When a company cleans house, things tend to look worse before they get better — which was the sentiment expressed by Hain Celestial executives during the company’s quarterly earnings call with investors on Tuesday. The organic and natural products company reported a net loss of $69.9 million for the quarter.
The company, a leader in the natural food industry for the past 25 years, has fallen behind emerging competitors as organic food products have risen in popularity in recent years. In early efforts to better compete, Hain Celestial acquired numerous brands, but found itself overextended with less streamlined product offerings.
A recent refocusing on Hain Celestial’s best-selling products, while cutting underperforming SKUs, has given the executive team hope that the company can successfully pivot toward profitability. Still, the maker of Terra vegetable chips and Sensible Portions vegetable sticks noted that its Q3 earnings report in September will likely show further declines.
“These transformation efforts take time to show tangible results, but these initiatives are translating into improvements in our measured channel numbers,” said Gary Tickle, CEO of Hain Celestial North America. He cited the successful repackaging and reformatting by packaged tea maker Celestial Seasonings as an example of that kind of transformation. He continued: “This year, Celestial had a near record year in terms of its performance. So a dramatic turnaround and on a tight shelf set and a tighter SKU set. We are getting more productive with less SKUs and with better innovation.”
In 2016, Hain Celestial initiated an internal cost reduction and reorganization plan, referred to as Project Terra, which in part has resulted in higher marketing spending on brands like Earth’s Best baby food and Terra snacks, and a new range of product sizes and flavors to help boost sales. With these changes, Hain Celestial is already seeing distribution gains. Tickle said the company already confirmed 49,000 net new points of distribution for seven of its top brands across a broad range of retailers and channels. The additions are expected to have a positive impact on earnings in the second quarter of 2019.
Another win for the company, executives noted, is its settlement of a U.S. Securities and Exchange Commission (SEC) investigation into its financial reports, which does not include any financial penalties. As part of the restructuring, the conglomerate also recently divested its Hain Pure Protein line of organic poultry to free up more capital to put back into its core offerings.
In the name of change, Hain Celestial will also soon have a new leader at the helm. CEO and founder Irwin Simon announced in June that he would be stepping down. On the call, Simon mentioned that executives have been “highly pleased” with potential CEO candidates and that there would be an announcement regarding his successor “in the near future.”
“I am confident now it’s the right time for the next generation of leadership,” said Irwin, “and I firmly believe that some of our greatest opportunities definitely lie ahead.”