ITEM 1.    BUSINESS

Overview

        We manufacture, sell and distribute a diverse portfolio of high quality, shelf-stable foods, many of which have leading retail market shares in our relevant markets. In general, we position our retail products to appeal to the consumer desiring a high quality and reasonably priced branded product. In our relevant retail markets, 11 of our branded products hold number one or two retail market share nationally or regionally or are unique products. We complement our retail product sales with a growing institutional and food service business. Our fiscal year is the 52 or 53 week reporting period ending on the Saturday closest to December 31. Our fiscal 2003 ended on January 3, 2004. Over the past five years, we have achieved consistent growth in net sales and EBITDA. In fiscal 2003, our net sales and EBITDA were $328.4 million and $61.9 million, having increased at compound annual growth rates since fiscal 2001 of 8.3% and 6.9%, respectively. Our results over the past five years were achieved through a combination of internal growth plus the addition of eight brands through acquisitions and one brand through a long-term license agreement, our most recent of which was the acquisition of the Ortega line of branded Mexican food products in August 2003. During the three months ended January 3, 2004, which includes the results of the Ortega line of products after the completion of the integration of the acquired assets into our existing business, our net sales, EBITDA and EBITDA margin were $101.2 million, $19.2 million and 19.0%, respectively, compared to net sales, EBITDA and EBITDA margin of $78.7 million, $13.4 million and 17.0% respectively, for the comparable period in the prior year. We use the terms "EBITDA" and "EBITDA margin" which are not indicators of performance or other measures determined in accordance with Generally Accepted Accounting Principles in the United States (GAAP) and are fully discussed under Item 7—"Management's Discussion and Analysis of Financial Condition and Results of Operations."

        We were acquired by Bruckmann, Rosser, Sherrill & Co., L.P. (BRS) in December 1996 from Specialty Foods Corporation, which is not our affiliate. We are wholly owned by B&G Foods Holdings Corp. (B&G Holdings), which in turn is owned by BRS and its affiliates, and members of the Company's management and Board of Directors. See Item 11—"Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters." We maintain our corporate headquarters at Four Gatehall Drive, Suite 110, Parsippany, New Jersey 07054.

        On June 17, 1997, we acquired certain assets relating to the Regina wine vinegars and cooking wines, Wright's liquid smoke hickory flavoring, Brer Rabbit molasses and Vermont Maid syrup brands, including trademarks, inventory and certain equipment used to bottle the Regina wine vinegars and cooking wines, from Nabisco, Inc., which is not our affiliate.

        On August 15, 1997, through a subsidiary, we acquired from E. Mcllhenny's Son Corporation all of the outstanding capital stock of JEM Brands, Inc., the holding company of Trappey's Fine Foods, Inc.

        On July 17, 1998, through a subsidiary, we acquired all of the outstanding capital stock of Maple Grove Farms of Vermont, Inc. and related entities from certain individual investors. The Maple Grove acquisition included the Maple Grove Farms of Vermont and Up Country Naturals labels of pure maple syrup.

        On February 5, 1999, we acquired certain assets of the Polaner and related brands from International Home Foods, Inc. (IHF) and M. Polaner, Inc. Prior to the consummation of the Polaner acquisition, we had been the exclusive manufacturer, or "co-packer," of the Polaner products for IHF, and had distributed the Polaner products regionally under co-packing and distribution contracts that were terminated upon consummation of the Polaner acquisition.

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        On March 15, 1999, through a subsidiary, we acquired the assets of The Heritage Portfolio of Brands from The Pillsbury Company, Indivined B.V. and IC Acquisition Corp. The Heritage Portfolio of Brands includes Underwood meat spreads, B&M baked beans, Ac'cent flavor enhancer, Sa-son Ac'cent flavor enhancer, Las Palmas Mexican sauces and food products and Joan of Arc dry bean products businesses.

        On June 8, 2000, we entered into an agreement with Emeril's Food of Love Productions, LLC (EFLP) pursuant to which we and EFLP agreed to create a signature line of dry grocery products which are marketed under the label Emeril's .

        On January 17, 2001, we completed the sale of our wholly owned subsidiary, Burns & Ricker, Inc., to Nonni's Food Company, Inc. pursuant to a stock purchase agreement of the same date under which we sold all of the issued and outstanding capital stock of Burns & Ricker to Nonni's.

        On August 21, 2003, we acquired certain assets of The Ortega Brand of Business (Ortega) from Nestlé Prepared Foods Company. The Ortega product line includes salsas, peppers, taco sauces, taco kits, Mexican spices and taco shells.

Financial Information

        The consolidated balance sheets at January 3, 2004 and December 28, 2002 and the consolidated statements of operations, stockholder's equity and cash flows for the years ended January 3, 2004, December 28, 2002 and December 29, 2001 and related notes thereto set forth our revenues from external customers, profit (or loss) and total assets. See Item 8—"Financial Statements and Supplementary Data."

Products and Markets

        The following is a brief description of our brands and product lines:

        The Ortega brand has been in existence since 1897 and its products span the shelf-stable Mexican food segment including taco shells, seasonings, dinner kits, taco sauce, peppers, refried beans, salsa and related food products. Ortega products are distributed nationally. Ortega has the leading market share nationally in taco sauce.

        The Maple Grove Farms of Vermont brand is the number two brand of pure maple syrup in the United States. Other products under the Maple Grove Farms of Vermont label include a line of gourmet salad dressings, marinades, fruit syrups, confections and pancake mixes. Maple Grove Farms of Vermont products are distributed nationwide.

        The Bloch & Guggenheimer brand originated in 1889, and its pickle, pepper/pimentos and relish products are the leading brand in the New York metropolitan area. This line consists of shelf-stable pickles, relishes, peppers, olives and other related specialty items.

        The Polaner brand was introduced in 1880 and is comprised of a broad array of fruit-based spreads as well as jarred or bottled wet spices such as chopped garlic and basil. Polaner All Fruit is the leading national brand of fruit-juice sweetened fruit spread. The spreads are available in more than a dozen flavors. Recently, we introduced Polaner Reduced Sugar and Polaner No Sugar Fruit Spreads in Polaner's key markets.

        The Emeril's brand was introduced in September of 2000 under a licensing agreement with celebrity chef Emeril Lagasse. We offer a line of seasonings, salad dressings, marinades, pepper sauces,

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barbecue sauces and pasta sauces under the Emeril's brand name. In addition, we recently introduced mustards and sauces under the Emeril's brand name. Sales of Emeril's products for fiscal year 2003 were $25.4 million.

        The B&M brand was introduced in 1927 and is the original brand of brick-oven baked beans. The B&M line includes a variety of baked beans and brown bread. The B&M brand currently has the leading market share in the New England region.

        The Underwood brand's " Underwood Devil " (logo) is among the oldest registered trademarks for a prepackaged food product in the United States. We market meat spreads of several types, including deviled ham, chicken and roast beef as well as liver pate and sardines under the Underwood brand name. We believe that no competitors offer a directly comparable product to our meat spreads.

        The Las Palmas brand originated in 1922 and primarily includes authentic Mexican enchilada sauce and various pepper products. The Las Palmas brand is the number two brand of enchilada sauce in the United States.

        The Ac'cent brand was introduced in 1947 as an all-natural flavor enhancer for meat preparation and is generally used on beef, poultry, fish and vegetables. We believe that Ac'cent is positioned as a unique flavor enhancer.

        The Trappey's brand includes two major categories of products under the brand, high quality peppers and hot sauces.

        The Regina brand includes vinegars and cooking wines. Vinegars and cooking wines are most commonly used in the preparation of salad dressings as well as in a variety of recipe applications, including sauces, marinades and soups. Regina brand wine vinegar is the number two selling wine vinegar in supermarkets nationwide.

        The Joan of Arc brand includes a full range of canned beans including kidney, chili and other beans under the Joan of Arc brand. Joan of Arc products are sold nationally with significant sales in the Midwest region.

        The Wright's brand was introduced in 1895 and is an all-natural seasoning that reproduces the flavor and aroma of pit smoking in meats, chicken and fish. Wright's is the number two brand in the United States and is offered in two flavors: Hickory and Mesquite.

        The Sa-són brand was introduced in 1947 as a flavor enhancer used primarily for Puerto Rican and Hispanic food preparation. The product is generally used on beef, poultry, fish and vegetables. The brand is the number three flavor enhancer in Puerto Rico as of 2002, the latest year for which we have data available. The brand's flavor enhancer is offered in four flavors: Original, Coriander and Achiote, Garlic and Onion, and Tomato.

        The Brer Rabbit brand currently offers mild and full-flavored molasses products and a black strap molasses product. Mild molasses is designed for table use and full-flavored molasses is typically used in baking, barbeque sauces and as a breakfast syrup. The Brer Rabbit brand currently holds the number two market share in the United States.

        The Vermont Maid brand has been in existence since 1919 and we offer maple-flavored syrup under the brand name. Vermont Maid syrup is available in regular, lite and butter lite varieties. Vermont Maid is mainly distributed in New England.

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        We sell and distribute our products through a multiple-channel sales and distribution system including the following:

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sales and shipments to supermarket warehouses;



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sales and shipments to distributors and food service accounts;



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sales and shipments to mass merchants, warehouse clubs and other non-food outlets;



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sales and shipments to specialty food distributors;



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direct-store-organization sales and shipments on a regional basis to individual grocery stores in the greater New York Metropolitan area; and



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sales and shipments through export, catalogs and the Internet.

        We believe our presence in these channels allows us to distribute additional product volume cost-effectively. We sell our brands primarily through broker sales networks to supermarket chains, food service outlets, mass merchants, warehouse clubs, non-food outlets and specialty food distributors. Our broker sales network handles the sale of our products at the customer level. Our sales managers supervise our broker activities as well as support our relationship with buyers from our key accounts. We distribute our products in the greater New York metropolitan area primarily through our direct-store-organization sales and distribution system, which we refer to as our DSO system. Our DSO system supports an organization of sales personnel who directly service over 2,000 individual grocery stores.

Processed Food Industry

        The processed food industry is one of the United States' largest industries. Due to its maturity, it is characterized by relatively stable sales growth, based on modest price and population increases. Over the last several years, the industry has experienced consolidation as competitors have shed non-core business lines and made strategic acquisitions to complement category positions, maximize economies of scale in raw material sourcing, production and distribution. A series of large mergers over the last twenty years has led to the formation of a few, very large companies with a presence in a variety of branded product categories.

        Retailers are demanding higher margins, while at the same time reducing inventory levels and increasing their emphasis on private label products in certain categories. The importance of sustaining strong relationships with retailers has become a critical success factor for food companies and is driving many initiatives such as category management and efficient customer response. These two initiatives focus on retailers' need to minimize inventory investment and maximize dollar sales for allocated store shelf space. Food companies with category leadership positions, value-added distribution and strong retail relationships have increasingly benefited from these initiatives as a way to maintain shelf space and maximize distribution efficiencies. In addition, the specialty foods, mass merchandiser, food service and private label markets and channels provide additional opportunities of growth for food companies.

Sales, Marketing, and Distribution

        Sales.     Our sales organization is aligned by distribution channels and consists of 87 employees, 22 regional sales managers and key account managers. Regional sales managers sell our products nationwide through national and regional food brokers, with separate organizations focusing on specialty, food service, grocery chain accounts and special markets. Our sales managers coordinate our

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broker sales efforts and make key account calls with buyers or distributors and supervise retail coverage of the products at the store level through brokers.

        Our sales strategy is centered around the individual brands. We set quotas for our sales force and allocate promotional spending for each of the brands. Regional sales managers coordinate promotions with customers. Additionally, our marketing department works in conjunction with the sales department to coordinate special account activities and marketing support, such as couponing and public relations.

        Over the past several years, we established a national sales force that is capable of supporting our current business as well as potential new acquisitions. We have primarily developed our national sales force internally, and did not integrate sales and marketing personnel from acquired companies in connection with most of our brand acquisitions. In the case of the Maple Grove Farms of Vermont acquisition, management retained the brand's sales force to serve the specialty channel related to that brand and for future specialty-oriented brands that we might develop, license or acquire in the future. This same sales force subsequently launched the Emeril's brand. The current national sales force is very experienced and was able to integrate Ortega within 30 days following the close of the acquisition.

        Our DSO sales force consists of seven managers and 32 sales representatives that work with individual stores in the New York metropolitan area. These sales representatives visit the 2,000 stores within the DSO area on a weekly or bi-weekly basis.

        Marketing.     Our marketing organization is aligned by brand and is responsible for the strategic planning for each of our brands. We focus on deploying promotional dollars where the spending will have the greatest impact. Marketing and trade spending support, on a national basis, typically consists of advertising trade promotions, coupons and cross-promotions with supporting products. Marketing support for the products distributed through the DSO system consists primarily of trade promotions aimed at gaining display activity to produce impulse sales. Consumer promotion and coupons supplement this activity. Our trade spending has remained stable as a percent of sales throughout fiscal 2002 and fiscal 2003, countering industry trends. Our rigorous in-house system tracks spending through the planning and execution phases and is used as a check on customer invoicing and deductions, as well. This system has allowed us to address rapidly any unauthorized deductions, improving the chance of recovering funds.

        Distribution.     We distribute our products through a multiple-channel system that we have developed as we have grown our business. The system operates primarily from three major distribution centers, which ship approximately 72% of orders on a full truckload basis via common carriers. We believe our distribution system has sufficient capacity to accommodate incremental product volume in a cost-effective manner, as demonstrated recently in the Ortega acquisition.

Customers

        Our top ten customers accounted for approximately 37% of our fiscal 2003 pro forma net sales, as if our acqusition of Ortega had occured as of December 29, 2002, and no single customer accounted for more than 6.1% of our fiscal 2003 pro forma net sales.

Seasonality

        Sales of a number of our products tend to be seasonal. In the aggregate, however, our sales are not heavily weighted to any particular quarter due to the diversity of our product and brand portfolio.

        We purchase most of the produce used to make our shelf-stable pickles, relishes, peppers and other related specialty items during the months of July through October, and we purchase all of our maple syrup requirements during the months of April through July. Consequently, our liquidity needs are greatest during these periods.

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Competition

        We face competition in each of our product lines. Numerous brands and products compete for shelf space and sales, with competition based primarily on product quality, convenience, price, trade promotion, consumer promotion, brand recognition and loyalty, customer service, advertising and other activities and the ability to identify and satisfy emerging consumer preferences. We compete with numerous companies of varying sizes, including divisions or subsidiaries of larger companies. Many of these competitors have multiple product lines, substantially greater financial and other resources available to them and may have lower fixed costs and/or be substantially less leveraged than we. Our ability to grow our business could be impacted by the relative effectiveness of, and competitive response to, our product initiatives, product innovation, advertising and promotional activities. In addition, from time to time, we experience margin pressure in certain markets as a result of competitors' pricing practices.

        Our most significant competitors for our pickles and peppers products are Vlasic® and Mt. Olive® branded products. In addition, J.M. Smucker is the main competitor for our fruit spread products marketed under the Polaner label. The Maple Grove Farms of Vermont pure maple syrup competes directly with the SpringTree™ brand in the pure maple syrup category. Our Vermont Maid syrup products also have a number of competitors in the general pancake syrup market, including Aunt Jemima® , Mrs. Buttersworth™ and Log Cabin® . The B&M Baked Bean and Joan of Arc products compete with Bush's® brand products. Ortega products compete with the Old El Paso® and Taco Bell® brands.

        In addition, our products compete not only against other brands in their respective product categories, but also against products in similar or related product categories. For example, our shelf-stable pickles compete not only with other brands of shelf-stable pickles, but also with products found in the refrigerated sections of grocery stores, and all our brands compete against private label store brands to varying degrees.

Inflation

        We do not believe that our operating results have been materially affected by inflation during the preceding three years. There can be no assurance, however, that our operating results will not be affected by inflation in the future.

Raw Materials

        We purchase agricultural products and other raw materials from a variety of suppliers, including growers, commodity processors and other food companies. Our principal raw materials include peppers, cucumbers, other vegetables, fruits, maple syrup, meat and poultry. We purchase our agricultural raw materials in bulk or pursuant to short-term supply contracts. We purchase most of our agricultural products between July 1 and October 31. We also use packaging materials, particularly glass jars and cans.

        The profitability of our business relies in part on the prices of raw materials, which can fluctuate due to a number of factors, including changes in crop size, national, state and local government-sponsored agricultural programs, export demand, natural disasters, weather conditions during the growing and harvesting seasons, general growing conditions and the effect of insects, plant diseases and fungi. Although we enter into advance commodities purchase agreements from time to time, we are still exposed to potential increases in raw material costs. Moreover, due to the competitive environment in which we operate, we may be unable to increase the prices of our products to offset any increase in the cost of raw materials. As a result, any such increase could have a material adverse effect on our profitability, financial condition, results of operations or liquidity.

Trademarks and Licensing Agreements

        We own 122 trademarks that are registered in the United States and 241 trademarks that are registered in foreign countries. In addition, we have nine trademark applications pending in the United

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States and foreign countries. Examples of our trademarks and registered trademarks include Ac'cent , B&G , B&G Sandwich Toppers , B&M , Bloch & Guggenheimer , Brer Rabbit , Cozy Cottage, Joan of Arc , Las Palmas, Maple Grove Farms of Vermont , Ortega, Polaner , Regina , Sa-són , Trappey's , Underwood , Vermont Maid and Wright's . We consider our trademarks to be of special significance in our business. We are not aware of any circumstances that would negatively impact our trademarks. Our senior secured credit facility is secured by substantially all of our assets, including our rights to our intellectual property.

        In June 2000 we entered into a license agreement with Emeril's Food of Love Productions, L.L.C. (EFLP). This license agreement grants us an exclusive license to use the intellectual property owned by EFLP relating to Mr. Lagasse, including the name "Emeril Lagasse" and pictures, photographs and other personality material, in connection with the manufacturing, marketing and distribution of dry seasoning, liquid seasoning, condiments, sauces, dressings and certain other products through retail channels in the United States, the Caribbean and Canada. We also have the right of first negotiation with respect to other shelf-stable grocery products. Under the license agreement, EFLP owns all of the recipes that it provides to us and all of our Emeril's brand products and related marketing materials are subject to the prior approval of EFLP, which approval may not be unreasonably withheld. In addition, we are prohibited from entering into similar arrangements with other chefs or celebrities in connection with any of the products covered by our agreement with EFLP.

        The license agreement has been extended through June 2005 and is subject to extension and renewal at our option for an indefinite period if we meet specified annual net sales results. Among other things, we are obligated to introduce and market new products in each year of the license agreement and to pay EFLP royalties based on annual net sales of our Emeril's brand products. The license agreement may be terminated by EFLP if we are in breach or default of any of our material obligations thereunder. We have also agreed to indemnify EFLP with respect to claims under the license agreement, including claims relating to any alleged unauthorized use of any mark, personality or recipe by us in connection with the products in the Emeril's line of products.

Employees and Labor Relations

        As of January 3, 2004, our workforce consisted of 774 employees. Of that total, 529 employees were engaged in manufacturing, 97 were engaged in marketing and sales, 115 were engaged in distribution and 33 were engaged in administration. Approximately 289 of our 774 employees, as of January 3, 2004, were covered by collective bargaining agreements. In general, we consider our employee and union relations to be good.

Government Regulation

        Our operations are subject to extensive regulation by the United States Food and Drug Administration, the United States Department of Agriculture and other federal, state and local authorities regarding the processing, packaging, storage, distribution and labeling of our products. Our processing facilities and products are subject to periodic inspection by federal, state and local authorities. We believe that we are currently in substantial compliance with all material governmental laws and regulations and maintain all material permits and licenses relating to our operations. Nevertheless, there can be no assurance that we are in full compliance with all such laws and regulations or that we will be able to comply with any future laws and regulations in a cost-effective manner. Failure by us to comply with applicable laws and regulations could subject us to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, all of which could have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity.

        We are also subject to the Food, Drug and Cosmetic Act and the regulations promulgated thereunder by the FDA. This comprehensive regulatory program governs, among other things, the manufacturing, composition and ingredients, labeling, packaging and safety of food. For example, the FDA regulates manufacturing practices for foods through its current "good manufacturing practices"

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regulations and specifies the recipes for certain foods. In addition, the Nutrition Labeling and Education Act of 1990 prescribes the format and content of certain information required to appear on the labels of food products. We are subject to regulation by certain other governmental agencies, including the U.S. Department of Agriculture. Our management believes that our facilities and practices are sufficient to maintain compliance with applicable governmental regulations, although there can be no assurances in this regard.

        We are also subject to the U.S. Bio-Terrorism Act of 2002 which imposes on us new import and export regulations. Under the Act, among other things, we are required to provide specific information about the food products we ship into the U.S. and to register our manufacturing facilities with the FDA.

Environmental Matters

        Except as described below, we have not made any material expenditures during the last three fiscal years in order to comply with environmental laws or regulations. Based on our experience to date, we believe that the future cost of compliance with existing environmental laws and regulations (and liability for known environmental conditions) will not have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity, except as noted below. However, we cannot predict what environmental or health and safety legislation or regulations will be enacted in the future or how existing or future laws or regulations will be enforced, administered or interpreted, nor can we predict the amount of future expenditures that may be required in order to comply with such environmental or health and safety laws or regulations or to respond to such environmental claims.

        On January 17, 2001, we became aware that fuel oil from our underground storage tank at our Roseland, New Jersey facility had been released into the ground and into a brook adjacent to such property. Since January 17, 2001, together with our environmental services firms, we have worked to clean-up the oil in cooperation with the New Jersey Department of Environmental Protection (NJDEP). After completion of the work we submitted our findings to the NJDEP along with recommendations for no further action. The NJDEP responded that additional investigation was required before it could agree to the no further action recommendations. The additional work has been conducted and we are awaiting the NJDEP's response. While the NJDEP could assert that more work is required, the cost of such work is not expected to have a material adverse effect on our business, consolidated financial condition, results of operations or liquidity.

        We recorded a charge of $1.1 million in the first quarter of fiscal 2001 to cover the expected cost of the clean-up, which approximates the actual amount spent as of December 29, 2001. In the third quarter of fiscal 2001, we received an insurance reimbursement of $0.2 million and accrued an additional $0.1 million for certain remaining miscellaneous expenses. Our management believes that substantially all estimated expenses relating to this matter have been incurred and paid as of January 3, 2004.

        In January 2002, we were named as a third-party defendant in an action regarding environmental liability under the Comprehensive Environmental Response, Compensation and Liability Act, or Superfund, for alleged disposal of waste by White Cap Preserves, an alleged predecessor of our company, at the Combe Fill South Landfill in New Jersey, a Superfund site. In February 2003, we paid $0.1 million in settlement of all asserted claims arising from this matter and in March 2003, a bar order was entered by the United States District Court for the District of New Jersey protecting us, subject to a limited re-opener clause, from any claims for contribution, natural resources damages and certain other claims related to the action until such time that the litigation is dismissed. The $0.1 million and a portion of the legal fees were reimbursed by the purchaser of White Cap Preserves pursuant to an indemnity wherein they acquired that liability.

        We are involved in various other claims and legal actions arising in the ordinary course of business. In the opinion of our management, the ultimate disposition of these other matters will not have a

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material adverse effect on our business, consolidated financial position, results of operations or liquidity.

        We are subject to environmental regulations in the normal course of business. Our management believes that the cost of compliance with such regulations will not have a material adverse effect on our business, consolidated financial position, results of operations or liquidity.