The next three to five years, at least, will continue to see accelerated and large scale growth in distribution of healthy, organic and natural products, Hain Celestial Executive VP and Chief Executive Office of the U.S. John Carroll told investment analysts Nov. 6 during the firm’s first quarter earnings call.
“There is a lot of runway across the board in terms of retailers” continued interest in natural and organic products, he said.
“As you look at the grocers and the retailers, not everybody is as well-developed on natural and organic like Kroger or Wegmans. There are a lot of leading grocers, leading mass merchandisers, club operators, even drug [stores]that are just not nearly as far along as there is potential for them to be,” Carroll said.
For example, he noted Hain Celestial has less than 100 SKUs of healthy products at Target. “There is a lot of runway at Target. There is a lot of runway at Walmart,” and Hain Celestial is poised to take advantage of it.
For example, in the first quarter Target added 11 new baby food SKUs in all stores, Publix added four Greek Gods Kefir SKUs and Walmart added four new Sensible Portions stackable veggie chip SKUs in more than 3,000 stores, Carroll said.
As this expansion demonstrates, “today our products are not just available at your local natural food store or grocery store, but across mass-markets, convenience stores, white tablecloth restaurants, fast-casual dining and what is called our eCommerce business,” CEO Irwin Simon said during the call.
He added that he expects distribution through diversified outlets to continue to expand as retailers increasingly come to the company and say: “We thought this was a fad or trend. We missed it. Now we need to get into it, because that is what our consumers are looking for.”
He noted: “This demand for healthy, better-for-you products led to a record quarterly performance” for the Lake Success, N.Y.-based company with net sales up 35% to $642.6 million and net income up 31% to $18.9 million for the firm’s first quarter compared to the same time last year.
In particular, he said, consumers want healthy and organic baby food, GMO free options and more plant-based and non-dairy products.
Hain Celestial secure with suppliers
Increasing consumer demand for organic and natural products is straining the supply chain, but Hain Celestial is confident in its partnerships with suppliers, company executives told investors who questioned the sustainability of growth in the face of increased competition.
Sourcing organic and high quality ingredients in large enough quantities to meet consumers’ growing demand is “one of our biggest obstacles that we have to fight out there,” – especially with the increasing number of private label SKUs that require the same ingredients, Simon said.
“Absolutely there is lots of competition. On the other hand, I feel with the infrastructure we have in place – we’re ahead,” he said, explaining Hain Celestial has established long-term partnerships with suppliers worldwide.
In addition, by buying ingredients directly from suppliers and not using brokers, the firm has been able to work with farmers to slowly build production to meet increasing demand, Carroll said.
“These are relationships that we have cultivated, no pun intended, over a long period of time and have been able to work with these farmers and tell them where our demand is going so that they actually build up their capacity to supply us,” he said.
As a result, he said, Hain Celestial is well-positioned to capitalize on the still growing demand for natural and organic products, and it expects earnings in future quarters be just as stellar as its first quarter.