Hain Celestial’s 3.0 strategy is stuck in 2.5

LAKE SUCCESS, NY. — Inflation, ingredient shortages, supply chain disruptions and a slowdown in key plant-based categories have prevented Hain Celestial Group from fully transitioning to the Hain 3.0 strategy that was unveiled in September 2021. Key elements of the plan included divesting the business of personal care and focusing on such growth categories as snacks, dairy alternatives and meat alternatives.

A little less than a year later, the personal care business remains, the meat alternatives category has slowed and inflationary pressures in Europe have narrowed the outlook for Hain Celestial’s dairy alternatives business, most of which are private labels.

“We will definitely continue to reshape our portfolio as we mentioned at the investor day last year,” Mark L. Schiller, president and chief executive officer, said during an Aug. 25 conference call to discuss fiscal 2022 results. “And there active discussions on a variety of things within our portfolio. It’s a bit difficult for buyers to get financing right now, but there is certainly interest in some of the tail brands that we wanted to sell.

“In terms of the plant base, look, it’s been a very volatile two years with COVID and now the recession, and, so, what we’re doing is a lot of analysis around, are these changes permanent or are these changes temporary? “

During the third quarter of fiscal 2022, Hain Celestial said it had lost a plant-based milk co-production contract. During the fourth quarter, European net sales fell 25%, driven by the loss of the contract and overall softness in the non-dairy beverage category.

“The category had grown at a high average rate for the first three quarters of the year and fell quite significantly in the fourth quarter,” Mr. Schiller said. “So we think part of it is a function of the recession. We don’t think this is a long-term change in the trajectory of the category.”

Regarding meat alternatives, Mr. Schiller added, “plant-based protein has been soft for a while, and that’s something we’re evaluating in terms of its importance to our portfolio and whether this remains a turbocharged brand for us.”

During fiscal 2022, ended June 30, Hain Celestial earned $77.9 million, or 84¢ per share in common stock, up slightly from fiscal 2021 when the company earned $77.4 million, or 77¢ per share.

Full-year sales were $1.89 billion, up from $1.97 billion a year earlier.

During the fourth quarter, Hain’s net income was $3 million, or 3¢ per share, down sharply from last year when the company earned $40.5 million, or 41¢ per share.

Quarterly sales were $457 million, up slightly from $451 million in the same period a year ago.

Hain Celestial’s North American business unit sales rose 5% to $1.16 billion for the year. Adjusted operating income from the segment fell 28% to $103 million. Inflation, supply chain disruptions and a $10 million reduction to eliminate several unprofitable brands and stock-holding units were cited as reasons for the decline.

International business unit sales fell 16% to $729 million. Adjusted segment operating income was $81.7 million, down 21% from a year ago. The decline was due to lower gross profit as a result of lower sales, as well as higher energy and supply chain costs, compared to last year.

Looking ahead to fiscal 2023, Mr. Schiller expressed optimism about Hain Celestial’s prospects.

“While the environment is clearly volatile and unprecedented, we believe we are well positioned for a successful year,” he said. “Here are some of the reasons why. First, we have strong top-line momentum and brand strength in North America, which we expect to continue. Second, our innovation is working well, helping us further expand our distribution and shelf share.

“Thirdly, we have successfully obtained significant pricing in the first quarter in the United States and the UK, which should allow our prices to catch up with inflation as the year progresses. Fourth, we are making solid progress in signing new contracts to replace the lost volume of non-dairy beverages in Europe. And finally, our productivity pipeline is full.”

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