Hain Celestial: Rudi’s will be ‘next $100 million brand’

by Monica Watrous    View Me on Google+
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LAKE SUCCESS, N.Y. — On the heels of a record sales quarter, the Hain Celestial Group, Inc. remains confident in continued growth from recent strategic acquisitions. The company sees big promise in its April purchase of Rudi’s Organic Bakery, a manufacturer of organic and gluten-free grain based foods, which it bought for “a great price” at $61.3 million from a private equity firm.

“We believe Rudi’s Organic Bakery will be Hain Celestial’s next $100 million brand,” said John Carroll, executive vice-president and chief executive officer of Hain Celestial U.S., during a May 8 call with analysts to discuss third-quarter results. “Rudi’s is growing strongly in both the organic and gluten-free segments. They have a tremendous innovation queue in place, and we believe the brand is extendable beyond bread and baked goods.”

Hain said the brand fits the company’s key acquisition criteria; Rudi’s is a leader in the natural channel with presence in high-growth categories of whole grains, organic and gluten free. The brand also offers significant distribution whitespace opportunities and synergy savings. Rudi’s is located in Boulder, Colo., where Hain operates its Celestial Seasonings business.

Hain plans to leverage Rudi’s position in the organic segment. The company said Rudi’s growth of organic products is in the low double digits, while growth of the brand’s gluten-free products is about twice as high.

“The significant part of that business right now is in organic, and we don’t feel like there has been enough attention paid to really keep leveraging the leadership position they have in organic,” Mr. Carroll said. “While you know as well as I do that everybody wants more gluten-free. So we think that it is actually going to be an opportunity to drive organics, particularly in natural, and gluten-free everywhere else.”

Also driving Hain’s confidence are the acquisitions of BluePrint in 2012 and Ella’s Kitchen last year. The company said it expects additional integration opportunities from the two brands to continue into next year.

“We have owned BluePrint for over a year and doubled the business,” Mr. Carroll said. “Our Ella’s Kitchen AOC consumption is up more than 40%, and both businesses are delivering against our target for expanded distribution, increased consumption, accelerated innovation, productivity, and S.G.&A. synergies. We believe there are still more opportunities to drive against all these levers for these acquisitions while continuing to integrate the businesses further into our S.G.&A. platform for S.G.&A. synergies.”

Hain generated its largest sales quarter in the company’s 20-year history and 13th consecutive quarter of double-digit sales growth. For the third quarter ended March 31, Hain Celestial earned $35,241,000, equal to 71c per share on the common stock, down more than 13% from $40,715,000, or 88c per share, in the year-ago period. Earnings in the comparable quarter included a one-time tax benefit.

Net sales reached a record $557,420,000, up 22% from $456,087,000. Hain Celestial U.S. sales increased 15% to $319,417,000.

Also during the quarter, Hain closed on its acquisition of Tilda, a global rice brand, introduced more than 100 new products at Natural Products Expo West in Anaheim, Calif., in March, delivered productivity savings to help manage rising key commodities, and completed the divestiture of the Grains Noirs business and other discontinued products in Europe.
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