People say that the food stocks tend to work even when the market doesn’t. Cramer is enticed by the smaller food companies like B&G that buy brands from larger companies and build them into bigger brands with higher growth rates. To see how B&G is handling this strategy, he spoke to CEO David Wenner.
The approach of buying cast-off brands and turning them around is something B&G specializes in. “We tend to buy smaller brands out of bigger companies that have been neglected” and ones that “we think have great brand equity and great margin structures,” Wenner said. By focusing on these brands, B&G is “typically successful” in turning them around and generating moderate growth, he said.
But with raw costs soaring and food inflation picking up steam, people are betting that the whole agriculture complex is going higher. Wenner believes B&G can – and is – handling the task of passing on higher costs. The company had problems in 2005, he admitted, but it held its own in 2006, and this year “we’re improving our margins with pricing against cost.”
Even if food inflation is an issue for these companies, Cramer thinks B&G an archetypical stock that will do well in any environment, like the one we’re in now, where mortgages are causing pain and panic for investors.
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