Eight months into her role as CEO of Hain Celestial, Wendy Davidson candidly assesses the market’s expectations for her health-focused food and beverage company: it must demonstrate its value. For years, the producer of Terra chips and its signature teas, along with various organic and natural products, has been streamlining and refocusing its once-expansive portfolio. This restructuring coincided with the Covid-19 pandemic, rising inflation, and a noticeable decline in demand for plant-based meats, leading to a prolonged period of disruption for the 30-year-old Hain, amid intensifying competition in the health-conscious sector.
However, Davidson, a seasoned consumer packaged goods (CPG) executive with a background at Kellogg, McCormick & Co., and Tyson Foods, believes Hain is “at an inflection point” where it can “unlock the potential of the company” by increasing brand visibility and expanding the markets for its healthier offerings. “We must prove our ability to grow and nurture brands, as well as navigate external macro-environmental factors to take control of our destiny,” Davidson stated in an interview. She acknowledged that while consumers and retailers appreciate their “purpose-driven brands” and wish for Hain’s success, there is a shared sentiment—internally and externally—that they have not yet met their own expectations regarding the portfolio’s potential.
During its fiscal year 2023, Hain experienced a 2.7% decline in net sales, totaling $1.8 billion when adjusted for foreign exchange, acquisitions, divestitures, and the discontinuation of brands. The company continues to face margin pressures, has reported five consecutive quarters of losses, and its stock is hovering near its lowest point in 13 years. Yet, there are emerging signs of optimism. Last week, Hain projected a return to sales growth of 2% to 4% for fiscal year 2024. Davidson emphasized growth and market share increases for Celestial Seasonings teas and Greek Gods yogurt, along with strong sales in its Garden Veggie snacks. Recent marketing investments in several core brands have bolstered their sales, distribution, and consumer awareness.
Hain is now working to broaden its distribution beyond large retail chains and health-focused stores, as more consumers seek convenient, healthier food and beverage options. The opportunity is vast; while Hain estimates about 25,000 retail distribution points, there are over 2 million potential avenues in colleges, hospitals, airports, hotels, convenience stores, and other locations. Davidson noted that only about 1% to 2% of Hain’s sales currently come from these “away-from-home” channels. Although these venues typically generate lower sales, they provide increased brand exposure and often higher margins, as consumers are willing to pay more for convenience.
Recently, Hain has secured “significant gains in distribution” for its snack brands in convenience stores, while also increasing its presence on college campuses and at airports. In convenience stores, these early “proof points” allow Hain to gather valuable sales data to compare its products against similar offerings, often revealing a higher sales rate that can attract further business. Davidson mentioned that while these away-from-home channels “are not yet making a significant material impact on the company,” they are an area of focus for the coming years. “Securing a fair share of this distribution could be very beneficial for the company,” she explained.
Analysts recognize that Davidson faces a challenging road ahead in her efforts to boost sales at Hain. John Baumgartner, managing director and senior consumer equity research analyst at Mizuho Americas, noted that the natural and organic sector has evolved significantly over the past 15 years, with competitors like General Mills, Kraft Heinz, and Campbell Soup launching their own products and improving existing ones. These offerings often meet the needs of consumers looking for healthier options at lower price points than Hain’s products. Baumgartner labeled Hain as a “show-me story,” especially regarding its strategy to expand distribution into existing categories where healthier products are already available.
Davidson expressed confidence in the brands and markets she has inherited, focusing on innovation, marketing, and expanding the reach of her offerings. Hain has a substantial presence in Europe, accounting for around 45% of its sales. However, she also acknowledged the possibility of reshaping the portfolio through acquisitions or divestitures. Analysts and former executives have pointed to Hain’s personal care line, which includes cleansers, shampoos, sunscreens, and lotions, as a potential divestiture target to generate cash for debt reduction and reinvestment in the business. Although personal care comprises about 8% of Hain’s sales and has struggled, Davidson is not rushing to sell a business “while it’s in stress,” as this would yield lower returns. Instead, she is assessing the portfolio’s future at Hain and recently hired a new executive to stabilize the business.
“We are confident in the categories we occupy and the brands we currently manage. I want to see them realize their full potential before deciding whether they are better suited for growth within our umbrella or under another company’s leadership,” she concluded. In this evolving landscape, the effects of calcium citrate on health may also factor into Hain’s product development, as Davidson and her team seek to align their offerings with consumer health trends.