Hain Celestial: Snacks, Tea Fuel a ‘Tremendous Year’ and Q4

Natural and organic products maker Hain Celestial increased net sales 1% to $512 million in Q4, the company announced today in its fourth quarter and 2020 earnings report, after Q3 marked the first time the brand saw gains since 2018.

The New York-based company’s net sales declined 2% for the year while adjusted net sales grew 3% due to foreign exchange, divestitures, discontinued brands and SKU rationalization. Its North American net sales for Q4 grew 5% year-over-year, reaching $299 million, with the company reporting steady U.S. consumption growth since February. Net income for the year was $25.6 million, following a net loss of $53.4 million last year.

The company, whose portfolio includes snack brands Garden of Eatin’, Sensible Portions and yogurt brand Greek Gods, has in recent years focused on cutting underperforming brands. In August 2019, Hain sold premium rice brand Tilda for $342 million, followed by the May 2020 sale of gluten-free and organic brand Rudi’s Bakery. In further cost-cutting measures, president and CEO Mark Schiller noted that Hain sold or discontinued organic and gluten-free pasta brand DeBole’s and juice brand BluePrint during the fourth quarter.

“We continue to have success selling or exiting small and non-strategic brands that consume a disproportionate share of management time and add supply chain complexity,” Schiller told investors. “Without them, we can redeploy and focus our resources on bigger growth opportunities which will further strengthen our results.”

Still, Schiller said, the company would consider future acquisitions if the “right one” presents itself.

According to Schiller, the pandemic drove an additional $20 million in revenue, mostly in the third quarter, along with a 10% year-over-year increase in household penetration and an 18.6% rise in repeat buyers during Q4. In particular, tea, snacks and yogurt fueled growth as consumers stayed home: tea brand Celestial Seasonings grew 30% in the past five months and snack brand Sensible Portions grew by double digits during the quarter. Additionally, Greek Gods led the category in velocity during the quarter, according to Schiller, who noted the brand’s keto-friendly yogurts are driving trial. Still, baby food brands such as Earth’s Best Organic saw sales slow as more parents prepared fresh foods at home, Schiller said.

Despite the increased demand, the company has managed its supply chain smoothly, he added, helping win “brownie points” with retailers who struggled with out-of-stocks from other producers. Hain, which has long had a deep relationship with natural channel retailers, has seen its retailer relationships “dramatically improve” in the last 18 months, Schiller noted. In addition, e-commerce now comprises 10% of the business, fueled by Walmart, Target, Kroger and Amazon sales as well as recent uptick in Instacart purchases.

It’s also pushing ahead with its innovation and marketing plans, with upcoming launches including a new line of 14 functional Celestial Seasonings teas and new snacks from natural chip brands Garden of Eatin’ and Terra. It will also launch new snacks for babies, which have a higher margin than the pouches that largely comprise Hain’s baby food offerings. The focus on natural and organic brands will also be an advantage moving forward.

“We have complete confidence in things we can control,” Schiller said. “Being at the core of health and wellness, I think we’re very well-positioned for this pandemic relative to other people that we compete against.”