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Hain's productivity strategy good for retailers, investors

Initiatives such as automating production inoculate global healthy food company from full effects of labor shortages; plant-based brands expanding in Europe.

Hain Celestial's newest strategy, referred to as Hain 3.0, has set the company up for success during this late-pandemic era and beyond, CEO Mark Schiller said Tuesday.  

In a virtual conference with Rob Dickerson, managing director at Jefferies LLC, Schiller provided more details about Hain's productivity initiatives and how it plans to expand geographies for some products in the United Kingdom and Europe.  

Already, the company has generated about $50 million a year through productivity initiatives—a target Hain expects to meet again in FY 2022 and FY2023, Schiller said.

Because of the pandemic-related challenges, Hain executives have changed their priorities, moving some initiatives forward and pushing others off, he said.

"We've been re-prioritizing projects because with the supply chain disruptions, some of the things we were hoping to execute sooner, we've moved to later given the complexity or headwinds we're facing," Schiller said.

"Others, we're moving forward because of the necessity around labor shortages and transportation shortages," he added.

He explained the company is automating equipment so it doesn't have to hire more people and filling up delivery trucks so the company needs fewer drivers. Getting trucks off the road also benefits the environment, he added.

Factories the company owns are 100% staffed, however. One facility recently produced record output, he said, while the company overall has hit record production for a number of consecutive weeks.

"The internal part of this equation, which was complicated by labor, we've done a terrific job on," he said.

Schiller reminded investors, though, that he can't control labor shortages that delay receiving raw materials such as tea or packaging materials, manufacturing at co-packers and sending out finished products.

These issues, which all food manufacturers are facing, complicate the production process.

"You have to find back up options that come at a premium price. You have to air freight things that come at a premium price. So it is adding costs and complexity," Schiller said.

Hain is servicing its customers better than its competition is, both in the United States and in Europe, he said.

"I know that because customers are calling us with merchandising opportunities that somebody else vacated, with space opportunities where others have openings on the shelf," he explained. "Our relative performance has been very good and we continue to be optimistic about our ability to overcome the challenges."

Expanding plant-based brands

Schiller also explained, when Dickerson asked, why he is so confident that Hain will continue to experience strong growth in meat and dairy alternatives and snacks.

Hain is projecting 10%-13% sales growth in those categories by 2025, which simply assumes the company holds its share of sales, Schiller said. The assumption is prudent, he added, because more players are entering the categories.

Schiller highlighted Hain's non-dairy beverages' strengths abroad:

  • Its sales rank No. 3 in continental Europe, and has more opportunities in southern Europe.
  • It's been creating non-dairy beverages for 25 years and is a primary innovator in the category.
  • It recently launched its non-dairy beverages in the United Kingdom under the Linda McCartney brand, which has Paul McCartney as its spokesman.

"When you start thinking about Linda McCartney plant-based (products) going in to continental Europe, you're doing it with a spokesperson that's a household name," Schiller said.

The Linda McCartney brand of plant-based frozen foods is No. 1 or No. 2 in the U.K., he said. Hain also has the No. 1 plant-based chilled food brand, Yves, in Canada. The company is using the innovation from each brand in the other country, adding chilled foods in Britain and frozen foods in Canada.

"We've got proven products that we are just expanding geographically," Schiller said. Linda McCartney brands recently became available in Austria and Ireland, and Hain is looking at introducing it in other European countries as well.

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