Hain Celestial seeks acquisitions to become a “bigger fish” in snacks, dairy and meat alternatives

The $259 million acquisition of the maker of ParmCrisps and Thinsters is how we roll on December 28 “fits perfectly”with “Hain 3.0,”which aims to become a “bigger fish”in the categories of better-for-you snacks, dairy alternatives and meat alternatives, Schiller said at ICR Strategic Communications & Advisory’s annual conference Jan. 10.

“ParmCrisps, in particular, fits that vision perfectly because it gives us another leg up on the stool in snacking. It’s a mid-teens growth business that will have mid-teens EBITDA margins next year once we get some of the synergies in place and we get a part of the prices, because they have not yet taken prices to cover inflation.Schiller said.

The brand also adds to the company’s existing portfolio, as it plays well as a snack mix in the high-protein, low-carb snack segments versus beef jerky and protein bars, but it also serves as a clean salad garnish, which opens up to multiple facets, consumers and usage occasions.

As enthusiastic as Schiller is about the addition of ParmCrisps and Thinsters, he has repeatedly pointed out that the company is aggressively pursuing additional opportunities in snacks in the United States and in non-dairy in Canada – noting that these are two “turbocharge” categories that are central to Hain 3.0.

Even though Hain has “a lot of firepower and a lot of capacity”For acquisitions, Schiller noted that the timing of future transactions is somewhat outside the company’s control given the broader macro climate, including supply chain and workforce challenges. work.

Innovation and expanded distribution will drive growth

Hain isn’t solely dependent on acquisitions to grow its business, according to Schiller. Rather, he’s also pushing forward innovation and expanded distribution, which he says are “inextricably linked” given the current environment.

He explained that during Hain’s “2.0” phase, it focused on supporting its retail partners by delivering orders on time and as complete as possible – even if that meant paying a premium for the source of the ingredients. or transportation.

“We prioritize service over cost, because as a challenger company, we don’t have brands worth billions. The retailer can live without some of our products. So we have to keep fighting for space and prove to them that we are hungry and that we want it and that we are reliable. And that has served us well in 2.0 in terms of rebuilding the company’s reputation. For us to be a growing company, we need to maintain these strong relationships. So it’s a short-term pressure on the P&L, but we’re feeling very, very optimistic in the medium to long term,”Schiller said.

He also noted that this strategy is paying off as retailers reached out to Hain to find additional products that could help fill shelf space when other brands and companies were unable to deliver full orders in time. timely due to external circumstances.

Schiller said he also thinks it would serve the company well when it launches new products because retailers will know they can rely on the company to provide sufficient supply in a timely manner.

In terms of new product development, Schiller noted that Hain has a “Really strong pipeline in tea, snacks and personal care and we have some great innovation in yogurt coming when the category resets in June and July.”

He added that depending on the innovation, he expects the company’s new products will also help Hain gain access to new accounts across all channels.

Through these two lenses of innovation and supporting retailers when needed, Schiller said he expects the company to see strong sales growth in the second half of the year, as that retailers reset categories and free up more space for Hain products as permanent features rather than fillers. Likewise, he said, retailers stocking Hain products have sold out and will soon need to restock.

More prizes on the way

While Hain has intentionally taken a hit to its margins to ensure a steady supply to its retail partners, Schiller acknowledged that the company will need to proceed with a second round of pricing in the coming months, but will focus on the brands and channels where it has yet to act to counter inflation.

“We’re now taking a second round of pricing to cover off-plan inflation…and it’ll hit in Q3 and Q4. But we’re trying to get it out on different brands and different channels,” he said.

For example, during the first round of price increases, the company avoided brands that were struggling to source supplies, but with those challenges now resolved, it is able to move forward, said Schiller.

“We try very hard to avoid taking second and third prizes on the same brands from the same customers and so far we’ve done a good job of that,”he said.

He added that where Hain has taken price, he has seen little to no decline in volume, as consumers seem willing to pay more for better-for-you products.

“Our consumption has increased by 11% overall in the last 12 weeks and we are taking market share in some categories more than others. You have brands like Sensible Portions which are up 45% compared to a year ago. one year and 65% compared to two years ago”,he noted, as an example.

Assignments are heavy

As Hain continues to grow its portfolio in areas where it looks most promising, it will also continue to divest from segments that are not core to its new strategy, Schiller said.

“We talked about personal care that might at some point be candidates for disposal,”and possibly a few brands in the UK, including its hot dessert business, that don’t fit well with the company’s new strategy, he explained.

Hain has already sold several brands that are not core to its new target areas, including its North American non-dairy beverage brands Dream and Westsoy, and its UK-based fruit business Orchard House.

“The good news is that all of these brands are profitable, so we’re not going to give them away. We want to make sure we’re getting fair value for them,”he added.

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