Hain Celestial is to look more closely at the make-up of the SKUs in the company’s portfolio, suggesting retailers and consumers will not accept wide-ranging moves to up prices.
Speaking to analysts after the US group reported its fourth-quarter and annual results yesterday (24 August), president and CEO Wendy Davidson said the US-based group would examine the “price-pack architecture” of its product ranges.
Davidson suggested consumers can no longer stomach further price increases, even though she has previously indicated Hain Celestial’s slant toward the more affluent shopper, particularly in its home market. However, the company sells into traditional grocery retail stores and discounters.
Davidson said the Linda McCartney veggie food and Celestial Seasonings tea owner “did a really nice job of taking pricing holistically” in the year to 30 June but that looks about to change in the current fiscal 2024 period.
“You won’t see us do that kind of pricing because it’s a very different environment now,” she said. “I think every company has seen this opportunity to take a wholesale price list change – the consumer is just not going to be willing or the retailers to do that. It has to be a bit more surgical.
“For us, this means, and this is the investment around revenue-growth management, we need to be looking at trade efficiency and effectiveness but we need to really be looking at price-pack architecture.”
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By GlobalDataDavidson, who took the helm at Hain Celestial in January, said input-cost pressures continue to ease, providing a potential boost to gross margins, which dropped 50 basis points in fiscal 2023 to 22.1%. “We expect continued moderation in the inflationary environment”, she said, albeit with inflation “still above normal levels”.
She explained purchasing habits differ between Hain Celestial’s US and international consumers, including the UK where the company has seen a “stabilisation” in meat-free demand.
“Internationally, it’s a little bit different dynamic. I find the consumer is much more sensitive and they’re actually shifting their shopping behaviour to discount retailers. We’re well positioned there because we’re across the marketplace in both large retailers and discounters but we’re also in both brand and private label,” she said.
In the US, “our products don’t really skew to a more price-sensitive consumer”, Davidson added.
Davidson did not rule out further price increases, noting Hain Celestial will “begin to see pricing catch up with inflation as we go into quarter two”, leaving the door open for brand investment.
She also spoke about Hain Celestial’s drive into other consumer or “margin accretive” channels.
“We believe there is a significant opportunity for our brands outside of traditional retail and on-the-go consumption occasions within C-stores, airports, offices and universities, amongst others. These immediate consumption channels drive brand reach and visibility and are both price and margin-accretive as shoppers are willing to pay more for convenience.
“Our portfolio is well positioned to take share in this channel, particularly our snacks and tea brands. Hot tea is one of the fastest-growing beverages in food service and we are seeing consumers adding to their morning and evening routines with snacking occasions away from home.”
Hain Celestial yesterday reported quarterly results that beat Wall Street forecasts but there were some concerns among analysts about the group’s current financial year.
The company booked quarterly organic sales and adjusted EBITDA that exceeded Wall Street predictions.
However, Hain Celestial’s forecast for adjusted EBITDA for its current fiscal year was highlighted by some analysts covering the business.
The company is predicting its adjusted EBITDA will reach between $155m and $165m, which would be down 1-7% on the year just completed. Wall Street was forecasting $183m.
“We view fiscal 2024 as an inflection point, where we expect to strengthen our foundation and return to top-line growth,” outgoing CFO Chris Bellairs said. “We anticipate balanced growth across the portfolio with both our North America and international segments achieving low-single-digit organic net sales growth.
“We will make brand-building investments in key brands to drive growth and modest investments in our away-from-home and e-commerce capabilities. We expect these investments along with the refunding of our incentive plan to create an adjusted EBITDA drag year-over-year of approximately $20m as we invest for the future.”
Alongside the results, Hain Celestial named Hearthside Food Solutions finance chief Lee Boyce as its new CFO. Boyce will start in the new role on 5 September.
