For Hain Celestial CEO, it's all natural
When Irwin Simon wanted healthy food for his baby daughter in 1995, he scoured Manhattan for the organic brand Earth's Best.
"I didn't want fruit and vegetables grown with pesticides," said the chief executive of Hain Celestial Group Inc., a Melville natural and organic-products company. "That's what inspired me to buy Earth's Best."
He liked the brand so much he bought the company from Heinz in 1999. Since then, Earth's Best, which was started by twin brothers in Vermont in 1985, has gone from $14 million in sales and fewer than 20 products to more than $100 million in sales and more than 120 products, the company said.
That buy-and-build approach to the brand reflects the business strategy of Hain, the country's largest natural and organic foods manufacturer. It has gobbled up more than two dozen brands or companies since 1994, the year that Simon acquired Hain Pure Food, and expanded their product lines.
"It's recognizing the value of a natural or organic brand and how we integrate it into our structure and grow it," Simon said.
The strategy seems to be paying off. Sales have grown from $13 million in 1994 to more than $1 billion today.
Hain has acquired Celestial Seasonings teas, Terra Chips, Avalon Natural personal-care products and WestSoy. The company changed its name to Hain Celestial after the 2000 purchase of the Boulder, Colo.-based tea company.
The acquisitive Hain has itself become the subject of takeover talk. Jim Cramer, the host of CNBC's "Mad Money," said last month that the popularity of natural foods could make Hain a good acquisition target.
Andrew Wolf, managing director of BB&T Capital Markets in Richmond, Va., said Hain is "undervalued," meaning its stock price doesn't reflect the company's value.
"It is a complete company and a very well-run company, from strategy to brand management to operations."
Hain is a behemoth in an industry with robust growth. Sales of organic foods and products jumped to $24.6 billion in 2008, up 17 percent from 2007, according to the Organic Trade Association in Greenfield, Mass.
Before Hain, Simon owned the kosher-products company Kineret, which bought Hain Pure Food in 1994. He had honed his food-industry skills at Häagen-Dazs, where he worked from 1985 to 1991.
The product "had a lot of brand equity," said the Nova Scotia native. "What I really learned is how to market and grow a brand."
One of Hain's largest customers, the Austin, Texas-based chain Whole Foods Market, praises Hain on that score. Last month Whole Foods, which has two Long Island locations and plans to open a third store next year, began carrying yet another Hain product: kosher antibiotic-free chicken.
"Most of the brands that they have acquired over their history are legacy brands in the natural-products industry," said Jeremiah McElwee, who oversees Whole Foods' personal-care division. "We love them. Our customers love them, and they have been an important part of our company's growth as well."
A gathering three weeks ago at a Manhattan restaurant kicked off events that will lead to Earth's Best's 25th anniversary in 2010. When Simon acquired Earth's Best, the brand focused mostly on baby food. Over the years Hain bought other specialty companies and added their products to the Earth's Best line. For example, it bought the Michigan company TenderCare International in 2007 and acquired a line of natural diapers and wipes. In January Hain will begin selling the wipes and natural training pants at Babies "R" Us.
Earlier this month Hain announced it had entered into a partnership to sell Earth's Best formula and foods in China.
Despite its successes, Hain is not without its challenges. The company's profit fell 81 percent in its fiscal fourth quarter ended June 30, to $1.3 million, in part because of severance pay for layoffs and stock-option expenses. The company, which has 2,000 employees, laid off workers but wouldn't say how many Long Island jobs were lost. However, the company stressed that the number of local employees - 203 - is up from last year.
Last month, Hain settled Securities and Exchange Commission charges that the company backdated stock options, or made it appear they had been granted earlier at lower prices. The agency didn't fine Hain because it "took into account the cooperation that Hain provided." And the agreement didn't call for any charges against earnings beyond a $16.9 million charge, or reduction, the company took after learning of the SEC inquiry in 2007.
Simon is busy looking ahead to the next five years, when he hopes sales will have doubled to $2 billion. He will rely on a familiar strategy.
"A lot of that is going to come from acquisitions," he said.