Just eight months into her role as CEO of Hain Celestial, Wendy Davidson provides a candid evaluation of the market’s perception of her health-focused food and beverage company: it needs to demonstrate its value. For years, Hain, known for products like Terra chips and its signature teas, has been streamlining and refocusing its once extensive portfolio. This restructuring was soon overshadowed by the Covid-19 pandemic, a surge in inflation, and a significant decline in demand for plant-based meat alternatives. These obstacles led to a prolonged disruption for the 30-year-old company, all while competition in the health-conscious sector grew fiercer.
Despite these challenges, Davidson, a seasoned consumer packaged goods (CPG) professional with a background at Kellogg, McCormick & Co., and Tyson Foods, believes that Hain is “at an inflection point” where it can “unlock the potential of this company” by investing in brand awareness and expanding the markets for its healthier offerings. “We must prove that we can grow and build brands, and we must show that we can navigate external macroeconomic factors and take control of our fate,” Davidson stated in an interview. She noted that both consumers and retailers appreciate Hain’s “purpose-driven brands” and want the company to thrive, but there is a shared sentiment that they have not met their own expectations regarding the potential of their portfolio.
In the fiscal year 2023, Hain reported a 2.7% decline in net sales to $1.8 billion compared to the prior year, after adjusting for foreign exchange, acquisitions, divestitures, and brand discontinuations. The company continues to grapple with margin pressures, has posted five consecutive quarters of losses, and its stock price is hovering near a 13-year low. However, there are emerging signs of optimism. Last week, Hain forecasted a return to sales growth ranging from 2% to 4% for its fiscal 2024. Davidson highlighted growth and market share increases in Celestial Seasonings teas and Greek Gods yogurt, along with strong sales in the Garden Veggie snack line. Additionally, recent marketing investments in several core brands have enhanced their sales, distribution, and consumer awareness.
Hain is beginning to broaden the distribution of its products beyond major retail chains and health-focused retailers, catering to an increasing number of consumers seeking convenient, healthier options. The potential is immense; while Hain estimates around 25,000 points of distribution in retail stores, there are over 2 million opportunities in colleges, hospitals, airports, hotels, convenience stores, and other venues. Davidson noted that only about 1% to 2% of Hain’s sales currently come from these so-called away-from-home channels. Even though these locations generally yield lower dollar sales, they provide greater exposure for brands and tend to have higher profit margins due to consumers’ willingness to pay for convenience.
In recent months, Hain has secured “substantial gains in distribution” for its snack brands in convenience stores and has increased visibility on college campuses and in airports. In convenience stores, Hain sees these early “proof points” as valuable opportunities to gather sales data, comparing its brands to similar products nearby or those previously on the shelf. In most instances, Hain has reported higher sales rates, which can help attract additional business.
While these away-from-home channels “are not yet driving a meaningful material impact to the company,” Davidson indicated, “you will see us heavily invest in this area, especially over the next few years. Capturing a fair share of that distribution could be highly beneficial for the company.” Analysts acknowledge that Davidson faces a challenging yet feasible path ahead in her efforts to boost sales at Hain. John Baumgartner, managing director and senior consumer equity research analyst at Mizuho Americas, commented that the natural and organic sector has evolved significantly since Hain was the undisputed leader 15 years ago. He pointed out that competitors like General Mills, Kraft Heinz, and Campbell Soup have launched their own products and improved the labels on existing offerings. These alternatives often attract consumers looking for healthier options at lower prices than Hain’s products.
Baumgartner described Hain as “a show-me story,” particularly regarding its strategy to expand distribution into other channels where healthier products are already available. “These are not untapped markets; you will need to displace existing products, which will require significant investment due to competitors’ greater resources,” he said. “It remains to be seen how effective [Davidson’s] strategy will be.” Davidson expressed confidence in the brands and markets she has inherited and plans to prioritize innovation, marketing, and expanding their reach. In addition to North America, Hain has a significant presence in Europe, which accounts for about 45% of its sales.
Nonetheless, Davidson mentioned she could foresee some restructuring within certain categories through acquisitions or divestitures. Analysts and former executives have identified Hain’s personal care segment, which includes cleansers, shampoos, sunscreens, and lotions, as a plausible candidate for sale, potentially providing funds to reduce debt and reinvest in the core business. Personal care, contributing roughly 8% of Hain’s sales, has faced challenges, but Davidson is cautious about divesting a struggling segment, as it might not yield a favorable return. Instead, she is assessing the portfolio’s future at Hain and recently appointed a new executive in February to stabilize the business.
“We feel confident about the categories we’re in and the brands we currently offer. I want to ensure each reaches its full potential before we decide whether they are best suited to grow under our umbrella or thrive elsewhere,” she concluded. Meanwhile, Hain’s commitment to health and wellness products, such as its 21st century calcium citrate maximum D3 400 tablets, remains steadfast as it navigates its path forward.