Hain Celestial (HAIN, Financial) is a leading organic foods player. It is present in more than 65 countries with a diversified product portfolio comprising of 27 brands, including the recent inclusion of Tilda and Ella’s Kitchen. Out of these 27 brands, 17 brands have delivered double-digit growth, and the rest are growing at high single-digit rate. The company receives nearly 60% of revenue in the U.S.
The company expects to benefit from the wide range of distribution channel from Tilda and Ella’s kitchen. These brands have also built strong platform for the rest of the brands to get promoted in the market. Further, Hain Celestial is busy innovating its products with value added features such as packaging and labeling, which will help the company to penetrate in the market.
Hain has proven ability to expand great distribution products into various channels of distribution, including conventional mass club, and it see significant opportunities to promote its products and penetrate in the market.
A strong pipeline
The company is focusing on the vertical integration, and will be testing its first farm in New York that will supply BluePrint brand parsley, cucumber, kale, red beets, romaine lettuce and spinach, and all organic products . This is certainly good move initiated by the company as it reduces its dependency on farmers alone.
Hain Celestial is aggressively planning to utilize the opportunity that lies ahead as per the fact that the total organic and natural market segment, which now has total potential of $50 billion, is growing at the good pace to capture more and more from the overall food market that throws huge potential of $700 billion.
Therefore, the company is investing heavily in the distribution channel, which the company considers the key to success, and wants to ensure that there remains at least one Hain product at every point of sale where cash is registered.Â
Exploring the opportunity
There are 25,000 independent ethnic stores around the world, none of which sells any Hain products. Hain Celestial consider this as a great opportunity, and wants to promote its ethnic products that will create good market for the company, especially in new geographies such as Middle East, North Africa and India.
Hain Celestial announced the acquisition of Rudi's Organic Bakery, a leading certified organic bread brand, which will create enormous opportunity for the company.
In addition, the company is busy in practicing various marketing initiatives such as organizing the Natural Food Show. Hain Celestial was surprised to see that the show was attended by more than 70,000 people, where the company featured approximately 100 new food, beverages and personal care products.
Further, Hain is focusing on driving the growth in branded product innovation in natural organic grocery and mass channel, which is up by 25% and 35% respectively and expect these innovation to yield higher results in the coming quarters. The company has spent $70 million to build strong infrastructure that will possibly support its future growth in the coming years.
Final takeaway
Hain Celestial is well positioned for growth, as demand for organic and natural products grow. The company currently trades at the trailing P/E of 35.63 and forward P/E of 25.56. The company provides a profit margin of 6.4%, which will rise as the potential outlook and enormous growth remains very strong in favor of organic and natural food products in coming years. It also provides operating margin of 11.22%, good enough for food companies amidst tough competition across the regions. It also has handsome return on equity of 9.88%. Its total debt stands at 832.73 million, which is well mix by most measures.
Another striking element for the company is that the analysts have forecasted CAGR of 17.07%, higher than that of industry’s average CAGR of 13.77% for the next five years. All-in-all the company looks good short as well as long term prospect for investment. Though the stock is little expensive but it has a lot of room to expand further in the future as the world is moving towards organic food from the junky or GMO products.
