LAKE SUCCESS, NY – A defining characteristic of The Hain Celestial Group, Inc. under the leadership of president and chief executive officer Mark L. Schiller is it is a smaller, more focused company. Since taking the helm in 2018, he has exited 23 brands with almost $1 billion in sales. Now he is transitioning the business into a global pure-play food company focused on health and wellness.

Achieving his goal will require divesting Hain’s personal care business and investing behind brands that deliver on management’s growth expectations, specifically in meat alternatives, dairy alternatives and snacks. Mr. Schiller called this next phase Hain 3.0 during a Sept. 28 virtual investor day with securities analysts.

“Hain 2.0 is the transformation from a holding company to an operating company by simplifying the business and setting the foundation for profit growth,” he said. “Now, Hain 3.0 … is about building a global healthy food and beverage company with industry-leading top-line growth.”

The personal care business is being separated from the company with the goal of transitioning Hain Celestial into a food company. Mr. Schiller did not provide a timeline for when the separation may occur.

“…Our personal care business is a great business with significant growth and profitability opportunities where we can create a lot more value,” Mr. Schiller said. “And as a result, we will selectively invest in personal care and continue to drive shareholder value and growth until these brands are worth more to someone else than they are to us.”

The reinvigoration of Hain Celestial began in North America with the shedding of non-core brands and assets, and that model has been used to improve business in Europe and other parts of the world.

“Hain 3.0 is about building a global healthy food and beverage company with industry-leading top-line growth.” – Mark Schiller, The Hain Celestial Group, Inc.

“We’ve adopted the North America playbook that’s also driven significant margin improvement in the international business,” Mr. Schiller said. “To date, we’ve consolidated three operating entities, sold four businesses and eliminated several hundred unproductive SKUs (stock-keeping units). We strengthened our capabilities by creating one supply chain organization under a newly hired seasoned leader adopting the North America productivity processes and finding global synergies.”

Hain 3.0 will require shifting management’s focus from rejuvenating North America to focusing on growing global brands, said Mr. Schiller. This will be accomplished by segmenting brands and investing behind those with the best growth potential. The company has created four brand categories and assigned brands to a category based on potential. The first, highest priority category, is what the company calls “turbocharge” brands and it includes meat and dairy alternatives as well as snacks sold under such brands as Linda McCartney’s, Yves Veggie Cuisine, Sensible Portions, Terra and Garden of Eatin’.

“In fiscal '21, they (turbocharge brands) were 40% of our total company sales, up from 28% in fiscal '19, and there were also 41% of our profits with strong high-teens profit margins,” Mr. Schiller said.

Wolfgang Goldenitsch, CEO of Hain Celestial Europe, said that combined the company’s meat-free and non-dairy brands have grown more than 18% over the past two years.

“Plant-based is one of the most dynamic areas in food today,” he said. “And even after years of strong growth, it still has huge potential as plant-based nutrition becomes more mainstream around the world.”

The second bucket is called “targeted investment” and includes the tea, baby food, yogurt and personal care businesses. Food brands in this category include Celestial Seasonings, Earth’s Best Organic, Ella’s Kitchen and Greek Gods.

“This category is made up of leading share brands in lower-growth categories,” Mr. Schiller said. “To date, we’ve demonstrated our ability to drive share and reinvigorate these categories and we expect that we can continue to do this in the future. These brands are 33% of our total sales, up from 28% in fiscal ‘19, and they delivered 37% of our profits with high-teens profit margins.”

The last two categories are being called “fuel for growth” and “simplify.” The fuel for growth category includes stable brands with mid-teens margins and simplify includes declining brands likely to be exited.

“(Fuel brands) fund our growth investments,” said Christopher J. Boever, chief commercial officer. “We have a terrific set of premium health and wellness pantry brands, like spectrum cooking oils, our three leading share soup brands in the UK and Maranatha almond butter that are well positioned to capitalize on the resurgence of in-home cooking.

“These brands have scale. They’re stable in sales with very strong margins. We are focused on continuing to expand those margins while maintaining sales with scrappy, relevant innovation, along with space expansion in core channels and customers.”

Mr. Boever did not identify which brands fall into the simplify category but iterated that management’s goal is to maximize their value and divest at some point.

Javier H. Idrovo, chief financial officer, said “turbocharge” brands are expected to be more than 50% of Hain Celestial’s sales and profits. “Fuel for growth” brands are expected to make up 16% of total sales and 13% of total profits.

Mergers and acquisitions also will be a part of the Hain 3.0 strategy.

“Our M&A will be focused on the growth brands, with particular emphasis on the ‘turbocharge’ segment with the aim of accelerating top-line and/or bottom-line performance,” Mr. Idrovo said.

Management expects Hain 3.0 will lead to 7% to 10% adjusted sales growth and 9% to 12% adjusted EBITDA growth by fiscal 2025.

“This is a significant acceleration in our top line, and we will take time and investment to deliver it,” Mr. Idrovo said.

In the year ended June 30, 2021, Hain Celestial net income was $77.4 million, equal to 77¢ per share on the common stock, a reversal from a loss of $80.4 million a year earlier. Net sales were $1.97 billion, down 4.1% from $2.05 billion.