely done yet, but much, at a much lower level.
And, you know, on soybean oil, it's kinda staying high, but it doesn't seem like it's gonna keep going up, at least for the short term. So on, the portfolio, to me, was way too complicated. 53 brands operating in 30 different categories. We were struggling to really really put enough focus on any one place, and we needed to make some choices.
We've made some choices now, you know, with the business unit structure about what we want to play and how we're going to play. And we're very deliberate about spice and seasoning, a place we want to play. Good margins, great category. Meals, you know, our meals portfolio is good, but we want to focus in on Mexican at home, Las Palmas, you know, Ortega, and other things. Frozen and vegetables business unit really needed individual attention on the frozen business to get the economic model back up and going, which we're doing now. The Green Giant canned business, kind of a tough business, but we're getting through that one. And then the specialty portfolio to me was just clarity on what we wanted. What we want to do there is just manage cash flow. We want to maintain cash flows.
We want to make sure that w e're getting that strong cash generation for those businesses to be able to cover, service the debt and cover the debt. So. And each one of those has separate management teams that are managing those businesses against different criteria and different expertise and building the capability. So I feel like we've come out of, you know, a very complex portfolio, clarified the focus a little bit, and pushed down accountability to make sure we're driving it better. I know we can talk about a little bit more about that in a second. I mean, the last piece, honestly, is that, you know, we were highly levered going, you know, in, coming out of the pandemic, probably too highly levered. We didn't clean up the balance sheet as much as we should have. The inflation cycle just, it made that a much bigger problem.
But if I look at the last 12 months, we've pulled a full turn off of our leverage. You know, our leverage is now down to about 6.7. We said we were gonna be at under seven by the end of the year, so we're ahead of schedule. We're continuing to push leverage down. We're getting inventory and working capital improvements. You know, our EBITDA is recovering nicely. We've, you know, the proceeds from the Back to Nature sale, we used to pay down some debt. So I think we're making progress there, but honestly, I, you know, before we get back in the acquisition game, which to me is kind of core what B&G has been historically, we got to get down below, well below six to get back there. And so we're making progress, but more to do to get there.
Got it. Yeah, and you talked about, you know, about a year ago, you announced the formation of the-
Yep.
four business units, spices and seasonings, meals, and frozen vegetables, and specialty. I guess a little bit more color would be great.
Sure.
So how that structure has benefited the company maybe over the past year? Has it had the intended impacts of these sort of assumed?
So I think really the number one benefit from the business units is to provide more focus and clarity on the individual parts of the portfolio. And if I think about this, these management teams now have been up and running for about, really operationally, for about nine to 10 months.
But you're already starting to see the benefits. So I'll give you a couple of examples. So one, I've always said the economic model on frozen wasn't working for us. You know, the gross margins were too low to be able to support a frozen kind of cost infrastructure. That team got the mandate, went to work, some real productivity in our facility in Irapuato, so we're getting margin improvements there. They figured out that our rice and spirals business, all the margin was being made by a contract packer that we had put in business, and so we just bought them and took the margin. And the other thing about that group is they figured out the churn in the frozen freeze occasion, in the frozen vegetable section was, like, 20% a year.
And we weren't driving an innovation that was profitable enough to replace the old stuff. So we began to kind of fix our innovation pipeline and launching stuff that's more profitable than what we had in the past. So all in all, we've increased the margins in that business by 200-300 basis points, just behind some really focused things that I don't think we would have gotten to if we didn't have a business team working on it. I could give you a couple of other examples, like Clabber Girl, you know, where we are pricing between all of our retail brands, and we supply most of the private label was completely off.
Yep.
So the management team went in and fixed that, and you can see that that business, I don't know, what it was up like 40% in Q2. So I'm seeing better decisions, faster decisions, better multifunctional coordination and management portfolio from, you know, where we were, I think, before.
Great. And I guess, what role do you expect each of the business units to play within the portfolio? Maybe you can provide a little detail on sort of how you assessed, you know, the potential of each unit as you went through the structure.
So one of the things we've done as a business is to provide very clear kind of expectations. So spices and seasonings, we expect to get organic growth of 3%. It's a good category. We've got a good position. We've got good brands. I expect that business will put the resources and the capabilities. And, you know, it's pretty sizable, $450 million of our sales. It's a business that we should be able to grow. It's a business that we should be able to maintain high margins and profitability. And I believe it's also a place where we can acquire new businesses, pull them in. We've got good assets. We've got good capabilities. We should get, you know, top and bottom line synergies that bring new businesses into that platform. So that's that, that's that one.
The meals portfolio, again, I think we want, like, 2%-3% growth. The, you know, the Mexican at Home Meals is part of that. We've also, you know, Cream of Wheat, Maple Grove Farms, some other, you know, kind of breakfast items. That portfolio is capable of delivering that, you know, maintaining good margins as well. I, I see that as a clear expectation. Again, Mexican at Home would be a place that I would favor sort of adding new acquisitions, you know, in kind of a fragmented, authentic Mexican kind of portfolio out there in the marketplace. So, frozen vegetables, honestly, the mandate was fix the frozen economics. Do as much as you can to stabilize the canned vegetable business, but we can talk more about that later. That's a tough business to be in.
I think we're getting the frozen business back up. I think you'll see volumes start to stabilize as we get through the pipeline, the innovation pipeline. So we're making good progress there, especially with just the clarity and especially as a code name for cash flow. Okay?
Yep.
So, you know, manage the cash flow, good cash generation, maintain margin stability in that business. And that team is doing, I think, a very good job of doing that with a complex set of assets underneath them. Predominantly the Crisco business. They've transformed to a Crisco pricing, commodity-based pricing model, which is kind of maintaining our gross profitability of that business very nicely. So each one of those business units understands their role, what their expectations are, where they're trying to get to, where we're gonna put resources, where we're gonna be light resources, or where we're going to look at, you know, future acquisitions to put on.
Great. That's helpful. Maybe shifting a little bit closer in. You know, in your second quarter, conference call, sales actually came in a bit better than anticipated. You lowered the full year sales guidance a bit and are now looking for base business net sales growth of flat to up about 1.5% i n the back half of the year. Can you talk about what you were seeing in the market at that time, that ultimately led to that sort of back half adjustment in what you're looking for in sales?
Yeah, and I think the first thing to remember is, as you think about 2023, finishing 2022, and what the job of the company was, management, you know, we needed to restore margins. Right? 2022 was a really challenging year for us from a margin standpoint. And so priority one was we got to make sure we have price in place and improve margins. So management's focus was EBITDA. It was cash generation, it was reducing inventory and reducing debt. As part of that strategy, we knew we were gonna put some pressure on sales. We're coming out of the pandemic. I don't know the normal, like you said, we're not there yet, but we are lapping a lot of inflated demand. For us, we're realistic. We are midway through the year. We're kind of flattish on sales, and our expectation for the back half of the year is, you know, sort of flat to up about a point and a half.
That's the guidance. That's kind of what would take us to where we are. I think there's, there's challenges, obviously on a top line. I think the entire industry is seeing some volume pressure. I think people should take a long-term view on that and understand that we're coming out of inflated sales that persisted for two to three years with several rounds of pricing. And really, over the long term, you know, the B&G model is about stable top line and, you know solid EBITDA margins, cash generation.
Yeah.
That's the model that deliver value to investors, and that's where we are.
Yep, and that's worked over a long period of time, you know, for this entity, back since the early IPO. You mentioned also on the earnings call that the Green Giant volume declines in the second quarter were in part driven by sort of the shelf-stable piece of the business.
Yep.
With competitors, I guess, having turned very aggressive on pricing and promotion to work down sort of higher inventory seasonal pack. Can you expand a bit on how you ultimately see that dynamic playing out? I mean, how much of an impact it could potentially have on the back half of the year, both from a top line and a margin perspective?
And here we're talking primarily canned vegetables.
Yeah.
For the most part. So the way the canned vegetable business works is, you know, you have a seasonal pack that you take in at a certain price. And unfortunately, the 2022 pack was pretty strong relative to the future demand. So we've seen excess capacity in the canned vegetable market, and I think historically, the market is kind of discounted to try and drive it out. I mean, honestly, we were probably a little slow to respond to that. We've now kind of gotten ourselves more competitive in the fall season, so we will work through our current pack and discount it to get it out. But it is unusual because, you know, in years where, like I'd say in 2021, it was a softer pack, so margins were high against high demand and, you know, low supply.
Got the opposite impact going on right now. I think we'll get through it, but, you know, I think this is how the canned vegetable market works. People take - they don't want to hold the inventory forever -
Yeah.
so they discount to get it out. You know, you're sitting on the entire year.
Right.
And we probably learned a hard lesson that we needed to move more quickly on that.
Got it. Okay. And then I think when we sat here last September, you know, there was some uncertainty regarding the long-term direction of the frozen segment. And the priority at that time was, as you mentioned here, fixing the economic model of the business before really making a decision on that, one way or the other. So a year later, obviously, you talked a little bit about the progress that you're already making on the economic model in frozen, but you can talk a bit more about that. And does that then give you a way to think differently about the business or its role in the portfolio or just if nothing else, increase the optionality that you may have w ith respect to that frozen business?
Yeah, I think, look, fundamentally, frozen is a, you know, is a decent category. It's long-term, you know, kind of got good category growth. I think our issue, you know, as we talked about last year, was we have to. If you don't have a 30% gross margin in the business, you can't afford to run our frozen model. And if your churn is 20% in the freezer case every year, you've got to be able to support that kind of an innovation pipeline.
Yeah.
So, you know, for me, the first step was getting the economics improved, getting to a better gross margin, and being able to build the capabilities to drive a better innovation portfolio. 'Cause we had driven a lot of innovation in the past since we acquired that business. A lot of it didn't make a lot of money. So figuring out how we could do that profitably was really important. So if we have those kind of capabilities, then to me, it's... I'm cautiously optimistic that we could look at adding some more frozen assets to our frozen capabilities and to our distribution system and build some scale benefits. It's still a question mark for me.
If I'm honest, I would favor, you know, buying a spice and seasoning business, adding it in, just continue consolidating some of the Mexican at Home, buying a specialty business that we know we could just plug and play and drive good cash flow generation, buy it 6x or lever it to 10x. So those would be my preferences, but I think frozen now is an option for us. It's an option that we can look at and explore based on what assets come up and how much scale the benefits we could get. But without the capability and the margins, I, I wouldn't make that a platform. So we're, we're getting there. We're getting there.
Got it. And by the way, and spices is interesting because, you know, it always comes up, hey, you compete against, obviously, a really dominant player, right? You know, in McCormick, but it's interesting, you actually compete in that category sort of in a different way, right?
Yes.
Not, not as much across the sort of the broad spectrum of spices. You got some individual, unique sort of brands that play differently.
Yep.
It's, I think, worth going into that a little bit because it does give you, I think, an ability to sort of compete effectively in that category, where some might just think, oh, being a small player in a category that has a dominant, you know, player doesn't make sense.
Yeah, I think this is an interesting aspect of that category. So, we're number two to McCormick, distant number two, but the reality is we're not head-to-head in terms of competition. So McCormick is, you know, clearly dominant in A-Z.
So they have several tiers of the A-to-Z spices. We only have one smaller entry in the premium A-to-Z spices and Spice Islands. The rest of our business is all blends, seasoning blends, Dash, grilling blends, grilling spices, very kind of differentiated products. You know, we launched Einstein Bros. Everything Bagel. So we're competing not in the A-to-Z, but in the blends and the interesting kind of segments that are emerging there. And we even launched a sweet, you know, kind of Cinnamon Toast Crunch seasoning blend, added a, you know, sweet outlet to add to ice cream and yogurt and other things that has done pretty well. So we're playing a different game than McCormick, and that's. So far, that's working for us.
We look at licensed properties as a way to get a little bit some name recognition. And also with retailers, we're trying to add a little excitement to the category, you know, not just bringing another, you know, another cumin. You know, we're bringing something that's a little bit more interesting and differentiated, and that's how we'll play.
Got it. Can you talk a bit about your, your recent move to alter the pricing structure, right? Of some of the, the more sort of past school-oriented Crisco brand.
Yeah.
What was the purpose behind it? How effective has it been so far? Because that was a big shift, right? And how that business operates, but one that I think has proven, you know, pretty successful thus far.
Our goal, you know, so Crisco is part of that cash generation portfolio. So, it, you know, I think when we bought the business, the volatility of soybean oil was really growing. You know, it's tied to the oil commodity now because of biofuels and everything.
We were seeing just huge shifts, swings going on. If our goal is to maintain cash flow and profitability, the reality is we want to manage that business for its gross profit.
So, you know, trying to do a traditional way of, you know, managing pricing with retailers, where we would come in every time the commodity would spike, it wasn't working for us, it wasn't working for them. So what we agreed was, you know, to come in every quarter, take a running average, you know, of the soybean oil cost market, of the spot market, and tie pricing to that and stick with that for the next three months. And we would buy in those windows to try and make sure that our costs in our prices, we're running together. And we're in our third cycle now with retailers. They like it, we like it.
If I look at our gross profit margin, I mean, our gross profit, you know, last year and this year, we're pretty much and 2021, since we've acquired 2021, 2022, 2023, our gross profit has been pretty stable. And so it's working. It's not easy because we're learning how to run a commodity business, and we're paying a lot more attention to the soybean oil market. I can tell you that we're looking at that every day. But it's a different approach and one that I think is working for that business to do what we need it to do, which is to generate good cash.
Yep, got it. And you're saying?
The other thing is, because I've answered so many questions today, we don't pay as much attention to the sales and volume. You know, we're looking at that, of course, and we're sensing the volume trends, but sales will go up, margins will move around. Gross profit dollars, that's what we care about.
Yep. As you said in the past, it is somewhat more like the coffee category, which you've got experience with as well. You were staying on Crisco, you mentioned that having seen the elasticities hover above one when prices crossed that $5 threshold. The expectation is that as prices recede back below $5, we expect to see elasticities still above one on the way, on the way down, if you will. Meaning that the price reduction should coincide with significant volume recovery. Now that Crisco prices have begun to kind of move lower, I guess, what are you seeing in the market on the volume recovery side?
We haven't really seen the price come down that much yet because we just, the last pricing cycle happened with customers at the end of August.
Got it.
We had a small decline kind of starting in June, and we did see kind of volume declines begin to improve.
Right. Yep.
Yep, moderate with that. So the real test for me is because we'll get below the $5 mark, you know, in, you know, in Walmart, we'll get below the $6 mark in grocery on an everyday basis. But as we head into the fall season, we're gonna promote. We're gonna be promoting a two for $4, two for $9, two for $8. So you're, I think that promotion cycle will help accelerate the volume progress. Like, it will compress the differential private label, and I think you'll see, we'll get that elasticity effect back on the way down that we saw on the way up.
One question on, sort of merchandising and promotional activity in general. Is it fair to say that as you move to the back half of this year and the port holiday season and everything else, just given that service levels are back to a better place now, pricing is now better caught up, right, to inflation, that you can go after a more normal cadence of like, in-market activity and pressure on these brands than maybe you've been able to do over the last two years? Or, or is that, am I over, you know, overthinking?
I think it's fair. I think that's fair. I think promotional activity is gonna start to return to normal, right? It has been depressed for the last two or three years.
Yeah.
Supply chain being one of the biggest drivers of why it was depressed.
A lot of that, my sense is it's volume driving.
Yeah.
And a lot of it, right, is pretty high ROI because it generates a lot of economic ROI.
So, you know, 2021, very low levels. Increased in 2022 and is now increasing in 2023.
Yep.
Not all the way back to where it was pre-pandemic but it's heading there.
Yep.
I think exactly what you said. I mean, we're taking a cautious approach to how much we increase because, you know, we don't wanna just, like, throw a bunch of money. We wanna make sure that as we build promotion activity back, it's gonna, it's gonna produce a return on the lift.
Yep.
And so we're taking a steady, as you go approach, but he's right. I think it is moving back towards where it was pre-pandemic.
Yeah. Do you feel like your systems allow you now to pretty accurately track return, right, and lift on sort of going up promotional spending? You know, I know companies have certainly recently made a lot of investment over the last couple of years in being able to better assess that in a much more granular way.
Yes, so we made an investment in a trade management system a couple of years ago, which was primarily designed to kind of first control the spend and make sure we could track it.
Got it.
Now we're using it for post-promotional analytics to improve our return.
Got it.
We're beginning to see an improvement in our returns on, you know, our major customers because we deployed it in there. We'll actually probably broaden that, you know, within the next six months to a broader set of kind of customer crews.
Got it.
It is, you know, there is always opportunity in this one to get, to get more efficient. We may not cut spending, but we wanna get more volume and lift out of it at higher return.
Outside of Crisco and Green Giant, at least in 2Q, right, sales for the remainder of the portfolio in aggregate, I think, increased about 3.5% or so. What's been going right in that part of the portfolio? Maybe what have been some of the gems, if you will, the shining stars within that piece of it, over the last year or so?
Yeah, I'd just say, B&G, we own 50-odd brands, right? And there's always gonna be some pluses and minuses. You highlighted, too, that for unique reasons, we're more challenged than others. But we've got some other brands that did pretty well. You know, we love our spices and seasonings business. It's lapping some peak performance, but it's starting to fire on all cylinders.
You know, you think about that category on a pre-pandemic level, that, that's a great category, and that should do well. Clabber Girl is having one of those moments where things are working. We're able to take price, but we're still getting some good volume performance. We've got a pretty interesting position there, as Casey said. You know, we own the brands, and we're producing some of the private label, you know, great, great, great performance there. So I think it's, you know, it's, there's only some brands that you're gonna point out, but overall, performance has been fine.
I'm curious on your take on the overall industry sort of volume weakness that we've been seeing a little bit. You know, it doesn't seem that, like, private label is not gaining a ton of share, away from home eating is not gaining a ton of share. I think consumers are eating fewer calories. You know, some companies have talked about consumers maybe, you know, sort of managing waste a little bit more closely, hunkering down a little bit more. I guess, what are you seeing in terms of sort of recent consumer behavior, I guess? What's your thesis on maybe where, where this volume is going? Is it summer travel? Is it - Because it's a little bit puzzling, I think, still, to a lot of folks out on the road.
I mean, what we see in the data and what we hear from, you know, consumers, there's kind of three things that are affecting the volume right now. So one is that we should not forget, we are lapping the big price increases of late last spring and summer.
Yep.
So, you know, you're still getting through those. So, you know, the elasticity impact of those pricing is still in those numbers. So that's number one. I think we'll get through most of that in our portfolio within the next month or two. There's usually, like, a month or two lag, and as you get through it, because the way consumers purchase frequency and their response happens.
So that's one. Two, you know, our portfolio is quite sensitive to in-home, out-of-home, so consumption. So I know people are saying, well, food service traffic or away from out-of-home traffic is kind of stabilizing out, but it was pretty. It was higher than a year ago for the first four to five months of the year.
So we, you know, we saw some volume softness earlier in the year that we attributed to, you know, year over year. And remember, in early 2022, you had Omicron, and you had partial lockdowns. You had people go back to some of those pandemic behaviors, yet you saw them kind of cut down their out-of-home consumption. So I think that out-of-home, in-home shift is still part of this equation, which I think goes away, is starting to stabilize.
Yeah.
The last thing and, that, you know, I think is happening also is, you know, we're reducing our inventories. Retail customers are reducing their inventory, trying to get more efficient. I mean, not by a massive amount. We also hear that from consumers. Like, they—we also hear them saying, "Hey, I'm gonna, I'm gonna either reduce my pantry stock or I'm gonna operate with less supply." You know, like, I remember a woman saying to me, "I used to buy a new bottle of Crisco oil when I was in half. Now I might wait till it's down to a quarter." So they're stretching out kind of some of their purchases and managing their own inventory.
So I think that's what's happening, and my personal belief is that we'll begin to see us lapping those effects in the kind of the end of the third quarter, fourth quarter this year as we get through all the comparisons to last year, and maybe consumers kind of work down their inventory a little bit. So that's my thesis.
Yeah. It feels a lot like, like the industry just almost wishing to fast forward six months, basically-
Yeah.
through this sort of journey to a more stable environment and get back to a more normal operating cadence.
Yeah.
So yeah, hopefully, we get there sooner than later. Simplification has been a theme. Obviously, we've seen across the packaged foods for us over the past several years. You know, earlier this year, we saw you guys complete the sale of Back to Nature. I guess, are you continuing to evaluate additional asset sales to further simplify the portfolio? Obviously, you have a lot of brands, a lot of categories. And if so, which of the areas within the portfolio maybe you think could be less central to your go-forward strategy versus maybe which ones you look as like, hey, this is a definite, you know, this is a definite keeper?
Yeah, and probably the two things I've learned about talking about M&A is, one, you know, the less you talk about it, the better, because it's just so hard to predict. And really, until you actually have something signed and announced, it's uncertain. And then the other part of it is, it's really fun to talk about M&A and speculate on who might do what and what makes sense and what all the moving pieces are. And so we do it anyway. And so for us, M&A, I think, you know, over time, we're going to be a buyer, but in the short to medium term, you know, there are some things we want to do through investors going forward.
Really, a lot of this is coming out of the business unit strategy, looking at where we want to invest, to grow what we own and what we would want to buy going forward, and then also where things pop and don't fit in that structure. Back to Nature was a perfect example of this doesn't make sense for us in 2023, right? At some point, it probably made sense when we bought it. We were trying to build out our snacks and better-for-you portfolio. No longer makes sense, and that's not where we want to be. So, you know, we executed that transaction quietly. It's been a very, very quiet M&A environment for the last year and a half. There's been chatter that activity may pick up, and maybe it does, maybe it doesn't.
You know, we're in an uncertain world for a lot of reasons. What that's led to is a lot of the M&A transactions that have gotten done quietly, not a lot of big, broad auction processes. Back to Nature, that's how it was done. It was a transaction where asset didn't make a lot of sense for us. It really made sense for somebody else that really wanted it, and they'd be a good caretaker in order for it. And so, you know, that works. Are there other things for us out there like that? Probably.
You know, is this the right environment to be pounding the table, trying to get things done? Probably not. But, you know, we expect to see things normalize. And for us, that M&A strategy that we'll lead to investors is what doesn't fit the portfolios. There are other things like Back to Nature that, you know, with 50 brands, some of them don't fit today. And, you know, we'll evaluate that, and when it's appropriate, you know, we'll talk about it.
We've identified the assets we think don't meet the criteria of where we want to go, and it's probably like, you know, more like 10%-15% of our sales.
But and I would like to get, you know, one or two of those done in the next six or 12 months, but we're gonna be diligent about, are we getting the right value? Do we find the right buyers? We're gonna make sure that we do that in a responsible way. But we, we are clearly, we do want to kind of reshape the portfolio some more and improve kind of the structure where we're going.
And I assume the hope would be also to do it in a way where we could help you deleverage a bit as well.
That would be a secondary thing that we would want to try to accomplish, yes.
The minimum pay down debt.
Sure.
Yeah.
I think maybe a good way to sort of wrap it up is, as you mentioned, you know, PG has a long history of value creation, in a bit of a different way maybe than some others, right? As you said, it's really about stable top-line growth, really high margin, profitable brands generate all that cash flow, use that, you know, smart capital allocation decisions, particularly around M&A, and finding other sort of smaller, maybe under-the-radar brands that can dominate a certain category with a high margin structure. And, you know, the company got away from that a little bit, you know, prior to your coming on board. It seems like you're now squarely aimed back in that, with that model.
Maybe you could talk a little bit about that model and just how that's created the sort of value that it does, because it, it is a little different, right, than many of the other food companies that are still pushing on sort of growth, you know, growth thing.
I think a lot of the brands that we own, where we've done very well are brands that have been around for a long time. So, not necessarily innovative brands. Not saying there's not a place for those, but we haven't demonstrated, you know, expertise in taking a brand from $5 million and making it $100 million. But we've been pretty good at managing these cash flow brands, things like a Cream of Wheat, things like an Ortega, things like a, you know, Crisco, we're learning. Clabber Girl, so some of these recent acquisitions, but, that's where we're really good. We also need to be priced right, right? And current cost of debt will be a factor in that.
You know, we've got to buy brands that can generate cash after capital, after CapEx, and after covering the interest expense. And when we can do that, you know, that's, that's what we've been successful in selling. And I think it's really being disciplined with following that business unit strategy and saying, "These are the areas that we want to play and where we want to invest and expand." And then also knowing, you know, we can be a little bit opportunistic in that specialty business unit, but it's got to be stuff that's priced right. It's got to be stuff that's not working capital intensive or CapEx intensive, and is, it's going to generate cash.
Got it.
I think it's, you know, we've got to have a solid foundation. We've got to have a business that's stable as a platform for future acquisition. Then when we get to acquisitions, we've got to be more choiceful.
Where are we going to add value? Where do we create value by bringing things into our portfolio? And how do we make sure that we're eyes wide open on what businesses fit that and being really selective about it, so that when we bring businesses in, whether it's effectively for cash flow, we drive stronger cash flow, or whether it's that we want to build up our pillar in spices and seasonings or, you know, in Mexican at home, that we're clear about how that happens and what the different look will be, of course. So I think m aybe it's not a com- a wholesale change in strategy, but it's really refining that strategy, to make it more actionable.
Stay disciplined.
Yeah.
Perfect. Good. Well, that's a great place to wrap it up. Join us right next door here for the breakout, any further questions you've got. And thank you, Casey and Bruce, for joining us.
Thank you.