B&G Foods, Inc. (BGS), Johnson & Johnson (JNJ): Three Growing Companies Building Powerful Brands

Page 1 of 2

B&G Foods, Inc. (NYSE:BGS) just announced plans to buy Robert’s American Gourmet Food, best known for its Pirates Booty brand. This is likely to be another in a long series of solid acquisitions for this brand extension expert.

B&G Foods, Inc. (NYSE:BGS)

Little Company, Big Brands

B&G Foods, Inc. (NYSE:BGS) started life with a collection of smaller brands that are dominant in their niches. Pickles and molasses are two examples. The company, however, quickly ramped up its acquisition machine. The first real headline-grabbing transaction was buying Cream of Wheat from Kraft Foods Group Inc (NASDAQ:KRFT) in early 2007.

At Kraft Foods Group Inc (NASDAQ:KRFT), this breakfast mainstay was an all but forgotten brand. At B&G Foods, Inc. (NYSE:BGS), however, it was an important growth driver. Cream of Wheat’s new owner launched new flavors and spruced up its image. Sales quickly responded, and Cream of Wheat went from a dying product at a big company to a growing one at a small company.

Robert’s American Gourmet Food is privately held and relatively small. That means it should quickly benefit from B&G Foods, Inc. (NYSE:BGS)’s relationships in the retail industry. And, B&G is likely to invest in product extensions, building out the Pirate brand from its current lineup of just three snack offerings.

Fueling Growth

B&G Foods, Inc. (NYSE:BGS)’s acquisition model has led to solid growth over the last decade. The top line has almost doubled over that time, going from about $325 million to around $630 million last year. And the company is still small enough that it can pick off smaller unwanted or unloved brands, resuscitate them, and see a big impact on the top and bottom lines–just like it did with its 2011 purchase of Mrs. Dash from Unilever.

The small company has increased its dividend in each of the last two years. The shares yield around 4%. Although its size increases risk, it is a good option for income investors looking for a food stock.

Not the Only Expert

B&G Foods, Inc. (NYSE:BGS), however, isn’t the only expert at brand extensions. For example, Church & Dwight Co., Inc. (NYSE:CHD) has been able to take Arm & Hammer Baking Soda and branch out into everything from kitty litter to toothpaste. It’s that type of outside the box thinking that’s led the company’s top and bottom lines higher every year for the past decade.

And the late 2012 addition of Avid Health looks like it could continue that trend. Avid is an already dominant player in the gummy vitamin market. Most would consider gummy vitamin’s to be a child’s product, but more and more adults are taking the healthy treats. With the aging baby boomers increasingly concerned about their health, moving beyond basic vitamins shouldn’t be too hard.

Page 1 of 2