Non-G.M.O., gluten-free guide innovation at Hain Celestial

by Monica Watrous
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LAKE SUCCESS, N.Y. – Gluten-free chicken nuggets, organic simmer sauce and relaxation tea are among 100 new products to be launched this year from The Hain Celestial Group, Inc.

The company’s innovation efforts focus largely on organic and non-bioengineered ingredients.

“If we were just a traditional specialty food company and not buying genetically modified-free ingredients today, we would have about $100 million of savings just on cost of goods,” said Irwin Simon, president, chief executive officer and chairman, during a Feb. 4 earnings call with analysts. “But that’s not what we are, and that’s not what we do. And as one of the largest purveyors of organic ingredients and non-G.M.O., and we put some great products out there, that’s why Hain has the product, the brands and the reputation it has.”

Hain Celestial’s portfolio includes more than 2,000 certified organic products and more than 500 verified non-G.M.O. products.

Slated for a 2014 debut are Terra Tropical Blend chips made with coconut and plantains, Earth’s Best gluten-free chicken nuggets, Imagine organic simmer sauce and Spectrum Essentials Warrior Vitality Blend, which includes chia seeds, maca powder and cacao. In beverages, Celestial Seasonings is expanding with a Reflections tea line that promotes daytime relaxation, and the BluePrint juice brand, which Hain Celestial acquired at the end of 2012, is launching a one-day cleanse product.

“… we are seeing our innovation positively impact our consumption growth across all channels, not just the natural channel,” said John Carroll, executive vice-president and chief executive officer of Hain Celestial US. “More and more conventional retailers, leading conventional retailers, are recognizing the importance of innovation in driving organic and natural sales and are increasing their speed to shelf on our new products.”

For example, the Ella’s Kitchen brand of organic baby food, which Hain Celestial bought last May, has gained distribution in Wal-Mart stores, and BluePrint continues expanding into test markets at leading grocery stores across the country.

“And both businesses have accelerated development of their innovation queue and implemented productivity measures,” Mr. Carroll said. “So, we are very pleased with the performance of our BluePrint and Ella’s Kitchen lines, and we expect that we will set up well with them for the second half.”

U.S. sales contributed $328 million to Hain Celestial’s largest quarter in company history with more than $500 million in net sales. The quarter also marked the 12th consecutive quarter of double-digit sales and adjusted earnings growth.

For the second quarter ended Dec. 31, 2013, net income increased 30% to $41,231,000, equal to 84c per share on the common stock, up from $31,622,000, or 69c per share, during the prior-year period.

Net sales for the quarter climbed nearly 18% to $534,879,000 from $455,319,000 last year.

For 2014, Hain Celestial expects to generate a total net sales range of $2.115 billion to $2.145 billion, an increase of approximately 22% to 24%, as well as an increase of 21% to 25% in earnings, driven by strong consumption trends, distribution gains, productivity savings from plant efficiencies, innovation and recent acquisition performance.

However, commodity headwinds continue to pressure the company, which said it will increase pricing for some of its almond and dairy products.

“I am sure we will see pricing actions across the industry based on the California drought, and to the extent it is applicable, almond and dairy costs,” Mr. Carroll said. “And, look, we have taken pricing before when the commodities have driven it and will do it again, and we will execute it as we have in the past.”

Digital technology represents an engine of growth for Hain Celestial, which said it is looking for opportunities to sell its products through social media and e-commerce.

“Of the top 12 Hain Celestial brands in the U.S., we show a reach of 65 million impressions in just January,” Mr. Simon said. “We touch 9 million to 12 million parents a month on our Earth’s Best and Ella’s web site and view this to be a tremendous asset to sell products and educate parents about our brands.”

The strategy aligns with Hain Celestial’s long-term goal to expand its reach across all channels.

“As I have said before, wherever food is sold, wherever there is a cash register, I would love to see at least one Hain product, at least, but I know we are going to see a lot more,” Mr. Simon said. “From airports to college campuses to food service and beyond, in restaurants like Panera, Chipotle and others, we are looking to improve our distribution and have Hain products out there.”
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