Hain Celestial moving into the mainstream

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Distribution gains in mainstream retailers helped propel Hain Celestial to a record year.

LAKE SUCCESS, N.Y. — After capping a record sales year, the Hain Celestial Group, Inc. has three reasons to expect further growth in fiscal 2015.

First, the company has noted an improvement in its tea business after weak performance last year.

“Celestial tea did not have a strong tea season last year in the mass channel, and we are already seeing our mass turnaround,” said John Carroll, executive vice-president and chief executive officer of Hain Celestial U.S., during an Aug. 20 earnings call with financial analysts. “Our Wal-Mart growth numbers are very, very strong on Celestial tea. So we expect that will be a big play for us in terms of driving growth.”

Second, the company expects accelerated growth for its Earth’s Best brand since moving from the natural section of Kroger stores to the mainline, a “strong play” for Hain.

Third, the company’s snacks business is “on fire,” with retail consumption up 30% and 25% for Garden of Eatin’ and Terra, respectively.

“And we’ve got some great go-forward drivers on that in terms of increased distribution growth,” Mr. Carroll said. “For example, Sensible Portions is now available in the top three grocery chains: Safeway, Publix and Kroger, whereas a year ago, we weren’t in any of those guys. Terra is seeing nice gains in distribution at Wal-Mart and Publix. Garden of Eatin’ has picked up an everyday slot at Sam’s and three new (stock-keeping units) at Publix. So … we think we are pretty well-positioned to continue to drive strong organic growth despite going at some very strong comps.”

Acquisitions represent another important growth driver for Hain, which during the fiscal year purchased Tilda rice and Rudi’s Organic Bakery, in addition to buying out its Hain Pure Protein business. Looking ahead, the company sees opportunities in several categories.

“I still continue to see the fresh category in many, many ways where there is good opportunity for growth as Hain moves away from the center of the store more and more into fresh, and today whether it is our yogurts, our meat-free; I think there is still a big opportunity in meat-free and how we expand upon that,” said Irwin Simon, founder, president, chief executive officer and chairman. “I think there are so many more opportunities in the yogurt category, which we will continue to expand with Greek Gods and we’ve done with our non-dairy business, taking it into non-dairy.”

And then, there are opportunities to expand geographically. The Tilda purchase positions Hain to grow the brand in North America while also launching Hain products in international markets.

“Tilda will get us into the Middle East with Hain products, will get us into India, but Tilda was very small in North America,” Mr. Simon said.

Another avenue for acquisitions exists in food service. In July, Hain paid $40 million for the remaining shares of Hain Pure Protein Corp., an antibiotic-free and organic poultry company with a full range of fresh and frozen products in the United States. The transaction opens more doors for Hain in the food service channel.

“Whether it’s Panera, Chop’t, Chipotle, they will sell a lot of our products, and the same with Hain Pure Protein,” Mr. Simon said. “We are seeing a lot of acquisitions, smaller companies that could be in the $7 million to $20 million range and you put them through the Hain infrastructure, they could be $100 million brands.”

Hain also is focused on recovering some of its smaller, flat and declining brands.

“Whether it is Breadshop, whether it is Nile Spice, how we grow our DeBoles business,” Mr. Simon said. “There is a portfolio of brands within Hain that we should be focusing on and growing those. If you are asking me if there is a $1 billion acquisition out there to do, the answer is no. And I think what smaller companies are seeing is being out there by yourself to grow today is very, very difficult.”

Net income for the fiscal year ended June 30 was $139,851,000, equal to $2.86 per share on the common stock, up from $114,656,000, or $2.48 per share, in the same period a year ago.

Sales for the year rose 24% to $2,153,611,000.
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