Hain Celestial Group Inc. is unloading its interest in the Irwindale, Calif., manufacturing plant where Health Valley brand products are made.
Chief Executive Officer Irwin Simon said selling the 23-year-old facility to a company that "runs plants for a living" should allow Hain to better predict and lower manufacturing costs while increasing production of Health Valley, Casbah, Nile Spice and Breadshop's products.
"We have been plant slaves," Simon said during the company's fourth-quarter earnings call with analysts. The new owners will install new equipment, including an extruder that will allow Hain to expand into new cereal categories.
Hain will take a one-time charge to jettison the plant, which Simon said has long "operated far below practical capacity" and cost the company $8 million to $10 million in unabsorbed overhead in fiscal 2002.
"We either had to divest this facility or put tremendous capital into it," Simon said. "Our strategy is to build brands and invest in brands, not in manufacturing plants."
For the quarter that ended June 30, Hain had a loss of $12.8 million, or 38 cents per share, compared with earnings of $2.7 million, or 8 cents per share, in the fourth quarter of 2002. Net sales rose to $95.4 million for the quarter, up from $79.1 million.
Irwin also announced the resignation of Co-Chairman Mo Siegel. Celestial Seasonings' founder joined Hain's board two years ago, when the Boulder, Colo.-based tea company was acquired by the Melville, N.Y., natural foods giant. "Mo did a great job integrating both the businesses," Irwin said.
Natural Foods Merchandiser volume XXIII/number 10/p. 5