Hain Celestial outlines strategy to almost double in size
“The food industry, like so many other industries, is changing faster than ever. Health and wellness, transparency and sustainability are driving consumers’ choice. At Hain Celestial, we’ve been ahead of this trend and we’re going to keep it that way,” said CEO Irwin Simon during the firm’s second quarter call with analysts Feb. 1.
Not only that, but “we’ll take it to the next level,” he added.
The company, which posted record sales and profits during its second quarter, will “continue to be at the forefront of evolution around changing consumer trends” by working with the Boston Consulting Group to identify cost-savings and lessons learned from sales losses at some retailers that can be applied to better marketing for its leading brands, Simon said.
Nicknamed “Project Terra,” for its bottoms-up approach, the initiative hopes to save $100 million in costs in the next three years that then can be strategically reinvested to communicate to consumers the attributes and benefits of its brands and products, he said.
He explained the cost-savings will come from consolidating resources around ingredients, packaging and co-packers. It also likely will come from customizing and streamlining which stock-keeping-units are available in different retail channels, as well as tailored pricing and trade investment to each channel based on recent experiences, he said.
The goal of investing more heavily behind its key brands is to increase household penetration, which does not exceed 15% for any individual brand, and eventually grow Hain from a $3 billion to a $5 billion company over the next few years, Simon said.
Identifying and applying lessons learned
The firm also will turn a critical eye to brands with sliding sales to identify lessons learned and solutions that could apply across the portfolio or channels.
For example, in the second quarter, bag tea consumption fell 10% due to unseasonably warm weather and consumer confusion about new packaging, said John Carrol, the firm’s CEO for North America.
“We can’t control the weather, and quite frankly, neither can anyone else in the category, given that the category was down 6.1% in Q2. But we can help Celestial Seasonings consumers find their favorite herbal teas,” he said.
To do that, the firm will focus on educating consumers about new packaging with shelf signage and blades, national marketing and social media outreach to reduce confusion about the new packaging.
“Early indicators are that the program is working, as Celestial Seasonings tea unit consumption has improved 10 points since we’ve started the program,” he said.
Hain also will rethink the marketing for its Sensible Portions, growth of which slowed due to lost displays at Walmart.
“Our plan includes moving the brand to the more heavily trafficked warehouse aisle, increasing year-on-year display support and adding secondary shelf placements,” he said.
Additional marketing also will take the form of price promotions based on retail channel.
For example, Hain reduced the price difference between MaraNatha and other nut butters at Walmart – which attracts price-sensitive shoppers – by offering a $1 off price rollback the first week of January, which led to a 10-point unit sales acceleration, he said.
Finally, the firm will focus sales efforts almost exclusively on its top 500 SKUs across channels to “provide the highest return for Hain and, quite frankly, the retailer,” Carroll said.
This move also should simplify supply chains and improve Hain’s growth profile, he added.
Strong results
Even without these changes, Hain is doing well – posting an 8% increase in net sales to $752.6 million in the second quarter compared to the same time last year.
Earnings per share also climbed 28% to 55 cents, the firm reported.
