PURCHASE, N.Y. — The Hain Celestial Group reported record sales in the recent quarter, despite overall weakness in the natural channel, where many of its products are sold. Executives said the company has evolved over the years to expand such brands as BluePrint juice, Greek Gods yogurt and Garden of Eatin’ snack chips beyond natural foods stores to wherever consumers choose to shop.
“Look, the slowdown in the natural channel would make us nervous if we didn’t see it offset elsewhere in the business, in conventional, specifically,” said John Carroll, executive vice-president and chief executive officer, Hain Celestial North America, during an Aug. 18 earnings call. “So, as we look at this and we continue to see good growth both for the category and ourselves in the conventional channel, we’re still very comfortable with our category.
“In terms of the dynamics, when we start to work with more conventional customers, the key dynamic is that you’re, in many instances, dealing directly with a direct-ship customer, and as a result, your programming and your pricing ends up being better than it would be, in instances where you would previously have gone through a distributor. Because it’s the same cost, just with going to a direct customer, you actually can invest those costs directly against price and programming. So ultimately, that should lead to faster turn of our products in the conventional channel, which will ultimately help us as long as the category continues to grow overall, lead to good strong growth for ourselves.”
The company expressed confidence in a comeback for the natural channel, if such stalwarts as Whole Foods Market and Sprouts learn to adapt to the growing competition from conventional retailers.
“Among natural, there’s 467 Whole Foods out there, and there’s 180 Sprouts, and they continue to open up stores,” said Irwin Simon, founder, president and chief executive officer of the Hain Celestial Group. “So between the two of them, they will continue, and I think they will right-size the numbers and get pricing right, and we’ll continue to see growth absolutely rebound in both Whole Foods and Sprouts, and I feel comfortable saying that.”
Meanwhile, Hain Celestial continues to expand its distribution in mass market retailers, traditional supermarkets and food service outlets. Mr. Simon said the company has a diversified customer base, with its largest customer accounting for 13% of total sales.
“While our brands used to be primarily in the natural channel, today you can also find organic/natural products in grocery, mass, clubs, specialty retailers, on e-commerce sites, Q.S.R., sports stadiums like City Field and Madison Square Gardens, just to name a few, within food service,” Mr. Simon said. “Wherever there’s a cash register, we can sell Hain product to today, and as we look to grow up and down the street… we look to grow more and more food service.”
Hain Celestial’s BluePrint juice brand recently gained distribution in all of Panera Bread’s U.S. locations, he said.
“We sell a lot of chicken and turkey today to a lot of retailers with a seven-day shelf life on it,” he added, “so we’re set up for it, and we’re ready to sell a lot more.”
In the year ahead, Hain said it is working to improve some of its offerings in the natural channel, including Imagine soups, Dream plant-based beverages and MaraNatha nut butters, which were recalled last year following a Salmonella scare.
“Those are three key brands that we’re putting quite a bit of effort against, and we think that we can dictate our own fortunes in the natural channel by investing in those businesses and driving increased consumption against what I’d argue is probably a low base in that channel,” Mr. Carroll said.
Innovation is integral to Hain’s strategy in the natural channel. Each year the company unveils scores of new products at Natural Products Expo West in Anaheim, Calif.“We look to introduce them into the natural channel first because that’s where… our consumers shop, so innovation is key there, also,” Mr. Simon said. “We look at, what do we do with certain brands that are focused on just natural channels? We have 50-plus brands today, and that’s where the opportunities are, what brands do we bring that are exclusive, just to the natural channel?”