June 4, 2020
Fifty brands in 37 categories.
Five sales teams.
Forty distribution centers.
That's what Hain Celestial had when Mark Schiller became its CEO in November 2018.
"We were drowning in complexity," Schiller said Thursday during the Piper Sandler & Co.'s 40th annual Consumer Marketplace Conference. This year's event was conducted virtually, with participants joining the conversation from what appeared to be their homes.
Schiller has since simplified the business, divested underperforming brands and focused on growing the brands worth investing in.
"We're right at the inflection point where we're turning the business back toward growth and the strategy has worked really well," he said.
With the new strategy and the advantages of being a global company, Hain Celestial was prepared for the challenges the coronavirus pandemic brought.
The company's third quarter, which ended March 31, was the first in 10 quarters that it saw top-line growth. Net sales increased 1%, but net income was up 184% and gross margin increased 324 basis points.
"In general, the strategy's working, we're on the right path, we've got the right team and we're very well set up for the future," Schiller said.
Simplifying the system reduced costs in a variety of ways, he said. Because the company's forecasting is better, it is destroying less out-of-date inventory, for example. And with fewer distribution centers, Hain can fill a truck with product, making each trip less costly.
The company has done a better job of delivering the right amount of product at the right time to wholesalers and retailers, thus reducing the fines it faced in the past.
"We're using the assets we had more efficiently," Schiller said.
Prepared for the pandemic
Hain built up inventory before the coronavirus crisis, and the company is now building it back up to be sure they have enough on hand, he said.
Michael Lavery, a senior research analyst at Piper Sandler, said his company's consumer survey shows that more than 70% plan to continue cooking at home an average four meals per week.
Whether that happens, as well as the length and depth of the recession, will be the biggest factors for fiscal 2021 sales, Schiller said. He expects that people will continue to eat at home more than they did before the crisis, however.
Hain Celestial has also benefited from e-commerce sales.
"E-commerce has always been a very significant part of our business. Amazon is one of our five biggest customers," Schiller said. While e-commerce sales grew between 30% and 40% before the pandemic, it doubled during the pandemic's height.
Those sales were profitable, as well, with a 1,000 basis point increase in margin, he said.
"We are one of the few I think that have cracked the code on how to make money in this channel," Schiller said. The company has done a lot of marketing there, making sure it is on the first page of search results and creating promotions as customers proceed toward checking out.
"We are one of the few, I think, that have cracked the code on how to make money in this channel," he said.
Retailer relationships are another area Schiller is working to improve. In the past, if a retailer asked for a price reduction, Hain would simply accommodate the request. Now, though, they negotiate, offering a better price if the retailers picks up an additional product that needs more distribution, he said.
"Prior to COVID, we were spending a lot more energy on forming strategic relationships than transactional relationships," Schiller said. "We never really leveraged the size of our portfolio to have senior-level conversations with customers and find win-win outcomes."
Schiller isn't yet satisfied, though.
"We are still not what I would characterize as a world-class operating company, but we now have the foundation in place to continuously improve on the things that we've started," he said.
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