Herbal tea, cold-pressed juice, Greek-style yogurt, organic
chips, almond milk.
If you've purchased these kinds of health-oriented products,
there's a good chance at least some of them come from one
company:Hain Celestial Group (
Hain sells hundreds of natural and organic products under
brands such as Celestial Seasonings, Terra, Garden of Eatin',
Health Valley, WestSoy and Earth's Best.
And that's just a starter list.
"They probably have the best and broadest exposure to the
natural foods industry in all channels of distribution," said
analyst Scott Van Winkle of Canaccord Genuity.
It's a good place to be these days. Organic and natural foods
are growing at a blended rate of at least 11% a year, Van Winkle
says. Conventional food is growing in the low single digits at
Hain has logged double-digit sales and profit gains every
quarter for more than three years. During its fiscal third
quarter, which ended March 31, revenue grew 22% from the prior
year to a record $557.4 million. Earnings also rose 22%, to 88
cents per share.
A Natural Choice
"(Hain) is a very good play on the core growth of natural and
organic foods," Van Winkle said.
Major customers includeWal-Mart (
) as well asUnited Natural Foods (
), a distributor that sells toWhole Foods Market (
) and other outlets.
Hain also sells to traditional grocery chains such asKroger (
),Safeway (SWY), Wegmans and Publix.
Thanks to health and dietary concerns, the kind of natural and
organic foods and personal-care products Hain sells have been
gaining shelf space in traditional grocery channels.
"That is where the growth is coming from," Irwin Simon, Hain's
chief executive, said in an interview. "We've seen the shift in
the last couple of years."
He says about 60% of Hain's U.S. sales come from traditional
Rivals run the gamut from large packaged foods companies such
asKraft (KRFT) andGeneral Mills (GIS) to small organic-food
players such asAnnie's (BNNY).
"Given that Hain has such broad exposure, it has hundreds of
competitors," Van Winkle said.
Meanwhile, the company's sales outside the U.S. have been
increasing. They represented 42.7% of the total during the fiscal
third quarter, up from 17.9% in 2011.
The U.K. is still Hain's biggest overseas market, with 32% of
Q3 revenue. Hain's product mix in Britain includes a larger mix
of mainstream grocery items than in the U.S., such as jams,
peanut butter and desserts.
To feed consumers' hankering for organic and natural foods in
the U.S. and elsewhere, Hain keeps rolling out new products and
adding new brands through acquisitions.
Last year it launched 125 new products, Simon says, though it
discontinued some others. New products rolled out this year
ranged from snacks, soups and shakes to gluten-free pasta and
It's also been a big year for acquisitions, continuing a
strategy Simon began in 1993 after he acquired struggling Hain
Pure Food from Pet Inc.
Simon says his strategy has always been to "buy brands started
by someone else," and then "figure out how to grow them from
In January, Hain spent $357 million to buy Tilda Ltd., a
premium Basmati and specialty-rice company based in the UK, with
sales in more than 40 countries.
Also this year, Hain acquired Rudi's Organic Bakery, which
makes a popular organic bread. And last week Hain bought the
remaining 51.3% interest it didn't already own in antibiotic-free
and organic poultry brands FreeBird chicken and Plainville Farms
Organic baby foods company Ella's Kitchen Group was added last
year, expanding Hain's large reach into the baby market, where
Earth's Best sells everything from infant formula to diapers.
In December 2012, Hain bought cold-pressed juice business
BluePrint Cleanse, putting Hain in a market that is "very on
trend," Van Winkle said.
Even old trends still have juice. For example, the Celestial
Seasonings tea brand contributes only 6% to 7% of overall sales
but produces margins that are "quite good," Piper Jaffray analyst
Sean Naughton noted in a report earlier this month.
In addition, he says, tea comes with "steady profitability"
and cash flow that can be invested in other areas of the
As calming as tea is for Hain, Wal-Mart's expanded rollout of
organic products through the Wild Oats brand may cause some
stress among organic-food players.
"With Wal-Mart launching Wild Oats at lower prices, our
concern is that it could put downward price pressure on the
organic category," said John Baumgartner, analyst with Wells
Since Hain has such a diversified product mix in organic
products, it might feel the price pinch more than other companies
with a narrower focus, he says.
Even so, Naughton views the Wild Oats threat as "largely
immaterial" to Hain, based not on pricing pressures but on the
fact that Hain and Wild Oats directly compete on only a small
percentage of products.
Assuming 20% to 30% cannibalization in affected categories, he
figured "a modest" headwind to Hain's revenue growth over the
next 12 months.
Another potential risk comes from United Natural Foods, which
looks to improve inventory turns by buying fewer units from
suppliers. Hain is "navigating the headwind by better product
sales in other channels," Naughton said. However, United
Natural's inventory-reduction program took away "some upside" to
his revenue estimates for Hain.
Analysts polled by Thomson Reuters estimate Hain will post
earnings of $3.16 a share for all of fiscal 2014, up 25% from
last year. Revenue is expected to rise 24% to $2.15 billion.