Hain Celestial (HAIN) on Track With Transformation Strategy
The Hain Celestial Group, Inc. HAIN has been gaining from its well-chalked transformational efforts, which includes boosting cost efficiency and portfolio strength. Moreover, the company is on track with the SKU rationalization program. These actions have kept this well-known food products company afloat, despite pandemic-led demand moderation that led to tough year-on-year comparisons. Let’s take a closer look
Growth Efforts on Track
Hain Celestial is progressing well with its transformation strategy to deliver sustainable profits. The strategy is aimed at simplifying portfolio, identifying additional areas of productivity savings, enhancing margins, reviving top-line growth and improving cash flow. Speaking on bolstering portfolio strength, the company is focusing on well-chalked innovations, marketing and assortment optimization efforts. In particular, the company is gaining from investments made in Get Bigger brands. During third-quarter fiscal 2021, the consumption of Get Bigger brands was up by nearly 54%, while shipments were up 8%. Moreover, strategic acquisitions have helped the company boost market share across key markets. It plans to keep looking for prudent buyout prospects, especially in core categories such as snacks.
Hain Celestial is also on track with simplifying business and focus on areas with higher growth potential. By exiting smaller and non-strategic brands, the company is able to reduce supply-chain complexity and redeploy resources on strategic growth opportunities. The company’s SKU rationalization program has eliminated SKUs based on lower sales volume or weak margins. We note that gains from SKU rationalization along with supply-chain productivity initiatives and higher product mix supported growth in adjusted gross margin, during the third quarter.
Apart from these, the company is boosting automation capabilities in plants to lower costs, optimize infrastructure and pricing as well as redesign engineered products. It has also been executing its simplified pricing model.
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Wrapping Up
With the roll-out of vaccines, society is gradually returning to the old normal and consumers are resuming outdoor dining. As a result of lower at-home consumption, demand trends have begun to moderate, causing tough year-over-year comparisons, as witnessed in the third quarter. Such downsides are likely to continue in the fourth quarter as well.
Despite the aforementioned headwinds, we expect that the company’s prudent initiatives to boost operating efficiency will continue to serve as upsides and help it maintain strong footing in the food industry. We note that shares of this Zacks Rank #2 (Buy) company have gained 30.9% in a year compared with the industry’s rise of 22.3%.
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