On our seats, we'll kick off our next session here with B&G Foods. So welcome back, everybody. With us today are CEO, Casey Keller, and CFO, Bruce Wacha. Welcome back to both of you.
Thank you.
Thank you.
Thanks for being here.
Thank you.
Casey, maybe a good time, a good place to sort of kick it off is, sort of a state of the union as you reflect upon how, you know, the company's transformed since you've taken over. What's top of mind as you continue to try and navigate through this sort of elongated period of uncertainty?
The elongated period of uncertainty? I like that. So, I'd say that the state of the union is we're getting better. If I think about, you know, some of the elements that we need to really manage with this company in terms of transforming it and turning it around, number one is the portfolio restructuring, and getting down to a core portfolio that we think we should be in long term. So, as we've talked about many times, you know, we've sold off several assets. We sold off the Back to Nature cookie cracker, getting out of the snack business. We sold off some of the vegetable assets that, you know, were high working capital intensity, high inventory, seasonal packs, everything else. So, you know, Green Giant canned vegetables in the U.S.
Most recently, the Le Sueur business, also the Don Pepino and Sclafani fresh pack tomato businesses, in New Jersey. We are making progress, making divestitures. Obviously, the big pieces that still need to happen are the rest of the Green Giant assets, both the U.S. frozen Green Giant business and the Canadian Green Giant business, which would be both canned vegetables and frozen. I think we're making good progress on those. You know, we've disclosed that they're under review, but, you know, candidly, that, you know, we're in advanced discussions, and I think those could be 2024-2025 transactions if things go well, but you never know, obviously.
Yeah.
These are pretty central to our transformation. Green Giant has been, you know, probably our most challenged piece of our portfolio. Our economics have never looked good. It's a very low-margin business, high working capital intensity, probably double the inventory intensity of any other business that we have. And it's probably been our laggard in terms of our performance. The category has been troubled. You know, private label has been an issue in that business, and we just have subscale economics. We don't have the depth of Frozen business to be able to support, you know, our own distribution or network or even our own R&D capabilities. So it just does. It's not a business that fits with the rest of our portfolio. It doesn't have any synergies, you know, almost in anything.
It's added a lot of complexity, and I think it's central to transforming our company to a much simpler company, a much more focused company, you know, in Spices and Seasonings, in Meals, and in Baking Staples. We, you know, those businesses have a lot of synergies. Those businesses we know how to run. Those businesses have higher margins, those businesses have better cash flows, so we will be a stronger operation once that is done. And so getting there, making progress. The other piece is just looking at the core performance of those remaining businesses, ex- Green Giant. I'm starting to see some progress. If I think about our total company, really tough first quarter, with, you know, down 9%, a lot of that being driven by kind of customer inventory reductions.
Second quarter, down 4%, so third quarter, you know, for the first two months, down between 1% and 2%.
Yeah.
So it's getting better. It's getting better. We're seeing some improvement in our consumption data. I know, you know, we're probably 60%, you know, you can read and measure channels, 40% not. So it doesn't exactly correlate, but we're seeing a little bit of progress there, not as much as I'd like, to be honest with you. I mean, I'd like to see us get, you know, even lower, you know, closer to zero in terms of our consumption, you know, sell-out data.
Mm-hmm.
And you know, we've taken some actions on some of our businesses. You know, we've had a couple of businesses that, you know, competitive entries, you know, the Ortega business with Taco Bell coming in, Siete coming in. We've done some much stronger actions to kind of defend against that, and I feel that we're making progress there. Our taco sauce business is healthy and growing. You know, Spices and Seasonings, we've kind of refocused down the core business of Dash and Weber, making good progress in terms of turning those businesses around. We got distracted with a bunch of small license opportunities that I think were not the right things for us to do.
So I think, you know, even, you know, with the dynamics of, you know, the hangover from COVID and inflation, I think we're starting to lap some of those effects, but then on some of the things that we can control in our own business in a more competitive environment, I think we're doing a better job—
Yeah.
You know, innovating and doing things.
Mm-hmm.
So we're getting there. We're getting there, you know, candidly, maybe a little slower on the restructure, the portfolio restructure than I'd like. And it's been, you know, kind of an elongated recovery in terms of the consumer. I'd like to see that go faster, but we are making progress, so we are making progress.
Yeah, that's great, great and very helpful background. I guess, on the consumer, sort of at a high level, how would you describe where the consumer is today, maybe relative to where, you know, it's been over the past couple of years? Is uncertainty still driving greater conservatism, or are you finally starting to see maybe some green shoots in consumer sentiment?
I think what's happening is that we're beginning to lap some of the changes in behavior. So the trade-down behavior, you know, the resurgence of private label post-COVID, the shock, sticker shock of the higher pricing and the inflation, I think we're starting to lap some of the behavior changes related to that. I think it's gonna take another six months for us to kind of fully get through that, but, you know, I'm encouraged that, you know. You know, I mean, there was some contraction of the center store that went on for a while. We're beginning to lap some of that as well. You know, I don't see. You know, I think consumers still, their budgets are still a little bit tight, particularly on the middle and the low side.
And they're, you know, continuing the behaviors that they did before, but I don't see that they're doing new things, that they're continuing to trade down more and more and more. I think we're just lapping some of the initial reactions to the higher pricing and their—
Right.
Constrained budget. So I'm optimistic that we'll get through it, I mean, and we'll get back to more of a steady state in terms of the center store. But, you know, it's been longer to recover on that than I would have expected.
Yeah.
But I'm not seeing any new behaviors that would indicate to me that things are gonna get worse. I think I'm just beginning to see a slow recovery, slower than we'd like.
Yeah. Great. It's been a few years now since you announced the formation of sort of the four business units: Spices and Seasonings, Meals, Frozen Vegetables, and Specialty. I guess, how has that reorganization benefited the company since it was first implemented?
You know, and I think, you know, a couple ways. So first, it's pushed accountability down for managing the P&L and managing the business, and I think, you know, it's hard to look at the period of time that the business units were formed and what's really happened, because it's been an incredibly volatile environment.
Yeah.
But I think we are managing those businesses better. We're making better decisions about where we should be playing, where we should not be playing. We're starting to get, you know, some breakthroughs in innovation on some of these businesses. In some cases, you know, like in Spices and Seasonings, I think we took a little bit of a wrong approach.
Yeah.
Now we're kind of fixing it and getting back. But it's pushed, it's pushed accountability down the business. We're making better decisions, we're making much faster decisions, and we're making better P&L decisions. If you look at, you know, ex-Green Giant, which has had its own problems, despite, you know, kind of some of the top-line issues in the company, you know, we're not doing badly on the bottom line. We're making smarter decisions about how we manage costs, how we manage pricing. You know, our productivity, you know, honestly, one of the biggest things that the business units have brought is a multifunction coordination of our productivity efforts. So bringing COGS down, you know, our margins are starting to improve. You know, we're managing, you know, we're managing whatever inflation we have, plus covering some of the margin improvement.
Mm-hmm.
So, and then right now, I think we're at, like, 3.5% of COGS in terms of our productivity efforts, which is a long way from when we started the business units.
Yeah
P robably less than one. So I think it's yielding benefits. Hard to look at the complexity of the last couple of years and say you can see it fully in the results, but I do believe it's working.
Great. And maybe just, by background, you can remind the audience what role you expect for each of those business units to sort of play within the portfolio, and—
Yep.
M aybe the time frame, which you'd anticipate each of these units reaching sort of their full potential. Since, you know, obviously, as you talk about, there have been some more dynamic times for the company in the past couple of years.
Yeah. So Spices and Seasonings, I think, is, you know, kind of our jewel. It's, you know, highest margin business. It's in a category that's showing some pretty good dynamics, you know, 2%-3%, you know, in the last year or two, tied to the fresh protein, the fresh perimeter of the store, in terms of flavor enhancement. You know, we struggled a little bit at the beginning of this year, didn't get quite the results we wanted, but if I'm looking at the third quarter, we're starting to see better results, you know, in our first two months of the quarter, getting better top-line performance. We're refocusing on our core brands, Weber, Dash, other things. You know, our private label Member's Mark business has been strong.
So I feel like we're getting to the point on Spices and Seasonings, that we should be seeing kind of consistent top-line growth in the low single digits. It's happening, and I think, you know, we'll continue to see it happening. Some challenges on that business from tariffs, because that's probably our main exposure. So we're sourcing most of our spices from, you know, overseas, obviously, not really available here in the United States, you know, China, garlic, you know, black pepper, Vietnam.
Yeah.
So, you know, we're taking pricing actions to do that. And so far, it looks like, you know, most of the industry is doing that because everybody's sourcing from the same place. But I think Spices and Seasonings, you'll see, you know, good improvement in the top line. And, you know, as we get through the pricing, you know, to manage the tariffs, we should be strong on the bottom line, too. You know, Meals, on the Meals business unit, you know, I'm expecting that business to be, you know, kind of, 1% kind of growth business.
You know, we're in the taco category with Ortega, which should be a little bit higher growth, but Meals overall, you know, Mexican meals, Ortega, Las Palmas, should be good growth, low single-digit growth. And then if you look at the other part of Meals, the concentration is really in the hot breakfast, so Cream of Wheat, McCann's Irish Oatmeal, and Maple Grove Farms, you know, pure maple syrup. I mean, the combination of those, I would expect Meals to be about a 1% grower.
Mm-hmm
O ver time, you know, with some stronger performance on the Mexican side, maybe some more static, you know, kind of top line on the hot breakfast side. Ortega has, you know, been a little bit of a journey for us because there's been a lot of competition entering that category. You know, traditionally, it was Old El Paso and us, and then Taco Bell has kind of made a big, you know, entry into that category, a resurgence in that category over the last couple of years. Siete came in, you know, kind of taco seasonings.
Mm-hmm.
Recently, but we, we've got some good plans, and we're fighting back, and I'm, I'm seeing, you know, better and better sell-out trends on that business, so I think we're getting there on that one. Baking staples, look, this is, the Baking Staples are what we call specialty business unit. This is kind of our mature—
Mm-hmm.
Yo u know, cash flow management business, maintain margins, and we've been doing a good job of that. So the profitability has been very steady on that business. Crisco, you know, Crisco has been a little bit of a challenge managing the volatility in the soybean oil prices. As we brought prices down on Crisco to reflect lower soybean oil costs, it's been slower to get reflected than we'd like, but we've maintained kind of profitability and margins.
Mm-hmm.
And so, you know, I think we've done a reasonable job of managing the cost and the gross profit of that unit, and you can see it in the results. You know, Clabber Girl's been a good performer for us in terms of baking powder. So that business we kind of expect to be flat, flattish, but maintain good margins, good cash flow, good EBITDA, and so far we've been delivering that. So that's kind of the expectations, you know, and we'll talk about Green Giant.
Yep.
'Cause we've already talked about that.
Yep.
That's been a big drag on our portfolio, so as we, you know, kind of-
Yeah.
Get that out of our, you know, out of the business, we should be, we should be seeing the other three businesses kind of more stable performance.
Yeah. And on that point, when you're sort of fully through maybe the more significant asset optimization moves that you're planning to make, I guess, what does the remaining business look like? Like, what's your expectation around the type of growth you're looking for, both—
Yep.
Top line and call it, you know, EBITDA?
I mean, I think our longer term, you know, algorithm is to get, you know, 1% across the remaining portfolio, you know, between Spices and Seasonings, Meals, and Baking Staples and Specialty. So we, we'd expect to get 1% on the top line, you know, good, you know, good cost management, get ladder that down to 2% in the bottom line.
Mm-hmm.
You know, just to get, you know, sort of a stable platform, that if we can get our leverage down and get back to, you know, something in our four and a half to five and a half leverage range, we can go back into the M&A game, make more disciplined acquisitions, more focused acquisitions in some of those core categories where we can add value and do some things and get synergies.
Yep.
I mean, that's kind of the vision.
Yeah.
So we're not gonna, you know, 1%, 2%—
Mm-hmm
Is not gonna drive huge valuation growth, but getting our business back to the point where we can do smart M&A, which is what our history has been, right?
Yeah.
If you like, if you take a look at B&G, you know, what have we done successfully?
Mm-hmm.
Honestly, if you look at Spice and Seasonings, that's probably the prime example. You know, we've bought three businesses over time, you know, built up a Spices and Seasonings portfolio. We've got a strong asset. We run that business well. We've got good margins. Yeah, it's a combination, a consolidation of, you know, three different, different acquisitions, a different size, scale. That's the model. The model is—
Yep.
Y ou know, we go and do that. We buy, we buy more Spices and Seasonings business, we buy another Baking Staples business. That's how I see us driving B&G going forward and driving valuation.
Yep.
But being smart about it and making sure that we're buying things that we can add value to, that will have synergies, that we just don't buy and bolt on, drop administrative synergies.
Yeah.
We need to do more than that. We need to get more in the P&L. We need to be more focused in terms of our—
B&G has a history, if we go back a ways, of doing that actually.
Yeah.
Very successfully.
Yeah.
Um, so, um—
Kinda got away with that, with Frozen, to be honest with you.
Right. Right. You recently announced an amendment of your senior secured revolving credit facility, which temporarily increases your, you know, maximum consolidated leverage ratio from seven to one to seven and a half to one. But leverage is obviously still a topic of concern for investors when it comes to B&G, with net debt to EBITDA still approaching seven times. I think on your second quarter earnings call last month, you mentioned that you believe you can reduce net leverage down by a full turn to maybe six times in 12 months' time. How much of that is predicated, I guess, on further asset sales?
Yep.
Using free cash flow to pay down debt versus using free cash flow, and can you talk through your plans to address the 2027 and 2028 bond and loan maturities?
Yeah. So Andrew, as you said, on the second quarter earnings call, we referenced our leverage just under 7x today—
Mm-hmm
A nd talked about a path to bring it down to about six times or so in the next twelve months. There's call it four pieces to that. There's about a half a turn of leverage that we expect to come out with the culmination of the strategic review of Green Giant, AKA, you know, divesting that business. There's about a third of a turn of deleveraging that comes from running the business better, hitting the midpoint of our guidance for EBITDA, should take about a third of a turn off of our leverage. And then about a tenth to two-tenths of a turn from both just excess cash, so excess cash, EBITDA less CapEx, cash interest, cash taxes, and after dividends.
Mm-hmm.
And then another 1/10 to 2/10 of a turn for continued optimization in our working capital and inventory, which we've been bringing down over time.
Yeah, great.
As far as the debt stack—
Mm-hmm.
W e're regular way issuer in the high yield markets. We have been for the last 25 years, and so we've got a debt stack that looks not that different than what it would've looked like ten years ago or fifteen years ago. We do have a 2027 maturity.
Mm-hmm.
Those become current in fall of 2026. I think it's reasonable to expect us to refinance those in the regular way, high yield markets, at some point that makes sense over the next 12 months.
Got it. Great. Thank you. In regards to the dividend, you've been able to maintain it at its current level, right, despite some of the leverage concerns. I guess, what's driving your confidence that the current dividend level is the right one?
So a couple things. So since we've been a public company, B&G has always paid a dividend. It's probably always paid a little bit of a higher dividend than the industry average to reward investors—
Mm.
To hold our stock while they wait for the next M&A event—
Mm.
T o create alpha. No different here. The board expects management to run the business to support a dividend, and I think it's reasonable to expect them to continue to do so. We do set our dividend policy quarterly from an approval process, but the board generally expects a longer-term view than just what is the next quarter. And so with everything that we have going on with the business today around strategic review and capital structure, I think it's reasonable to understand that the board is gonna look at the business post strategic review and post capital structure and say, "What is the right excess cash ratio to support a dividend, and what's the right ongoing dividend?"
Yep, your long-term EBITDA margin target is 18%-20%, which the company was able to achieve back in 2019 and 2020. However, implied EBITDA margin for 2025, I think, is closer to around 15%, which is only slightly below where EBITDA margin's been over each of the past two years. Can you remind investors what have been the biggest drivers of the EBITDA margin contraction from your long-term target down to the mid-teens range the past couple of years? And, you know, could margin get worse before it gets better, and how are you thinking about both the steps and the timeline it'll take to get back to that sort of longer-term range?
Yeah, there are two things that really drove that margin down. So part one, the first two years of COVID were phenomenal for a packaged food manufacturer, terrible for society, but we had outsized sales, and margins were pretty consistent with where they were pre-COVID. And then we had two years of supply chain disruption, input cost inflation, and then ultimately, massive cost increases, which led to massive price increases. Generally speaking, the price increases protected dollar profit, not margins, and so we margined down as sales went up due to pricing to protect dollars. So part one, we had inflation. We took price as best as we could, but we got margined down as a result of that. Part two is Green Giant. Our Frozen and Vegetables business has had margin deterioration.
It is volatile, it's in the agricultural industry, and so there's good crop, bad crop, and it's also had higher costs, particularly around logistics. If you just do simple math and extract that business from our portfolio, you would get a margin that's back around that 20% EBITDA margin area that we'd like to be.
Great. Maybe shifting to some closer in topics, and you touched on this a little bit earlier, Casey. Organic sales in the first half were down about 7%, though it did sequentially improve from down 10% in the first quarter, down 4% in the second quarter. Your guidance implies sort of organic sales in the back half, maybe down low single-digit range. Can you talk about what you're seeing in the market that sort of gives you some of the confidence you should be able to achieve that sort of sequential improvement you're looking for in the back half? And I know you talked about the first two months of this quarter were even better than that, so it seems like you're on your way.
I think so, you know, what we're looking at is obviously our sell-out data, you know, our shipments and sales for the first two months are in line with where we expected. So that, that's always the first confidence for me, that we're actually getting there. So, you know, and we need to see, you know, continued improvement, even going into the fourth quarter. And the only other thing I'd remind you is we have a 53rd week in the fourth quarter, so we have an extra week—
Yeah.
W hich is part of, you know, part of the reason how we'll get to—
Yep.
You know, kind of a flatter, positive performance in the back half.
Mm-hmm.
So, you know, and we're watching our sell out consumption data pretty closely. The 60% that we measure, just to see, you know, what's going on there. As I said, some improvement, but not as much as I'd like to see.
Mm-hmm.
And we're watching that week by week to see if, you know, we're getting that sequential improvement that we expect. Honestly, I don't really worry about July, August too much because that's really our low seasonality. You know, we're getting into our big seasonality with the fall baking and some of the other. You know, even Green Giant has a little bit of a, you know, seasonality effect in the fall. So it's gonna be really important that we see, you know, kind of sell-out data improving in that period. So but look, our sell-out data, I mean, our sell-in data looks good, our sell-out data is improving. We'll keep watching it, but the fifty-third week will help. So, you know, I'm feeling more and more confident.
We also have, you know, a dynamic in terms of EBITDA in the business of the Frozen business had a— We had some really bad crop issues that led to costs being in the back half of last year and then the first half of this year. So we had, you know, crop issues on corn, we had crop issues on peas. So those look like those crops are coming in very favorably this year, so we'll have better costs year-over-year. Plus, we had kind of FX, you know, with the Mexican peso kinda hurting us last year through the, you know, through the first half of this year. Should be moderating in the back half year-over-year. So we've got, you know, quite a bit of shift in our Frozen and Vegetable business going on from the bottom line.
The other thing we did, we put up kind of a $10 million cost challenge into the back half of this year. So Q3 and Q4, we've, you know, kinda cut costs, improved productivity from our original plans. We've got some restructuring that we've done in the company to save overhead costs. So we've got some things that are helping improve the profitability in the back half, which is what we really want to see as well. Not just top-line performance, we also want to see that shift in the Frozen and the $10 million cost challenge coming through in the P&L, which we're starting to see.
Got it. Got it. You know, in spice and seasonings, it's a segment, as you mentioned, that is expected to be most impacted by tariffs, you know, given certain ingredients are largely imported from Asia. I guess, given some of the softer trends in the segment of late, and you explained kind of why that is, how would you characterize your ability to maybe take some, you know, strategic pricing to cover some of this tariff-driven inflation? And I guess, how concerned are you about consumer elasticities if you were to put through some incremental pricing? Obviously, your largest competitor is gonna be doing some of that, as I move through the latter part of this year, to do their best to sort of mitigate. Where are you on that sort of, you know, that continuum?
We're taking pricing to recover tariff costs in the—
Okay.
Spice and Seasonings business. The only other place that we have significant exposure is in steel, steel cans, and we're also taking pricing to recover those costs. So we've released those things. We're in discussions, you know, and negotiations with customers on those. So I feel like we've got the right approach. You know, as in the Spices and Seasonings category, this is not just us, this is the—
Mm-hmm.
You know, the entire category is facing this. It looks like the lead competitor has already moved in some cases. So I think the plan to execute pricing is underway, and you know, it'll just be a matter of timing, getting through all the negotiation, the lead times to get things set relative to how our costs are coming in. So, you know, tariffs on Spice and Seasonings are really our biggest issue. You know, it's China, 30%, it's Vietnam, you know, black pepper.
Mm-hmm.
This is probably the biggest piece of the exposure we have. So if we can manage it in spice and seasonings, I feel pretty comfortable that we'll get through it all. Yeah, I don't know what's gonna happen in the future. We kinda waited, and I think that everybody waited until all this tariff negotiations —
Yeah.
Settled down. I mean, if we had taken pricing two months ago, we would have been at 54% in China, you know, instead of 30%. So it's been a little volatile, but I think it's kind of at least steady stated for a little bit here. I'm personally hoping that we get to a point, and when we get through all these tariff negotiations, that the unavailable natural resources argument, that, you know, coffee, cocoa, spices, you know, we begin to see some relief around that. But at this point, I think we've decided we got to move forward, and we're starting to incur costs behind the current tariff, so we need to start recovering that.
Mm-hmm.
And then over time, we'll look at, you know, do we get some relief on that front and be able to back off some of these —
Yeah.
This pricing action. But right now, it's, that's not in sight.
Yeah. Your meal segment over time is expected to grow sales, low single digit.
Yep.
You know, hasn't been able to deliver that really since just sort of reporting at the segment level. What gives you the confidence over the longer term, this is still a segment that can kinda consistently deliver modest sales growth, and how core valuable is Ortega and other, we'll call it, the ethnic brands, to the future plans in that space?
Yeah, I mean, so the biggest lag on us being able to get to positive sales growth has largely been Ortega. Las Palmas is growing nicely. You know, actually, Maple Grove Farms syrup has started to grow nicely. Cream of Wheat has been pretty steady. So really, it's about Ortega.
Mm-hmm.
Ortega has been, you know, and I think you probably even heard this with Old El Paso, you know. It's just new competition coming in, more competitive environment, slicing the pie up a little bit more.
Yeah.
We're defending our turf, we're doing the right things. We've innovated in sauces. Our sauces business is, you know, kind of healthy and growing. You know, we've taken some hits in terms of our shells and kits and some of the ancillary things. The other piece, frankly, half of the decline in Ortega is because we lost the whole chilies crop from, you know, South America.
Mm-hmm.
Last year. So we had literally no supply, and we're the game in town, you know.
Mm-hmm
the only game in town. So we lost probably $5 million of sales because we had no ability to service that business, and, you know, we will get back in 'cause Walmart's holding the slot and everything once the new crop comes through. So Ortega has been a struggle, supply, competition, but I think we've got, you know, new innovation coming on shelves that'll strengthen our position. We're launching a Cheez-It licensed shell in the cheese taco shell category. We have new green sauces coming on, you know, on Ortega sauces. We've got some enchilada kits coming in. You know, we've got some new things that are hitting. We've got some strong innovation. So I think you'll see Ortega, you know, beginning to improve. We've broadened the distribution of our sauce business across channels, so it's getting there.
It's just been a tough period with supply and competition.
Got it. Yep.
To get to the midpoint of your EBITDA guidance for the full year, it would require EBITDA to be up about 3% in the back half of the year, which would represent a pretty meaningful inflection relative to, you know, the EBITDA declines of 21% and 9% in each of the first two quarters. So what sort of visibility do you have towards achieving this inflection, and sort of what are the key drivers of doing so?
Yeah, sure. So the two big positive drivers, you know, part one, Casey mentioned, Green Giant. So we had a bunch of one-offs that impacted us the back half of last year.
Yep.
And the front half of this year, particularly around weather-related crop, bad crop last year, and then also currency. We manufacture in Mexico, so we basically manufacture in pesos, and the U.S. dollar peso got out of whack for a period of time. Both of those we expect to be better. We kinda know that they're better because—
Mm.
Of when crop and product is made. We should have some favorability in the back half on Green Giant from a margin and profit standpoint. Also, Casey talked about the 10 million cost savings challenge. We know where most of that is because it's fairly straightforward. It's cost savings, and we've already executed and actioned a fair amount of that. So, you know, pretty good visibility on those. There's bad guys, of course. We talked about it on our earnings calls. Both of those initiatives were about $8 million-$10 million between Green Giant and then the cost savings. We obviously know we've got bad guys as well around tariffs, around input costs, inflation—
Yep.
F avorability in some categories, a little bit of a drag in others, but on the balance, we feel pretty comfortable that we should be flat to up in the back half of the year.
And can you expand a little bit on what sort of actions specifically you're taking as part of that plan to save the incremental $10 million in the back half? And I guess, how sustainable are those efforts as we look past 2025 and into 2026 and beyond?
The components of the $10 million that are flowing to the P&L now, we actually can start seeing it in our numbers now. First, we increased our productivity efforts from 3% to 3.5%, and so we're starting to see that incremental 0.5% flow into, you know, our back half costs.
Mm-hmm.
Y ou know, if you think about it, 0.5% on our COGS of $1 billion, you know, it's pretty substantial. It's pretty substantial. So, and we're not counting on all of that flowing in this year because the timing of, you know, when we're shipping inventory and deferrals and all that, but we are expecting some of that, and we're seeing it, you know, kind of in the projections. The second thing that, you know, we looked at was, we did pare back on. We have conducted some restructuring. So we have restructured some of our operations. We got rid of a few central functions. We've, you know, RFP'd some of our other, you know, kind of services and other things.
You know, we're looking to the future of what our company might look like, ex-Green Giant, and we began to restructure some of that in advance of that. These things are all sustainable, you know, those will be ongoing cost savings. We also went into our trade spending, because our trade spending has kind of creeped up over the last couple of years, and looked at how do we get some, you know, efficiency out of the trade spend. You know, we've kind of pared back our back half plans, cut some inefficient spend, and done some other things and been able to see that.
You know, in some cases, we've looked hard at our marketing, where is it working, where is it not working, and cut back some of the things that we didn't think were effective and preserved, you know, marketing spend where we really needed it, so these are pretty tangible actions that we can see, and we can see them kind of flowing into P&Ls in the forecast, and they're the right things to do. I would say about a third of it is coming from restructuring, about a third of it is coming from productivity, and about a third of it is coming from just, you know, trade spend efficiency and some other things.
Sounds like you're trying to get ahead of any potential stranded costs that might come about.
Yeah, as a result of a Frozen divestiture.
Okay. Maybe the last thing is sort of as we sit here today—
I think that—
Oh, yeah.
That's the other thing we haven't really talked about, that Green Giant added so much complexities to our company. You know, Mexico operations—
Yeah.
Canada selling operation, that—
Mm-hmm
W hen we get out of that, we have disproportionate amount of costs trapped in managing that business. So we've got a program mapped out of what we would look like without it.
Mm-hmm.
We've kind of just moved that forward with some of these cost savings.
Good. You know, as we sit here today, what do you see as the biggest risk and/or opportunities for just the year to come, in either better or worse than sort of currently expected?
You're talking about 2025?
Yep, 2025.
I mean, I think the biggest, the two risks that, you know, we're watching pretty closely are, you know, how fast do we recover the top line?
Mm-hmm.
So, you know, does the sell-out consumption data improving and getting down into the, you know, closer and closer to stable?
Mm.
Or closer and closer to, you know, a low single-digit decline.
Yep.
I mean, I want to see that. Number one, I think that's a risk of how fast that happens. The other one is, tariffs.
Yep.
So we've executed the pricing, you know, we've released it, we're, you know, in the discussion with customers. It's really the, you know, how long it takes us to get it implemented.
Yeah
A nd relative to how fast the tariff costs come in. I think those are should be fairly closely aligned or maybe just a little bit of gap between them. But, you know, like, let's say we have some, you know, issues with getting that pricing through in a couple of big customers that, you know, that might be a little bit of a risk to what we're doing.
Right.
But I feel pretty confident, as Bruce and I are talking about. We see the EBITDA improvement versus year-over-year, you know, on the Frozen and Vegetable, the cost savings challenges.
Yep.
We feel pretty confident about that. It's really that top line and making sure that our top-line trends are recovering and stabilizing, and that we're seeing the pricing get reflected to cover tariffs.
Great. Good. I think that's a great place to cut it off. We're out of time. Please join us over in the breakout session, and please join me in thanking Casey and Bruce for being here.