Small acquisitions = big business at Hain
Sept. 4, 2013
by Eric Schroeder
BOSTON — A lot has changed since Irwin Simon began attending the Barclays Back to School Conference 17 years ago.
“Back then, words like ‘organic,’ words like ‘gluten-free,’ ‘sodium levels,’ ‘hydrogenated oils,’ ‘high-fructose corn sweetener,’ ‘pesticides,’ were not on people’s minds, consumers’ minds,” Mr. Simon, chairman, president and chief executive officer of The Hain Celestial Group, told analysts attending the conference held Sept. 3 in Boston. “A lot of people didn’t know what a genetically modified ingredient is.”
Today, those words are top of mind with consumers. As a result, Hain, which has established itself as a leader in the natural and organic sector, has evolved over the past 20 years into a company that for the first time this year cracked Fortune’s 100 Fastest Growing Companies.
“We are No. 83, but we are in the top 100 and we have a lot of room to grow,” Mr. Simon said of the recognition that was bestowed on the Lake Success, N.Y.-based company in late August.
Mr. Simon pointed to scale, size and integration as key to driving Hain’s top-line growth. He described the company as “the category manager.”
“We walk in there with multiple categories, multiple products, multiple brands,” he said. “And the big thing is we can ship a product to everybody, so there is a lot of efficiencies and savings, and that is how we expand our margins.”
Acquisitions also are a key component to Hain’s success, particularly in the United States, where the company over the past year acquired two businesses: BluePrint and Ella’s Kitchen.
BluePrint makes juice that the company said is “a fresh, pressed raw and organic juice used both for cleansing and regular juice consumption.”
Ella’s Kitchen makes organic baby food with 80 products offered in the United Kingdom, the United States and Scandinavia. It is seen as a high-growth complement to Hain’s Earth’s Best business.
Both are examples of Hain’s strategy of looking at smaller scale transactions in the United States, a topic Mr. Simon expanded on at the Barclays conference.
“There was a time we looked at doing a billion-dollar deal, went down the path, never got across the finish line because we ended up through our diligence saying it is not the right deal for us,” he said. “It was good to see that we knew we could do a billion-dollar deal. So if the right deal is out there from a scale and size, we absolutely would. But come back where we have been successful.”
Instead, success has come from smaller transactions, such as Greek Gods, which was grown into a $100 million business from the $12 million business it was when Hain acquired it, and from Sensible Portions, which was $55 million when acquired but is well over $100 million today, Mr. Simon explained. He said the recently acquired BluePrint business fits the same mold, and has the potential to grow from a $20 million business into one that generates $100 million.
“We love finding businesses that are small, that put through our distribution,” he said.
He continued, “So we can find nice $25 million, $50 million businesses and grow it ourselves instead of going out there and acquiring something gigantic,” he said. “We like that.”