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Inflation: We are 'surgically' passing on higher costs to consumers, Hain Celestial CEO says

Hain Celestial Group CEO Mark Schiller joins Yahoo Finance Live to discuss inflation and the company's acquisition of snack brands Thinsters and Parmcrisps.

Video Transcript

AKIKO FUJITA: If you're like me and you drink a lot of tea, you're familiar with our next guest and his brands. Mark Schiller is Hain Celestial Group CEO, the company behind Celestial Seasonings, as well as TERRA Chips. And Mark, it's good to talk to you today. Let's start with what has really been a constant over the last several months, which is the challenge of inflation and how companies are navigating it. What has this meant specifically for Hain Celestial and what kind of price pressures are you looking at?

MARK SCHILLER: Well, thanks for having me. The whole industry is facing inflation in pretty much every aspect of the business. Raw materials, packaging, transportation, labor.

And so we have a robust productivity agenda where we try and offset as much of the increased costs as possible, but given that we're looking at approaching 10% inflation on our business, we have to pass some of that on to consumers and we do that very surgically. We do significant analysis around price elasticity and what we think the response from the consumer will be, what our competitive position is, and try to make smart choices and keep prices as low as possible.

ZACK GUZMAN: Yeah, I don't like a lot of price increases, but I do like when they're surgical. And you have been-- you got the ability here to really raise prices when you got more and more people appreciating some of the products you offer. And we've been seeing reports of people turning to Sleepytime Tea in kind of the pandemic to deal with maybe some of the stresses they've had in getting to bed at a reasonable hour. I mean, what have you seen in some of the products that have taken off in the pandemic and what you expect to see in 2022?

MARK SCHILLER: Yeah, so the good news is that people are gravitating toward Health and Wellness. This is unfortunately a health crisis that we're facing. And people are much more conscious of what they're putting in their body, what they're putting on their body, their stress levels.

And so we've seen a lot of people who are cognizant of pre-existing conditions and just their health in general gravitating toward healthy eating, which for a company like ours that only does health and wellness, that has brought a lot of new triers into our brands. And you mentioned Celestial Seasonings Tea. We've got tea with gut health, tea with immunity boosters, tea with melatonin to help you sleep. We're famous for Sleepytime Tea.

So we've got all kinds of products in our portfolio that are for people who are worried about their health and they're delicious terrific products, and you mentioned a couple of them up front. And you know, we're a leader in many, many categories. We actually have 24 brands that are number one or number two in the categories that they compete in. So we're very well positioned and the consumer is gravitating toward us.

AKIKO FUJITA: Mark, you mentioned the growth in raw material costs. How much of that have you actually passed down to consumers?

MARK SCHILLER: Yeah, so we're about 90% covered on our raw materials. There are certain things that we can't hedge, but certainly crops, for example, we've bought out for the entire year. We're passing on as much of it as we need to to deliver against our financial commitments. And so, like I said, we generate about 4% a year in productivity, but we're seeing inflation closer to 10%. So we have to pass the rest of that on to the consumer.

ZACK GUZMAN: Can we talk about maybe other avenues that CPG snack companies have gone in the pandemic? We've seen some pretty large acquisitions. You yourself, ParmCrisps and Thinsters to wrap up 2021.

I mean, where do you maybe see some of those opportunities popping up? As you're talking about, you already got a portfolio of some health and wellness brands. ParmCrisps, you know, those sound actually tastier than they sound healthy, but talk about where you want to go in terms of growing the business next year?

MARK SCHILLER: Yeah, we've segmented our portfolio, and we said there's a certain group of categories that we think have tremendous growth potential that we are well positioned in and snacking, healthy snacking, is one of those categories. You mentioned TERRA Chips. We have Sensible Portions, Veggie Straws, which is actually the biggest brand in the entire company, that's up 60% over the last two years.

And so we want to become a bigger player in snacking. And what I love about ParmCrisps, it's a high protein, low carb snack. It competes against things like protein bars and beef jerky, which are very incremental to our portfolio. We don't have things that compete against those segments today.

This is high growth. It's got tremendous distribution opportunities and brand awareness opportunities. And so it fits very nicely with our growth strategy and we're looking forward to building that brand to new height.

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