LAKE SUCCESS, N.Y. — The Hain Celestial Group, Inc. is adapting its business model to compete more effectively against new players in the natural and organic category. In the recent quarter, the company reported record results; however, its sales in the United States declined due primarily to reductions in inventories at certain retailers.
“We appear to be at an inflection point in the natural and organic category with, among other things, more competition than ever before, be it traditional, natural and organic competitors, or deep-pocketed conventional C.P.G.-backed competitors, private-label or startups,” said John Carroll, executive vice-president and chief executive officer of Hain Celestial U.S., during a Feb. 1 earnings call with financial analysts. “And over here at Hain, we are changing and evolving our business model to address this changing market. Because we believe these changes spell tremendous opportunity for Hain Celestial U.S. We believe we have a portfolio of brands that is unsurpassed in the category. And we are well-positioned for today’s and tomorrow’s natural and organic consumer, the numbers of which are growing.”
For the second quarter ended Dec. 31, 2015, Hain had net income of $56,947,000, equal to 55c per share on the common stock, which was up 28% from income of $44,575,000, or 44c per share, for the prior-year period. Net sales advanced 8% to a record $752,589,000, which compared with year-ago sales of $696,383,000. Net sales included the unfavorable impact of foreign currency exchange.
Net sales for Hain’s U.S. business unit were $342,298,000, down 3.3% from prior-year sales of $353,969,000. The shortfall was attributed to several factors, including lost sales and inventory from distributor and account shifts, lost sales of nut butter following a recall last year, and lost display sales of Sensible Portions products at Wal-Mart following the retailer’s implementation of “a clean floor policy,” Mr. Carroll said.
Four brands in particular failed to perform to the company’s expectations during the quarter: Celestial Seasonings teas, Sensible Portions snacks, MaraNatha spreads, and Spectrum oils and condiments.
“We implemented an aggressive action plan on each of these brands, and we are already seeing results,” Mr. Carroll said.
Efforts include increased marketing and merchandising support, strategic price reductions, new product launches and product rationalizations. The company also has enlisted the help of a consulting group to identify cost savings opportunities so it may increase investment behind brand support and drive household penetration.
“We are implementing specific channel strategies, products, programs and, in some cases, dedicated brands, to meet our customers’ needs,” Mr. Carroll said.
Hain’s executives believe the company is naturally advantaged in the marketplace because it already has a portfolio to meet the growing demand for organic and non-G.M.O. products with simple ingredients. The challenge lies in how Hain sells and markets its products across categories and channels, said Irwin Simon, founder, president and chief executive officer.
|Simon, founder, president and c.e.o. of Hain Celstial|
“One size does not fit all,” Mr. Simon said. “We will continue to evolve our go-to-market strategy for our products with different classes of trade.”Net income for the first half of the fiscal year was $88,249,000, or 86c per share, up from $63,430,000, or 63c per share, the year before. Net sales increased to $1,439,777,000 from $1,327,640,000.