B&G Foods' base business is built the center of the store, which has experienced softness as consumers shift purchasing preferences to the periphery.

PARSIPPANY, N.J. — The same market trends that have plagued such prominent consumer packaged goods companies as General Mills and ConAgra Foods also took a toll on B&G Foods during the first two quarters of fiscal 2014. Consumers continue to shift their purchasing preferences away from the center of the store to the periphery, and the effectiveness of promotional activities has lessened.

“Our base business is very much a center of the store, shelf-stable business,” said David Wenner, president and chief executive officer, during a July 17 conference call with financial analysts. “As most of you know, this has been a challenging segment for the food industry for the past several years and it has become commonplace for publicly-traded food companies to report declining sales in this segment of their results. In that context, our base business volume growth of 2.8% was encouraging.”

But Mr. Wenner added that B&G’s volume growth came at a price.

“Promotional spending on certain brands, including Ortega, Polaner, and our B&G brand, reduced overall net pricing by 1.7% of net sales and reduced our overall increase in net sales for the quarter to a 1.1% gain,” he said. “In some cases, the money was well spent and fueled increases such as we saw with Ortega. In other cases, we saw relatively little sales lift. As we go into the second half, this promotional spending activity will be curtailed significantly in the interest of stabilizing prices.”

For the first two quarters of fiscal 2014, ended June 28, B&G foods recorded net income of $33,915,000, equal to 63c per share on the common stock, and an increase compared with the first half of fiscal 2013 when the company earned $18,201,000, equal to 34c per share.

Sales for the first half of the year were $401,029,000, an increase compared with fiscal 2013 when sales were $332,076,000.

The growth in both earnings and sales were due to the effects of four acquisitions B&G Foods made starting in May 2013. Mr. Wenner said the company has benefited from the acquisitions, but they also have taken a toll.

Costs associated with integrating recently acquired snack brands weighed on the company during the quarter.

“Very frankly, we have stressed our systems in a variety of ways, the impact of which we underestimated when we did those acquisitions,” he said. “The right opportunities present themselves unpredictably, and you must decide whether or not to take advantage of those opportunities as they happen. We believe and still believe that we were right in doing just that even though the stress of doing so and the resulting impact on short-term costs and efficiencies is apparent in our second-quarter results.”

For the second quarter, B&G’s net income equaled $16,138,000, equal to 30c per share. The company recorded a loss of $1,433,000 during the second quarter of fiscal 2013.

Sales for the second quarter were $202,889,000 compared with sales of $160,882,000 during 2013.

The series of acquisitions B&G has made has had an impact on the company’s warehousing and distribution operations, Mr. Wenner said.

“Costs continue to run above our expectations in our warehousing and distribution network due to several factors,” he said. “The first is space constraints, the result of added volumes from snacks and volume that is often bulky. Limited spaces caused us to double and even triple handle goods in our warehouses, inflating costs.

“Similarly, we are finding bulky light snack products inefficient to ship. This was expected to some degree, but not to the degree we are experiencing. We are acting to resolve these issues. One of our three major warehouses has already been moved to a larger facility and a second move is scheduled for the fall. The third is adequate for our needs. We are also working with our customers to alter order and shipment patterns on snacks to prevent more direct shipments from a manufacturing point rather than combining products with our grocery products in B&G Foods' warehouses.”

With regard to a shift taking place in consumer purchasing habits, Mr. Wenner described the change as a “creep” rather than a “tidal wave.”

“We’ve said in the past that part of it, I think, is there is an ongoing shift in eating habits and where people buy food and the kind of food they buy,” he said. “It’s a steady creep as we change generations and people’s habits change in terms of what they eat and how much food they cook at home, and all of those types of factors. I think you have to come up with concepts that make people want to use those kinds of products.”

As a result of the center of the store troubles Mr. Wenner described combined with the challenges of integrating the company’s most recent acquisitions, B&G Foods lowered its guidance for fiscal 2014. Management now expects earnings between $204 million and $209 million, a 2.4% reduction compared with previous expectations. The earnings per share guidance was reduced 3.1% to a range of $1.54 per share to $1.60 per share.