How Hain Celestial Group is innovating during COVID-19

Yahoo Finance’s Myles Udland, Julie Hyman, and Brian Sozzi speak with The Hain Celestial Group CEO & President, Mark Schiller, about how the company is faring amid COVID-19.

Video Transcript

BRIAN SOZZI: Hain Celestial has been one of the hottest food stocks around during the pandemic, notching a 44% year-to-date gain. Let's bring in Hain Celestial CEO Mark Schiller for more insight into that big move.

Mark, good to finally speak with you here. In reviewing Hain's year, I do get the sense it hasn't been all pandemic-- pandemic-driven. It's very much a lot of operational things you and the team have done this year to turn this company around. How different, in fact, is Hain going into '21-- 2021 compared to when it started at the end of 2019?

MARK SCHILLER: Yeah, thanks for having me on. I appreciate it. We have been in the midst of a transformation for the last two years since I started. There was a lot of complexity and a lot of work to be done in terms of just moving from a holding company to more of an operating company, so getting the customer service right, getting a much simpler organization to do business with for our customers, and getting systems and processes in place that would allow us to be kind of a stable growth company.

We had done a lot of things prior to the pandemic, reducing unprofitable businesses and individual items that were losing money, simplifying the number of sales forces we had, the number of IT systems we had. And so a lot of the heavy lifting happened before the pandemic, and we had just started accelerating our marketing and innovation. And then, of course, when the pandemic hit and more eating occasions went into the house, it accelerated from there.

MYLES UDLAND: And so then, you know, kind of building off of that, Mark, when you think about how the business changed because of the pandemic, did it change any of your plans that you guys had, because it was a multiyear process that you were looking at, you know, going back to 2019? Did it change any of those plans, given the trends that we've seen change and maybe some ones that you maybe think might stick here?

MARK SCHILLER: Certainly, we had to spend a lot more time making sure our employees were safe, making sure we had backup sources of supply and that we weren't going to see any disruptions. But we serviced the business so well during the pandemic while others struggled that we were able to bring innovation to market and pick up space at retail. We were marketing to the consumer to cement those relationships.

And we saw a very significant increase in our household penetration and our repeat rate as a result of that. So we've been a beneficiary of good kind of prework, if you will. And I think as we come out of the pandemic on the back end sometime in '21, that money that we've spent against the consumer, the innovation that we've brought to market, we think, is going to really pay dividends for us.

BRIAN SOZZI: You know, Mark, I did want to ask you about your European fruit business. That-- that has been a business that has been on the sales block. Is it-- are you nearing a sale of that? And how does the sale of that business change your international direction?

MARK SCHILLER: We are close to a sale. We have a lot of interest in that business. It's-- it's not core for us. It's a very complex business with people hand slicing fruits and sticking them in plastic containers with very short shelf life, and so it will do better in somebody else's portfolio than here.

Once we are successful in exiting that business, what you're going to see is our international margins will grow several hundred basis points and our top line growth rate will grow significantly. It's really been a drag for us. And it's about $160 million business, so it's a meaningful chunk of our overall sales. And it has really kind of masked the growth and the margin expansion that we've seen throughout the business because it's-- it's been a drag. So we expect that we will exit that business sometime early in the new year.

JULIE HYMAN: Mark, it's Julie here. You're talking about exiting that business. What about-- Hain traditionally had been known as an acquirer, right, rolling up a lot of natural foods brands. Is that going to continue? Are there areas in your portfolio where you're seeing a lot of growth or where you want to add growth?

MARK SCHILLER: Yeah, so we had acquired 55 businesses over 25 years. And because we manage them as more of a holding company, the complexity of that many brands became overwhelming. So since I started two years ago, we've shed 17 brands with about $800 million worth of sales and greatly simplified the business.

There are a few more that likely will be exited, but we're also at a point now where we're starting to look at acquisitions again, more strategic acquisitions in places that we've prioritized like snacks, and tea, and personal care, and plant-based meats, and non-dairy beverages in Europe. So there are some terrific growth businesses that we have decided to focus on and manage for growth going forward. And we will be looking in those places to make strategic acquisitions.

JULIE HYMAN: And-- and, Mark, just quickly also, I wanted to ask about supply chain, because this has been an issue for a lot of food companies where they're seeing a lot of demand in certain areas that they're not able to meet. How are you guys doing on that front?

MARK SCHILLER: So I think when the pandemic hit, we-- we were fortunate that we have a significant part of our business in Europe and really saw this coming, I think, before other people did. So we were able to find backup sources of supply and make sure that we had the right things in place to service the business very well.

And as we come into the surge that we're now seeing now, we've built up inventory, we've looked at things that have a long supply chain and really are very well-prepared to continue to service the business. And in an environment where people have struggled, in many cases, that earns us favor with the retailers and gets us in good stead to start having growth conversations with some of the great innovation that we've got.

BRIAN SOZZI: All right, we'll leave it there. Mark Schiller, President and CEO of the Hain Celestial Group, good to speak with you. And thanks for keeping my tea on the shelves throughout the pandemic. Appreciate it.

MARK SCHILLER: My pleasure. Thank you.