There are significant opportunities to grow the Rudi’s Organic Bakery brand, both through increasing distribution and taking it into new categories, says its new owner, Hain Celestial.
Speaking on the firm’s third quarter earnings call - just over a week after acquiring Rudi's in a $61.3m deal - Hain CEO Irwin Simon said: “We believe Rudi's Organic Bakery will be Hain Celestial's next $100m brand.”
He added: “Rudi's is growing strongly in both the organic and gluten-free segments. They have a tremendous innovation queue in place. And we believe the brand's extendable beyond bread and baked goods.
“We're also excited by the opportunities to grow Rudi's Organic Bakery across channels, as well as increase its profitability via productivity and SG&A [selling, general & administrative] synergies.”
Significant distribution white space opportunity
Rudi’s - which generated around $60m in sales in 2013, and produces around 60 products including USDA-certified organic, and GFCO-certified (gluten-free) products from its bakery in Boulder, Colorado - “fits all of our key acquisition criteria”, said Simon.
“First, we always look for a leading organic brand in the natural channel. Secondly, we look for brands that are in high-growth categories, and Rudi's is in a high-growth category: whole grains, organic and gluten-free bread and baked good sales are up double digits.
“We also look for brands with significant distribution white space opportunity, and Rudi's has that, as their top five SKUs average only 16% ACV in the AOC channel.
“We also look for businesses that have significant SG&A synergies savings available, as well as supply-chain productivity opportunities. Now remember, Rudi's is located in Boulder, CO. We already have a facility in Boulder with our Celestial seasonings business, so there's an opportunity for SG&A synergies there.”
As for productivity, he added, “Jim Meiers [Hain's chief supply chain officer] and his team have been at Rudi's Bakery all this week, identifying and prioritizing productivity opportunities.”
Mainstream retailers devoting more space to organic and natural
Most of the call, however, was devoted to growth opportunities for natural & organic products in mainstream grocery.
Said Simon: “More retailers like Kroger, like Publix... are, bringing more and more natural organic products within their stores…there's more space being dedicated.”
He added: “This year, there's $700bn of food sold. And why is consumption with a lot of the big CPG companies not growing? It's the consumer buying more and more natural organic products.”
In the third quarter, Hain Celestial U.S. sales were up 15% to $319.5m, while group revenues were up 22% to $557m, said John Carroll, CEO of Hain Celestial USA, who listed a series of distribution gains at Kroger, Publix, Sprouts, Target, Walmart and Whole Foods.
And recent acquisitions were performing extremely well, added Simon. “Now we've owned [premium juice cleanse brand] BluePrint for over a year and doubled the business. Our [organic baby food firm] Ella's Kitchen AOC [all outlets combined] consumption is up more than 40%.”