“Channel agnostic” strategy helps Hain Celestial’s sales grow double-digits

By Elizabeth Crawford contact

- Last updated on GMT

“Channel agnostic” strategy helps Hain Celestial’s sales grow

Related tags: Organic food

Natural and organic food manufacturer Hain Celestial Group continued its five year streak of earning double-digit quarterly sales growth thanks in part to a “channel agnostic go-to-market strategy,” according to the firm’s president and CEO.

Zero-based budgeting, a string of strategic acquisitions and an extremely diverse portfolio also helped the New York-based company increase revenues 19.6% year over year to $698.1 million in the company’s fourth quarter of 2015, as well as boost profits to $71.1 million from $35.7 million in the same quarter last year, executives told analysts Aug. 18.

CEO Irwin Simon explained that Hain is taking advantage of increased consumer interest in natural and organic products by being a channel “disruptor”​ and ensuring that Hain products are sold “everywhere there is a cash register.”

He added: “While our brands used to be primarily in the natural channel, today you can also find organic, natural products in grocery, mass, club, specialty retailers on eCommerce sites, QSR and sports debuts, like City Field Madison Square Garden, just to name a few.”

Specifically, Hain expanded distribution in the fourth quarter at Whole Foods, Kroger, Meyer, Publix, Sprouts, Walmart, Target and in food service at Panera, which announced Aug. 18 that it would sell Hain’s BluePrint juices in all 1,900 of its stores, Simon said.

In addition, Albertsons, Safeway, Sam’s Club and others have announced increased focus on natural and organic products, all of which give Hain “lots of room for us to grow,”​ Simon said.

The expanded focus is well timed given the ongoing general slow-down in the natural and organic channel, which otherwise “would make us nervous if we didn’t see it offset elsewhere in the business in terms of in conventional especially,”​ added executive vice president and co-CEO John Carroll.

To fully exploit the opportunity in the conventional channel, Hain has established dedicated sales teams to the major players in the channel and build a distribution system to “service every grocery store in America, every mass market,”​ Simon said.

As a result, some of the conventional channel accounts are considering going direct with Hain, instead of through a distributor, which frees funds for Hain to invest in programming and promotions at the stores, Simon said.

Even though comparative stores sales in the natural channel is basically flat currently, Hain is not giving up on the channel, Carroll said.

“We think we can dictate our own fortunes in the natural channel by investing”​ in New Covent Garden soup, MaraNatha nut butters and Dream plant-based beverages, Carroll said.

Budgeting and acquisitions help Hain

Hain’s success also can be attributed to its zero-based budgeting approach and strategic acquisitions, the executives said.

In 2015, it closed deals to buy Hain Pure Protein, Empire Kosher and Live Clean Brand in personal care, all of which contributed to growth, but also helped Hain achieve cost-savings, the firm said.

“In the quarter, acquisitions contributed $130 million in sales, which includes $30 million of sales growth from the brands under our ownership,”​ Simon said.

Including synergistic cost-savings from these deals, Hain generated $55 million in cost-savings worldwide and anticipates an additional $60 million for productive cost-savings in fiscal 2016, he added.

Innovative launches and diversity stabilize growth

The other significant driver behind Hain’s success is its broad portfolio of new product launches, the executives touted.

In fiscal 2015, the company launched more than 200 stock-keeping unites globally, and more than 100 in the US, which drove $46.5 million in fiscal 2015 sales, Simon said.

“These SKUs include great new products, like Sensible Portions stackable chips, Earth’s Best Toddler Formula, BluePrint Organic and Raw Green Ginger 32 ounce juice, Alba Botanica Coconut body wash and Celestial Seasonings Caramel Apple Dream Tea,”​ Simon said.

He added the company will continue to launch new products in fiscal 2016, including Greek God Yogurt, TERRA fruit and veggie nut bars, Celestial Seasonings ready-to-drink and aseptic Chai Tea Latte, Rudi’s organic pumpkin bread and Sensible Portions bats and ghosts Halloween snacks.

Notably, no one brand represents more than 10% of Hain’s net sales, which means if something goes south with a brand, the impact on the overall firm will be limited.

The executives stressed they are optimistic about fiscal 2015 and expect earnings per share between $2.11-$2.26 on sales of $2.97 billion - $3.11 billion. This, however, is slightly lower than analyst expectations of $2.19 a share on sales of $2.98 billion.

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