Speaking on the firm’s second quarter earnings call this week, CEO Irwin Simon noted that Hain’s US ecommerce net sales were now around $80m, and growing strongly, while he also saw “tremendous e-commerce opportunities for our Earth’s Best brand” in China, particularly in infant formula.
“Organic products have three times greater share of sales online than conventional products, and we continue to position Hain to win with our leading organic natural products,” said Simon.
“Any company, any retailer that is not moving to online or click and pick is going to fail…”
Hain Celestial North America CEO Gary Tickle said: “E-commerce is growing strongly for us with growth at around 40% in consumption sales and this is coming across a range of our key brands… Starting in mid-Q3, there will be expanded investment in the online channel with new dedicated programs and new methods of selling online. We have built strong growth plans on the back of this investment for late Q3 and into Q4.
“But, the biggest play for us is the investment and the structure we’re putting in for how we actually market online. It’s extremely important that when you’re online you have the right content, you have the right material, you have the right way of driving eyeballs to the product because being online is not enough, you’ve got to be online, present and available and also found by the consumer.
'I don’t know many people who buy products from an online site on page 50'
He added: “I don’t know many people who buy products from an online site on page 50. So, you can be online but you have to be consequentially online. So, a lot of the work that Julie [Julie Bowerman, Hain’s new SVP of digital engagement and ecommerce], is doing is getting the structure of our content right, making sure… that we have the right marketing vehicles behind it to drive the consumers to the products and then ultimately setting up a lot of the fulfillment work that we’re doing right now.
“So, we’ll have a different fulfillment model coming forward for Hain Celestial as well to help facilitate to make sure the product is available.”
Hain is currently focused on rationalizing a long tail of underperforming, lower-margin SKUs and focusing on its top 11 brands and top 500 SKUs, which deliver 95% of its sales, said Tickle.
“This focus will allow us to continue to drive cost and complexity out of our business... While the US growth rate will be impacted by this portfolio transition, the end result will be a higher quality, more profitable portfolio that will be better positioned to drive growth going forward."
Q2, 2018 results: Hain Celestial posted a 73% increase in net income to $47.1m on revenues up 4.8% to $775.2m in the second quarter, with sales increases in the UK, Canada, continental Europe, and Hain Pure Protein partially offset by a 3% decline in sales in the US.
Growth from the Tea, Pure Personal Care and Better-For-You Baby platforms including Celestial Seasonings, Terra, Garden of Eatin, Alba Botanica, Avalon Organics, Live Clean and Earth's Best brands was offset by declines from Sensible Portions, Spectrum and The Greek Gods brands in Better-For-You Snacking, Better-For-You Pantry and Fresh Living platforms, despite growth from MaraNatha and Arrowhead Mills.
During the earnings call, CEO Irwin Simon said Hain had received “a tremendous amount of interest" in its Pure Protein organic and antibiotic-free, fresh poultry business, which it aims to divest.
He added: "While we continue to believe this is a highly attractive business with very good growth potential... we have determined, it is not core to our go-forward strategy."
Challenges at Rudi’s, Spectrum, Sensible Portions
Drilling down to challenges with some key brands, Tickle said sales at Sensible Portions (veggie Straws, veggie chips) were down $6.5m year-on-year owing to supply issues related to a co-packer and the loss of distribution from “one large mass customer.
Coconut oil market down over past six months
Meanwhile, net sales at oils brand Spectrum were down around $2m year on year, “driven primarily by the category decline in coconut oil,” he said.
While the coconut oil category had notched up strong growth in recent years, he added, “That’s flipped over in the last six months in particular; it’s in something like a 23% decline. We are growing share in that business, which is great, but it’s not great when the category is not growing. So, that’s definitely dragging down the overall Spectrum number.”
Finally, net sales at Rudi’s Organic Bakery were down $2.8m year on year “as a result of lower velocities and some distribution losses,” he said.
Growth at Celestial Seasonings, MaraNatha, Earth's Best
On a more promising note, sales at Celestial Seasonings tea, Arrowhead Mills, and Avalon Organics grew in the double digits, while MaraNatha nut butters grew in the high single digits, Earth’s Best was up in the mid single digits, and Terra and Garden of Eatin’ net sales increased by low single digits.