Cost savings measures continued to benefit The Hain Celestial Group, Inc. in the latest quarter, leading to results in line with expectations, said Irwin D. Simon, founder, president and chief executive officer.
Net income in the first quarter ended Sept. 30 was $19,846,000, equal to 19c per share on the common stock, up from $8,604,000, or 8c per share, in the year-ago period. Net sales totaled $708,276,000, up from $681,464,000.
Project Terra, the company’s global cost savings and productivity program, generated approximately $16 million in savings during the quarter from reduction in headcount, cost of goods sold, manufacturing and various operations, Mr. Simon said.
“As we move toward our (savings of) $100 million for the year, we used approximately $6 million to invest in brand marketing, mostly in the U.S., and $3 million to offset higher freight and commodity cost, with the balance falling to the bottom line,” Mr. Simon said during a Nov. 7 earnings call. “As in the past, our productivity savings are typically higher in the second half of the year based on actions we take in the first half.”
In the quarter, U.S. segment net sales grew 4% to $263,659,000, with double-digit increases from brands including Earth’s Best, Spectrum and Arrowhead Mills, which were partially offset by declines in The Greek Gods, Garden of Eatin’ and Celestial Seasonings.
Key corporate initiatives outlined last year include a focus on products and brands that represent more than 90% of the company’s business, stock-keeping unit (s.k.u.) rationalization and cost elimination through Project Terra.
“From a total consumption view, we have growth in our top 500 s.k.u.s, representing 93% of consumption dollars across all channels, while we have significant declines of over 30% for the remaining 7% of the portfolio or $28 million in consumption for the first quarter,” said Gary W. Tickle, c.e.o. of North America. “This represents around 1,500 s.k.u.s. We are thoroughly reviewing the role of these s.k.u.s across channels and platforms. Our clear goal is to unlock the significant potential of Hain U.S. and our core top 500 s.k.u.s and 11 priority brands while reducing cost and complexity. As the retail landscape is rapidly evolving, we’ll be mindful of the role some of these s.k.u.s may play in select channels, but not necessarily all channels.”
A “significant growth opportunity” for the company is e-commerce, where Mr. Simon said a larger percentage of natural and organic products are purchased compared with brick-and-mortar retail.
“Today, our on-line business is the fastest-growing channel with over 30% in Q1, and we’ve only just begun to exploit and invest in the unique ways in which the channel can accelerate our brand growth,” Mr. Tickle said. “Across all our strategic platforms, we’re seeing double-digit growth in the quarter, with several platforms above 40% in e-commerce.”
Another priority in the United States, Hain Celestial’s largest market, is working with retail customers to increase household penetration, Mr. Simon said. A particular focus is driving brand awareness and engaging consumers who are new to the natural and organic space.
“In the U.S., our brands reached 57.4 million (households) in the last 52 weeks, an increase of 1.3 million households versus a year ago,” Mr. Simon said. “Household penetration needs to increase to drive sales growth. Much of the growth we’re seeing from customers like Whole Foods, Amazon, Sprouts is the result of planning earlier in the calendar year, where our teams worked with our category management teams. And we’re seeing a core product assortment now being optimized on shelf, executed consistently across the store base. We believe that our brand investment should create even greater opportunities for our customers to drive sales of Hain Celestial products.”
By Monica Watrous
Source: Food Business News
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