Hain Celestial pursues ‘bold transformation’ focused on snacks, food for kids & beverages

The plan, unveiled in September during the company’s investor day, “represents a material transformation of our P&L, influencing our pipeline growth and driving margin improvement,” with a long-term goal of at least 3% organic net sales growth compound annual growth rate through fiscal 2027 and at least a low double-digit EBTDA CAGR and low double-digit EBITDA margin in the same period, CEO Wendy Davidson said during the company’s first quarter earnings call yesterday.

To get there, the company will scaffold its business around four strategic pillars – focus, grow, build and fuel.

‘Early momentum’ on Hain Reimagined may not always be ‘clearly visible’​

Boldly characterizing the plan as a “commitment” and not an “aspiration,” Davidson said Hain Celestial is “already seeing encouraging early momentum from our Hain Reimagined strategy.”

But, she added, that momentum may not be as obvious to those outside of the company as to those inside.

“It is important to note that some of the bright spots in our growth may not be as clearly visible to you if you only view US syndicated consumption data,” she said. “As a reminder, approximately 40% of our business is in International and in North America, 35% to 40% of our business is in unmeasured channels.”

She added that “as we lean into our channel expansion strategy” under the grow pillar “this will become more pronounced.”

For example, she noted, “in better-for-you snacks, our non-measured snack sales were up 18% in dollars in the 12 weeks ending Oct. 8, led by Garden Veggie,” which the company is driving “primarily through strength in club as well as in e-commerce and away-from-home,” including incremental gains in travel and convenience stores as well as at colleges and universities.

Likewise, Davidson said, in better-for-you baby & kids, Earth’s Best grew 12% in dollars in the last 12 weeks, excluding formula, supported by strong retailer partnerships and share gains in baby food and purees. Innovation in snacks and our investment in the brand building campaign Good food Made Fun are helping drive Earth’s Best snacks up low single digits in dollars and a 20% expansion in total distribution points.”

In beverage, Celestial Seasonings bagged tea grew 1.3% in dollars in the last 12 weeks, with both dollar and unit velocity pacing the of the category and gaining share in herbal and wellness, Davidson said, attributing the gains in part to the company’s recently launched “Magic in You Mug” campaign.

Within better-for-you meal prep, the company’s private label business is seeing “strong growth within discounters” and internationally “as the consumer responds to the macro environment,” said Davidson.

Also notable are market share gains of the company’s meat-free brands. Yves brand in Canada was up 270 basis points in fresh and 70 basis points in frozen in the last 12 weeks, and in the UK the company’s Linda McCartney brand saw velocities increase 20% in frozen in the last 12 weeks with distribution also up 12%.

Drop in sales, gross margins, adjusted EBITDA expected​

Despite these “bright spots,” the company’s overall net sales fell 3.3% to $425m compared to the prior year period and gross margins and adjusted EBITDA also fell in the firm’s first quarter.

Total organic net sales dropped 2.9% over the same period last year, led primarily by a 9.3% drop in North America that offset a 9.3% gain in International, according to the company. Gross profit margin was 19.7%, a 170-basis point decrease from last year, and the adjusted EBITDA came in at $24.1m compared to $36m in the prior year period.

The drop was in line with the company’s expectations, which when combined with the “promising start” to Hain Reimagined gave the company confidence to reaffirm its expectations that organic net sales for the fiscal year will increase 2% to 4% over the prior year and adjusted EBITDA will be between $155m and $165m.