Good day, and welcome to the B&G Foods Second Quarter 2021 Earnings Call. Today's call, which is being recorded, is scheduled to last about 1 hour, including remarks by B&G Foods management and the question-and-answer session. I would now like to turn the call over to Sarah Jarolem, Senior Director of Corporate Strategy and Business Development for B&G Foods. Sarah?

Good afternoon, and thank you for joining us. With me today are Casey Keller, our Chief Executive Officer; and Bruce Wacha, our Chief Financial Officer. You can access detailed financial information on the quarter and the earnings release we issued today, which is available at the Investor Relations section of bgfoods.com. Before we begin our formal remarks, I need to remind everyone that part of the discussion today includes forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer you to B&G Foods most recent annual report on Form 10-K and subsequent SEC filings for a more detailed discussion of the risks that could impact our company's future operating results and financial condition. B&G Foods undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. We will also be making references on today's call to the non-GAAP financial measures, adjusted EBITDA, adjusted EBITDA before COVID-19 expenses, adjusted net income, adjusted diluted earnings per share and base business net sales. Reconciliations of these financial measures to the most directly comparable GAAP financial measures are provided in today's earnings release. Casey will begin the call with opening remarks and discuss various factors that affected our results, selected business highlights and his thoughts concerning the outlook for the remainder of fiscal 2021. Bruce, will then discuss our financial results for the second quarter as well as expectations for 2021. I would now like to turn the call over to Casey.

Good afternoon. Thank you, Sarah, and thank you all for joining us today for our second quarter earnings call. We are pleased with the company's performance in the second quarter and our prospects for the remainder of the year. As we expected, the second quarter was the most challenging to lap from a comparative perspective, given that Q2 2020 occurred at the height of pantry loading and stocking during the COVID-19 pandemic. However, performance remained elevated relative to 2019. As many of you know, this is my first earnings call at B&G Foods. I've now been in the role as CEO for about six weeks. So for the folks on the line that I haven't met yet, it is a pleasure to meet you today over the phone. I'm certainly looking forward to meeting many of you in person over the coming months as we get back into the cadence of in-person investor conferences, industry events and trade shows. While I am mostly in listen mode for now, I will be happy to share some of my observations so far, and then come back over the coming quarters with a more detailed discussion around strategy, the portfolio, as well as our opportunities and challenges at B&G Foods. Obviously, one of the biggest drivers of industry performance over the past 1.5 years has been the COVID-19 pandemic. In many cases, this is a matter of portfolio DNA, what are the brands, what are the categories, coupled with management's effectiveness in keeping employees safe, mitigating business risk, maintaining supply and maximizing opportunity. Here at B&G Foods, we have done a pretty good job. At the height of the pandemic in Q2 last year, we generated some of the largest growth numbers in the packaged food industry. Today, COVID continues to be a…

Thank you, Casey. Good afternoon, everyone. As Casey mentioned, we had a strong financial performance during our second quarter despite some very challenging comparables. A year ago at this time, we were still, for the most part, sheltering at home, had little hope of an effective vaccine in the near future and saw the majority of the away-from-home eating industry shutdown, other than a budding recovery of takeout dining that began midsummer last year. April, May and June of 2020 were the peak months of COVID-19, and Americans were still eating the majority of their meals at home, creating unprecedented demand for shelf-stable and frozen packaged food products, the types of products that we sell. In fact, when we reported our second quarter results last year at this time, we were discussing net sales growth that was up nearly 40% and adjusted EBITDA growth that was up nearly 45% from the prior year. Margins were also up significantly. This year, as we lap those pandemic-enhanced results, I think it is also important to view the second quarter in the context of its comparisons to Q2 2019. While sales were lower than March, April and May months of last year, net sales finished nicely ahead of pre-pandemic levels for the quarter, and we continue to track to the mid-single-digit increases over 2019 levels that we had been talking to for some time. We are seeing many of the consumer behaviors that we witnessed last year persist, driving a sustained increase in the numbers of Americans preparing their meals at home and eating at home on a daily basis. As Casey said earlier, we are seeing consumers cooking, baking and eating at home more frequently than they had pre-pandemic. Another factor worth mentioning before we get deeper into our results is inflation.…

Thank you, Bruce. As I said at the beginning of the call, we had a fairly strong quarter despite lapping Q2 2020, which benefited from peak COVID-19 demand. The quarter played out pretty much as management expected. And the company remains on track to deliver the mid- to high single-digit growth ahead of 2019 that is set as a target for this year. I am digging in and enjoying my early days at B&G Foods, and I look forward to sharing more of my perspectives on the company's performance, strategy and portfolio in the time ahead. This concludes our remarks, and now we would like to begin the Q&A portion of our call. Operator?

Thank you. [Operator Instructions] And we'll take the first question from the line of Karru Martinson with Jefferies. Please go ahead. Q – Oliver Grossman: Hi. This is Oliver Grossman on for Karru. What products would you say you have been better able to take price in? And which are you having more trouble with? And why would you think that's the case? I think you mentioned that 80% of the portfolio has seen price increases, so any color there would be helpful.

Yes, I can start, and then Bruce can talk a little bit. Yes. I think we disclosed that we've taken pricing on 80% of the portfolio at this stage because we've seen that the inflation and input costs, the pressure has been pretty broad across the portfolio. We - I would say the - and the increases on our core portfolio before Crisco are probably smaller, but depending on the item. So we've been pretty successful at being able to implement those with customers. And we have very strong justification with the inputs going up. I mean, Crisco is significant. When your primary component is soybean oil, and that goes up by 2x, which is what it has happened since we acquired the business. Those are obviously some tougher discussions, but we are getting through those because all of our customers in the industry see that those soybean [oil cost are up] that much. So I would say, look, overall, I think this pricing environment, customers feel it. We obviously have very tough but productive discussions about it. But we've been able to largely have successful discussions around pricing and get it implemented. And some of it is still yet to come. We just announced it, but it hasn't been implemented fully until probably a couple of months. Q – Oliver Grossman: Great. Thank you. And then just lastly, how much top line do you think that you guys have left on the table due to the capacity constraints that are not letting you fully meet demand.

I think that's a hard one to give at this time. I think it definitely depends on the category. I mean, certainly, Green Giant ourselves would be significantly higher in canned and in frozen corn on the cob, where we're relying on Mother Nature and we'll get the product. And so will our competitors when Mother Nature comes in throughout the crop season. And so that's one where we certainly heard. Spices & seasonings up something like 20% compared to 2019, actually up versus last year. If we had unlimited supply, we have a lot more sales. I think you go down the portfolio piece by piece, and you see that.

Ortega, taco shells and taco sauce, we've been kind of struggling to keep up with demand on those two and have plans to get additional capacity in place, but it's not there yet. A - Bruce Wacha Yes. Static Guard, if we had unlimited supply our sales would probably be kind of close to the same until people are out and about and using Static Guard on their clothes when they go to work.

That's an availability of the spray cans that's been the issue. So... Q – Oliver Grossman: Great. Thank you very much.

[Operator Instructions] We'll take the next question from the line of Andrew Lazar with Barclays. Please go ahead.

Good afternoon. And Welcome, Casey.

Thank you, Andrew. Maybe I want to start off, Casey. I know you're not ready to sort of lay out sort of the go-forward strategy in a whole lot of detail yet. But maybe I just want to get a sense, historically, right, the company has had a very successful strategy of sort of keeping the core relatively stable to growing very modestly. And then kind of supplementing growth with capital allocation around dividend policy and then accretive deals. And maybe it seems that B&G may have strayed a little bit from that strategy maybe the past few years looking for a little more growth out of the core. Just trying to get a sense if it's your intention to sort of take B&G back to its roots, so to speak, or moving in an entirely different direction? And then I've just got a follow-up. Yes, I'd say -- and Andrew, I do want to say that this -- 6 weeks in, I think I'd be crazy to say I understand everything about this company and know everything about where we need to go. But look, I am digging in, and I'm starting to form some ideas about what we need to do and working those with the team. I would say my approach is to say we need to keep -- we need to do what has been working at B&G well, which is stabilizing the shelf-stable portfolio and getting -- or even getting modest growth out of it. And then making sure that we're bringing in accretive acquisitions that are complementary to the things that we do well that we can build in and bolt in pretty successfully. And the company has done a remarkable job of that. I would say the one piece that I'm going to…

Yes. And then, Bruce, I think I heard you say that you're sticking with the 18%-plus EBITDA margin. I wasn't sure, and I may have just missed it. Was that also for this year or just kind of over time? Because I know you also talked about the typical lag that we have in timing between pricing and inflation and all of that.

Yes. Fair enough. I mean, look, I think in this quarter, you certainly saw the compression on margins. We were a little bit less than we were 2019, certainly, no expectation on our side that we would have hit 20% for this quarter. We're still targeting an 18% EBITDA margin because we think that's the right thing for the business and what we should be able to produce. And probably at the lower end of that 18%, 18.5% that we talked about earlier in the year, but that's still our goal.

Great. And I guess just on that then, what is -- because there are a bunch of food companies, obviously, that aren't able to reach their, let's call it, normal EBITDA run rate from a margin perspective this year just because of, again, the timing lags and the things that are typical with how this works in a rising input cost environment. I guess what's -- is it that you were faster to get pricing implemented? You've got additional productivity. Trying to get a sense of what's sort of making up that -- or making up for that gap or that timing lag to still allow you to get to that type of margin for the year.

Sure. I mean, look, not saying it's going to be easy. There's certainly going to be a challenge and that there's always risks. But as we highlighted when we gave our fourth quarter results and our outlook for the year and the beginning, part one, we weren't giving formal guidance this year because we thought that there would be many challenges coming out of COVID, both from a sales standpoint, but also thinking through the cost side. And we have that. In theory, we should have a margin benefit from Crisco this year because it is a higher margin business. But as we've said, that's an area where we've seen input costs. It's an area where we've taken pricing. And kind of the same, to a lesser degree, on the portfolio, we acted quick in terms of taking pricing, but we're still seeing cost increases. And so I wouldn't go too crazy with building an EBITDA margin upside opportunity for this year because I think like everybody else in the space, we're going to see challenges. But we still think that's the right Casey Keller.

I would say, Andrew, just very quickly, I believe just looking from the outside coming in here that B&G did call out inflation earlier and acted on pricing earlier than a lot of the rest of the industry, which is now followed pretty aggressively. The second thing I would say is that we did a good job on certain commodities protecting ourselves. So having coverage fairly long, we did that with soybean oil. So in the first half, we haven't seen a huge impact. We'll see more impact coming through Q3, Q4 because we were hedged or protected longer on some of the things that have gone up dramatically. And then the last thing is just sort of a focus on costs and cost savings, and making sure that from spending to supply chain costs that we were doing everything possible to get productivity. And I think it's the combination of all those that's going to enable us to stay around that 18% number.

Great. Thank you.

We'll take the next question from the line of Michael Lavery with Piper Sandler. Please go ahead

Thank you, good evening. I wanted to get a little bit more specific. You said you've got some good coverage on commodities. But I know when you were calling out inflation pressures or concerns earlier in the year, the fourth quarter was a big wildcard there. How covered is that now? Is there still a good amount of exposure? And can you give us any sense of how you may be positioned for 2022?

Not in a position right now to give our 2022 guidance. We typically would….

Yes. No, sorry, I don't mean guidance. Just do you have -- are you 20% covered on commodities? 30%? 10%? Something like that.

Not something that we would disclose at this point.

I think it's fair to say that we were pretty well covered through -- and I'm talking about against the increases. So we're actually fairly covered through this year, but we recovered against the larger increases through the first half of the year. The second half of the year, we will have pricing rolling through to help us offset the increasing costs that are going to be flowing through our inventory and P&L. So that's kind of what's happening. So we're we'll have pricing coming into a more -- a larger effect as we see more of the costs flow into the P&L in Q3 and Q4.

And I also think that's something that's going to remain fluid. I mean, we're seeing what seems like inflation across the board. Four months ago, no one was talking inflation when we had our call. Now everybody is talking about it. And you are hearing even the retailer is talking about taking price. If we continue to be an inflationary environment in 2022, there's probably more price increases. If we end up not being an inflationary environment and some of these cost increases go away, we'll have to watch that as well.

Okay. That's helpful. And just maybe a follow-up on the pricing side. You correctly note that you were kind of a leader here, talking about this earlier as an issue than your peers. But I guess then, you're also now saying that you've got the lag between the pricing and coming into effect and the inflationary pressure. Is it just that the inflation has moved so quickly? Is it just that you were trying to be careful to take pricing -- to not take pricing too soon and then you've got a gap. Can you help us understand some of the mechanics around the timing?

Yes. I mean there's certainly a conversation you can have with customers around price when you have input cost increases. And you have to see that materialize so you can verify and validate those cost increases and then put them in place. And so it still takes time. And I think our point was we are aware of it. We suspect a lot of people were aware of it and seeing it. And like I said, we prepared ourselves, and we are ready to act quickly, but there still is a lag effect.

And that's basically when do we see the costs really going up, which, by the way, they have been like increasing over the last 6 months. And when we take pricing as well as the time line for getting it implemented with customers. I mean most customers are going to insist that we have a 90-day lead time on price increases. So it's just those timing factors. But we try and get it in line as much as possible, but usually, there's some lag effect.

Okay. Thanks so much.

We'll take the next question from the line of William Reuter with Bank of America. Please go ahead.

Hi. I was wondering, often some retailers reset their shelf space during the middle part of the year. It didn't happen a lot during COVID. I was wondering if there were any changes in shelf space that you expect kind of over the next month or 2 for any of your key products?

People are trying to get back to the normal cadence as much as they can.

I mean, we don't -- honestly, just -- we're just now getting indications for most of the major retailers that they're doing category reviews and beginning to do new shelving sets and planograms. So we don't have a lot of information yet because that process is really just getting going. We're in initial discussions around some of our new innovation items that are going to be coming to market now and over the next several months. But I think it's a little early to understand what's happening with category reviews. And even some customers now are shifting some of the timing of those around. So we don't have any information to say one way or another, what's going to happen plus I don't suspect that we will have a lot of vulnerabilities that will be more about how do we optimize our SKU assortment and how do we bring new innovation into the market.

Okay. And then just one follow-up, if I can. On the supply chain disruption in Green Giant, you were on allocation with certain products. I guess, where do we stand on that now? And are you continuing to have a shortage of certain inputs, such that some of your customers are not able to fully provide them all the products that they'd like.

Certainly, on the can side for Green Giant, we're still just now getting into the pack season. And that begins basically now weeks ago and continues through just past the end of the third quarter. And so that's a position that's steadily improving and trying to get back to normal.

Great. That’s helpful. Thank you.

Thanks, Will.

Your next question comes from the line of Jenna Giannelli with Goldman Sachs. Please go ahead.

Hi. Thanks for taking my question. You talked about, obviously, your desire and interest to continue opportunistic M&A. But I guess, given there are some [Technical Difficulty] fact it near term to maybe be on pause in terms of the pipeline. And then just remind us again, potentially how high you're willing to take leverage and just commentary on valuation. Thank you.

Yes. So great question. I think we're always looking. I mean at B&G, it's hard to go more than 1 year or 2 here and there without seeing a couple of acquisitions. Don't know what the next one is. We're less than a year removed from Crisco. But we are always looking. I think, certainly, as Casey develops his strategy for the company, there's going to be areas that we're going to focus on where we see more or less opportunity. There's an opportunistic aspect of a willing seller in order to find willing buyer. And so that will continue to evolve as far as leverage. We've got a target ratio of 4.5 to 5.5 times x. And so we're a little bit above that but not too far above. But that's certainly a consideration that has to make the math work, both from a valuation and how we're paying for things. And so always willing to look, always willing to do the math on how to fund something and we'll see where the next one comes.

That makes sense. And then I guess I have to ask, you have some callable debt. How are you thinking about addressing that potentially coming to market, taking advantage of the favorable high-yield market, et cetera? Thank you.

Great question, similar answer to the M&A, which is -- I wish there was an opportunity to get out in the high-yield market at very, very attractive rates. We're happy with our capital structure today, but we are getting a little bit closer to the maturity on the 2025, although it's still a ways off. I think we've got to look and evaluate and if there's something to do structurally, that's great. But right now, we're very happy with our capital structure, both on the floating side and the bonds.

Thank you so much.

We'll now take the next question from the line of Rob Dickerson with Jefferies. Please go ahead.

Great. Thanks so much. Bruce, just a direct question. I know there's no guidance outside of revenue provided for the year development in parts. But just kind of given the commentary here, right, in the Q&A around you're trying to hold this 18% EBITDA margin for the year and then giving no new guidance. I'm not going to ask you what your EBITDA guidance is, but haven't you kind of implied what that EBITDA guide is. I just want to make sure there's not something else in there that would prevent the rest of us on this call, myself included, to kind of go that way. I'll start with that.

Yes. I think just for us, there's a recognition that there has been all this year and really beginning last year that were in unprecedented times. And it's just harder to put a fine number out there, knowing all the risks and in some cases, opportunities of what COVID has brought for us. And what happens in the coming months ahead in terms of what our restrictions and ability to eat in restaurants or not. And so there's a lot of unknowns out there. Our guidance or lack of guidance this year is a reflection on that.

All right. Fair enough. And then secondly...

A lot of volatility, I would say, on top of that, not only volatility in the COVID environment and expectations, what's happening. I mean you can look at the Delta variant now and say, it's hard to figure out what's going to really go there. But there's also a lot of volatility in the inflationary environment, I think it's like -- which is, I think, makes giving earnings guidance hard when you can't see exactly what's going to happen and what's going forward. So I think, look, we are targeting the 18% earnings margin. We just think there's too much volatility in the costs and the external environment to really be able to pinpoint it.

Yes. And certainly, a part of the thought process behind how and where we gave guidance this year was there isn't a lot of unknowns, and we didn't want to be in a situation where we're in an earnings call, whether it's the second quarter or the third quarter debating you're ten or above ten below an EBITDA margin number. There's - we're going to do our best, but there's risks. And like you guys said, a lot of other companies are seeing a lot more margin compression than we had. So we'll continue to do that.

Yes. It all makes sense. And then I guess I don't call it out as much or maybe it is in there. I'm just not reading it the right way. It's just kind of supply chain. I know you still call out some of the capacity constraint on Green Giant, what's happening there. I know part of your network is co-manned. But was there anything in Q2 or you kind of foresee back half that gives you some kind of pause on just overall supply chain complexity, inclusive labor and capacity, what have you…

Yes, it's all very much there for us like it is for a lot of people who are doing manufacturing or relying on co-packers. I think last year at this time, there was concerns could you get your factory staffed. And we were pretty lucky in terms of not having the massive shutdowns like some of the folks on the protein side had. I think now it's there's risks to different brands and different products that we have, and it's kind of plus or minus, but for the most part, reasonably healthy. But sure, I mean we could sell a lot more as we called out Ortega, if we had unlimited taco shells, we could sell a heck a lot more. You go into most stores. You see shelves not fully stocked. With that said, we're still putting up decent sales numbers relative to 2019. So it's less about do you have product to sell and more about do you have enough to sell to maximize the demand opportunity. Certainly, certain brands and certain products, we have that.

And spices & seasonings, we're -- we -- it's a kind of a good problem to have. We're running that factory full out, and we're trying to hire new people in this environment, it's tough. So there are some areas of our business where we're trying to add capacity. It's just -- it's not terribly easy right now, but we're going to get it done. In some places, it's about new lines. In some places, it's about bringing on additional labor. So we're trying to work through all this to maximize the opportunities from our portfolio.

Right. Great. And then just last thing quickly. I know you said upfront kind of the conversations with retailers seem to be somewhat ongoing, right, as you get through the year. And obviously, there's some complexity in kind of where those costs go as we move forward. But if we sit here today, when you go and talk to that retailer, I'm assuming -- like you're saying on Crisco, I'm assuming some hedges roll off on a kind of go-forward rolling basis. My assumption here is you're trying to kind of price to those rolled-off hedges later as you think through into '22 [ph] versus getting what you can now and then trying to go back at the end of the year. Just trying to figure out that -- how you think about that pricing dynamic relative to what your visibility is just off the spot today.

Yes. I mean, I think ultimately, we have to price the business off of what the with the long-term input costs are going to be. And so look, at the end of the day, we need to price so we're not margin compressed over the long term. And as we've kind of said repeatedly on this call, there may be some margin compression in the short term. Our goal is to maintain our margins over the long term.

Got it. All right. Thank you so much. Really, appreciate, guys.

Thanks, Rob.

Your next question comes from the line of Carla Casella with JPMorgan. Please go ahead.

Hi. Most of my questions have been answered. But on the new capacity front, you're talking about building capacity, is that something that could come on in the third quarter? Or is that something that's more fourth quarter next year in Ortega and the others where you're talking about constraints?

Yes. I mean it's probably more fourth quarter and first quarter of next year. To be honest, just -- there might be some slight impact in Q3, but it's really a Q4 on taco sauce. And the shell line won't come on for another 6 months. I think you could count on -- and then on the supply constraints on Green Giant, that's really about the pack -- the seasonal pack, as Bruce talked about.

Okay. Great. And then could you just talk about whether you're starting to see as we come further out away from COVID and lockdown, whether you're seeing any changes in promotional environment or cadence in -- or among the different product lines like frozen versus shelves? Anything you could call out?

Yes. I think what we've seen during the COVID pandemic, last fall and even this spring is promotions -- there's less foot traffic in the store during kind of promotional time -- traditional promotional time frames, call it Easter or whatever. And so the lift off promotion is a little bit less. But we expect, as things begin to normalize that, that will improve. So we're kind of -- we're not pulling back on promotion necessarily in the fall period. We're expecting that there will be some promotion events and that promotion will be a little bit better than it was last fall in the middle of pandemic. But it's kind of -- it's gradually returning. And we're just trying to follow that and make sure that we're moving in line with what we see from promotion activity at retailers.

Okay, great. Thank you.

We'll take the next question from the line of Ken Zaslow with Bank of Montreal. Please go ahead.

Good evening, everyone..

Hey, Ken.

Casey, as you kind of look at the business, a lot of CEOs come out and say, hey, look, I have a 100-day plan, a year plan, a 3-year plan. I know you're not in a position to tell us about what the plan is, but do you have a plan in which you're going to set up your plan, I guess? And like how are you going about it? And what is your philosophy in going through that? And how -- when will we know more? And what's the schedule to which you're going to reveal what your plans are on a longer-term basis?

Yes. I have a plan and a time line that I'm working against. And typically, it's at least 100 days before I'm at a point where I'm really willing to talk about it. And that's because I'll spend my first weeks, months in the company, just trying to understand where do I see value. Where do I see value creation happening? Where do I see the capabilities? Where do I see what businesses are working and not working. How do we want to think about resource allocation within the company across these things. What has been -- where we've been successful in the past, what do we need to change to maybe be successful in the future. So I think you can expect that I'll begin to lay some of this out, call it, 3- to 6-month time frame. Probably when we have this call again in November, I'll be able to provide some more detail about where do I see us going and where will we focus and what kinds of initiatives and priorities we'll put in place? And this is all -- I've done this a few times now. So to me, it's all about figuring out what's working and what's not working with the team to align on a strategy to drive higher value creation. And then putting the plan in place and communicating what we're doing to you all and investors, et cetera. So I'm on track with that. It's just 6 weeks is probably a little premature to say more than that just because I think I want to do my due diligence. I want to work with the team. I want to make sure that we're aligned and I want to make sure that I'm coming out with from a real knowledge base in terms of where we want to go. But I will tell you, that I do see very clear opportunities about what we can do to improve value creation, drive value creation. Like I said before, building off I think what B&G has done well in the past, and maybe enhancing that with more focus within the complexity of the portfolio that we have in terms of where we can drive value and where we can create value for shareholders and for the business.

Fair enough. I'm not sure who to say this question to you. But as you look at the Crisco business, can you assess the business case given the situation that you're in with the renewable diesel side of it? And I'm assuming, obviously, the profitability is pushed out, but how do you see that business case playing out? And should we think about it in a different perspective. And again, not this year, but I'm talking about the next 2 to 3 years. That would be where I'd leave that question. Thank you.

Yes. We feel very good about Crisco relative to where we built our model and we built the M&A case. Input costs are up. This is an area where they are higher than some of the other categories, but pricing is also up and also higher than where it is in some of the other categories. We feel very good about where the top line trends are going really like the category. Feel really good about just the overall consumer trends for things involved in baking. It's very strategic for us. It complements things like the molasses businesses and the Clabber Girl that we bought back in 2019. So happy with the acquisition. Would have preferred input costs to become favorable to us rather than go up. But it's also a category where us and our competitors kind of like most of the things across the board are taking price to reflect the change in input costs.

And my last question is, if you assume that the hedges roll off, have your business -- will your margins will be restored to the 18 to 15 -- 18% to 18.5% margins with all the pricing actions that you're doing and then the capacity coming online? And thinking about obviously the capacity constraints, the vegetable crop coming in. So if you kind of fast forward and say, hey, everything stays still from here. But time just goes by, would you say that, that 18% to 18.5% margin is in doable after…

Yes, you'd have to tell me what input costs are going to be a year from now, and then what price...

No, if everything was just stable, if everything just stopped. Time will stop. Like so the price inflation stopped, your hedges rolled off and you got the capacity restored from the vegetable crop. And you just kind of went forward from here. Would you have restored all the actions and everything, would you have been…

Again, if prices stayed permanently up at the levels where they are, I think you'll see people take list price up more.

But look, philosophically, our philosophy is that we will price to recover higher costs with the help of some productivity efforts to help us maintain margins and profitability. That is our philosophy, and that's what will drive. And it's a matter of what time period you want to talk about and the lag effect of being able to implement those things. But yes, we are going to price and cost save to make sure that we maintain margins, if that's what you're asking.

I appreciate it. Thank you, guys, very much.

Your next question will come from the line of Eric Larson with Seaport Research Group. Please go ahead.

Yes. Thank you, everyone. I also pass on my welcome to you, Casey, and good luck.

Thank you.

So I know that we've -- this whole thing has been beaten already to death. But given -- on the last call, I think one of the very few last comments that Dave Wenner made was that the cost inflation was rampant and it was getting worse. That's kind of how he left it. And are you - have you seen your costs - have you seen the cost side kind of starting to flatten out? Or is it still rising? And does that mean that you have to go back to your customers and take another bite at the apple at pricing? I'm curious as to the -- what the second and third derivative is on your input costs price increases or cost increases.

Yes, I'd say, look, we have taken pricing actions this year, including some recent pricing actions to make sure that we're pricing against the environment that we see for the next months. I would tell you that we're now in really analyzing what do we think cost will look like on certain key commodities next year. And do we need to be prepared for additional pricing and watching that. So it's a moving game. In some categories, you've seen it, it's gone up a lot, but it's starting to stabilize. In other categories, I'm still -- we're still seeing some increases that are being projected into the early part of next year. But we watch this pretty carefully, and we will plan. And I think we'll have to make some decisions about where our costs are, input cost inflation are relative to the pricing we have out there and do we need additional pricing actions, given what we see as justifiable input cost increases. And that's -- and as Bruce said, that's kind of a moving target. We can't really say what that looks like in 2022 next year, although I will tell you that I don't think inflation is transitory. Right now, I think we're going to be looking at inflation in some areas for more than just the next 6 months, we'll be looking at some inflation impact next year. But that's part of what we do to manage the pricing and look at that and we already have kind of plans in place to say how would we execute if we needed to based on input costs. Hopefully, that helps a little bit. Yes.

Okay, thanks.

Hopefully, that helps a little bit. Yes.

Yes. No, it does. Last follow-up here. Given all the weird volume movements COVID related from last year, where obviously the industry is down a lot because of tough comps, et cetera. Can you attribute any of that to price elasticity yet? Is it too early on some of the products? I mean, it's probably pretty hard to actually analyze if there's any negative elasticity at this point, but I'd be curious on your thoughts on that.

I think the easy answer, and it's probably not a full answer, but the easy answer is we have taken price, and we're relatively happy with where our sales are coming out so far this year. And so jury is still out because we're only 6, 7 months into the year. But so far, sales trends are bold enough to kind of where we talked about when we started to think about 2021, even if you went back to the end of 2020. We are trending at that mid, maybe a little bit better than mid-single digits higher than 2019.

Got it. Fair enough. Thank you.

Honestly, the place we're going to look at elasticity, the most is Crisco because that's where the magnitude of the input costs and the magnitude of pricing is the highest. And that really hasn't rolled into the market yet. So in Q3 and Q4, we'll have a better read on that. But that's - if you ask me personally, which one am I watching pretty close, it's that one. I mean I'm tracking that almost weekly to see what's happening. And as Bruce said, so far, we have not seen any real elasticity from the pricing that we've already taken that's been implemented in kind of late May, June is when we saw the first wave of things coming in.

Got it. Thank you, Casey, appreciate the color. Thanks.

Thanks, Eric,

And there are no further questions at this time. I'd like to turn the conference back over to management for any additional or closing remarks.

I think we'll just go ahead and close, but this is Casey. I want to say thank you for joining today, and thank you for all the great questions. And I look forward to talking to you more about what I'm seeing and where do we want to go in the future. And as I said, I think there'll be plenty of opportunities to around the November call and maybe even other times thoughts around that, that we can have those conversations. So thank you very much.

Ladies and gentlemen, this does conclude today's call. Thank you for your participation, and you may now disconnect your lines.+