The Hain Celestial Group, Inc.
The Hain Celestial Group, Inc.
Incorporated: 1926 as Hain Pure Foods Co.
Sales: $412.9 million (2001)
Stock Exchanges: NASDAQ
Ticker Symbol: HAIN
NAIC: 311920 Coffee and Tea Manufacturing; 311411 Frozen Fruit, Juice, and Vegetable Manufacturing; 311412 Frozen Specialty Food Manufacturing; 311423 Dried and Dehydrated Food Manufacturing; 311812 Commercial Bakeries; 311821 Cookie and Cracker Manufacturing; 311823 Dry Pasta Manufacturing; 311830 Tortilla Manufacturing; 311919 Other Snack Food Manufacturing; 311999 All Other Miscellaneous Food Manufacturing
The Hain Celestial Group, Inc. manufactures, markets, distributes and sells natural, organic, medically directed (sugar-free and low-salt), snack and weight management food products, many of which are the top in their categories. Among the company’s many well-known brands are: Arrowhead Mills (grains), DeBoles (pasta), Estee (diabetic foods), Hain Pure Foods (rice cakes and cooking oils), Health Valley (natural soups, snacks, chili, cereal, and baked goods), Kineret (frozen kosher foods), Westsoy (soy-based drinks), Terra Chips (vegetable snacks), and most notably, Celestial Seasonings (specialty teas). Formerly the Hain Food Group, the Uniondale, New York-based company changed its name to The Hain Celestial Group when it acquired Celestial Seasonings in 2000. H.J. Heinz owns nearly 20 percent of the company.
From Carrots to Oils and Beyond: 1926-94
Hain Pure Food Company was founded in 1926 in Stockton, California, by Harold Hain, who was originally interested in marketing carrot juice. The company grew well beyond its humble beverage beginnings to become one of North America’s oldest and most prominent natural food businesses, known for selling a range of foods that are minimally processed, mostly or completely free of artificial ingredients, preservatives, and other non-naturally-occurring chemicals, and are near to their whole natural state as possible. In 1955, the company introduced its Hollywood line of vegetable cooking oils. With the debut of Hain Yogurt Chips in the early 1970s, Hain began developing diet and health snacks. By 1983, the company was offering more than 300 natural and health food items. The company’s products found their place all over: in supermarkets, health food stores, and specialty shops throughout the United States and abroad in countries such as Austria, England, Germany, and Japan.
The small but promising natural food company was bought and sold through many larger companies throughout the 1980s and into the early 1990s before it could develop and grow significantly. Hain Pure Food was acquired by Ogden Corp. in 1981, and was again sold in 1986 to IC Industries Inc., which assigned Hain Pure Food to its Pet, Inc. specialty foods subsidiary. In 1991 the former IC Industries, which had become Whitman Corp., spun off Pet, which became an independent company. Pet sold Hain in 1993 to focus on its core businesses. The buyer, in April 1994, was Kineret Acquisition Corp., a specialty foods company based in Jericho, New York, that paid $22 million in cash and stock for the operation. At long last, Hain’s latest parent company would prove to be loyal, under the steady leadership of Irwin Simon, a former career executive in the food industry whose mission was to buy specialty food companies that were mismanaged or not realizing their potential, including those selling natural, low-fat, or ethnic foods. At this time, Hain was marketing even more natural food products, including the Hollywood line of specialty cooking oils, carrot juice, mayonnaise, and margarine, and had sales of about $50 million a year.
Flourishing Under Strong Leadership: 1994-97
The Hain acquisition “made us a major player in the natural-food industry,” Simon said. “It allowed me to hire a different level of people, and from a company standpoint, it allowed me to be able to participate in certain advertising and promotions and upgrade systems.” Simon immediately began to focus on one of Hain’s most successful product lines, its all-natural rice cakes, which accounted for about 40 percent of Hain’s sales. Simon repackaged the line in brightly colored, resealable cardboard cartons, introduced rice cake snack bars, and marketed Mini Munchies, a new line of bite-size rice cakes in several flavors, including “strawberry cheesecake.” Although Quaker Oats dominated this market, Simon did not let the food giant faze him. “People always ask me, ‘Doesn’t Quaker frighten you?’ “ he told a Forbes reporter in 1996. “But every time I see Quaker ads on TV I just shout, ‘Yeah!’ They’re growing the category.”
Simon moved his company to Uniondale in August 1994 and changed its name to Hain Food Group four months later. In fiscal 1994 (the year ended June 30, 1994), the company reported a loss of $502,000 on sales of $15 million. But, it also came up with 24 new products to market. With the completion of the Hain acquisition, revenues rose to $58.1 million in fiscal 1995. The company moved into the black that year, with $2.4 million in net income. Hain raised $7.6 million in 1994 from the conversion of warrants to common stock in connection with the company’s initial public offering. The funds were used to retire a $7.9 million loan.
In late 1995 Hain Food Group purchased Estee Corp., a deficit-ridden producer of sugar-free and low-sodium products for persons on medically directed diets, including diabetics, and other health-conscious consumers, for $11.3 million. Simon immediately closed the company’s New Jersey plant, dismissing 180 employees and contracting production to a Canadian firm. Hain’s acquisitions continued in 1996, when Simon purchased Growing Healthy Inc., a fledgling baby food company, and Harry’s Premium Snacks, a potato chip and pretzel maker.
During fiscal 1996, the company had revenues of $68.6 million and earnings of $2.1 million, and it upped the number of its food products to 250. Simon was running a very lean operation, with only 43 employees, by farming out manufacturing and distribution. Nevertheless, when sales declined to $65.4 million in fiscal 1997, a drop that was attributed in large part to a $10.5 million sales fall-off for Hain’s rice cakes, net income fell to $1.1 million. That year, the company marketed 71 new products.
In March 1997, Hain reached an agreement to manufacture, market, and sell soups, snacks, and other food products of Weight Watchers Gourmet Food Co., a subsidiary of H.J. Heinz Co., with the products to continue to be sold under the Weight Watchers name. These 60-odd products were the dry and refrigerated goods that had Generaled only $17 million in sales for Weight Watchers in 1996 but at one time had done $100 million a year in business before becoming “lost within the Heinz infrastructure,” according to Simon. Under the five-year agreement, Weight Watchers would receive royalties and a share of the profits. This transaction made Hain, according to one of its executives, the nation’s leading marketer of foods sold to dieters and other consumers with special medical needs. Hain repackaged the line to connect it more closely to Weight Watchers “1-2-3 Success” theme and added 30 new products.
Hain Food Group’s next major acquisition, in October 1997, was that of Westbrae Natural, Inc., a California-based company with sales of nearly $38 million the previous year, for $23.5 million in cash. Westbrae’s leading product was soy milk. The purchase allowed Hain to strengthen its presence in natural food stores, where Westbrae averaged 250 to 300 stockkeeping units (SKUs). Following the transaction, Hain’s product line reached 1,000 SKUs spanning 13 brand lines. Other 1997 acquisitions included Alba Foods, a Heinz line of dry milk products, and Boston Popcorn Co., a snack food firm. Having sold the manufacturing facilities of its acquisitions, Hain now was dealing with a network of 95 co-packers. Simon was named 1997 Entrepreneur of the Year by Ernst & Young; he was also named one of Business Week’s Best Entrepreneurs of the Year.
Going Public and Maturing: 1997-99
Hain Food Group made a new public offering of 2.5 million shares of common stock at $9 a share in December 1997. The proceeds of about $21 million were used to pay down debt, which was $16.6 million in mid-1998. In large part because of the Westbrae acquisition, net sales rose to $104.3 million in fiscal 1998. Net income increased to a record $3.3 million, inspiring the price of the stock to rise as high as $28.625 a share in the summer of 1998. One of the company’s supporters was billionaire George Soros, whose Soros Fund Management bought a 16 percent stake in early 1997 and still owned nearly 10 percent in October 1998. White Rock, a Texas corporation and limited partnership, owned 20.1 percent. Simon held 10.7 percent of the shares.
In April 1998, Hain Food Group announced that it had agreed to acquire four closely held natural foods businesses for $60 million, plus the assumption of about $20 million in debt, from Shansby Group, a San Francisco investment company, and other owners. These firms were Arrowhead Mills Inc., DeBoles Nutritional Foods Inc., Dana Alexander Inc., and Garden of Eatin’ Inc. The acquisition was completed in July 1998.
We have always emphasized that our success is built on four key strengths: our brands, our people, our strategy, and our financial performance. In the past, our commitment to this recipe resulted in achievements of which we are very proud. And, we are excited about our prospects for the future, as we continue toward our objective of becoming a billion-dollar company.
By this time Simon, who had a five-year plan to increase company sales to $500 million by 2002, was paying more attention to promoting Hain Food Group products among consumers rather than merely distributors and retailers. The company had become involved in a number of promotional campaigns, including ones involving Weight Watchers, the American Diabetic Association, schools, and several cancer groups. “As we move into the 21st century,” he told a reporter, “there is more awareness about nutrition and healthy foods.... We see the market (for better-for-you foods) growing drastically.” Accordingly, Hain, in the latter half of 1998, introduced Chicken Broth and Noodles with Echinacea, Country Vegetable with Echinacea, Creamy Split Pea with St. John’s Wort, and Chunky Tomato with St. John’s Wort. These products were described on their labels as “herbal supplements,” rather than soup, probably because dietary supplements were subject to less government regulation than were foods.
In addition to its Hain and Westbrae lines of natural food products, Hain Food Group’s products, in mid-1998, consisted of the Hollywood Foods line, the Estee and Featherweight lines of sugar-free and low-sodium products, kosher frozen foods under the Kineret and Kosherific labels, the licensed Weight Watchers products, and about 40 snack food items under the Boston Popcorn and Harry’s Original names. The additions from the July 1998 acquisitions consisted of 360 ready-to-eat grains, nut butters, and nutritional oils produced by Arrowhead Mills and DeBoles, about 48 natural food vegetable chip items by Terra Chips, and a variety of tortilla chip products from Garden of Eatin’. Nondairy drinks accounted for about 19 percent of Hain’s fiscal 1998 net sales.
Also by June 1998, Hain entered into a license agreement with food giant Heinz to market and sell its Earth’s Best baby food products to natural food stores. The venture did so well that, by the end of 1999, Hain had purchased the trademarks for the product line and secured the option to grow the product line itself. That same year, Heinz moved to tap into the growing natural foods market, by making a $100 million investment in Hain, which represented a 19.5 percent stake. During this fruitful time with Heinz, Hain continued to make strategic acquisitions and join company with yet another food giant: In December, 1998, Hain bought Nile Spice soup and meal cup from The Quaker Oats Company, and, in May 1999, Hain acquired NNG (Natural Nutrition Group, Inc.), an organic food manufacturer that marketed its products under the Health Valley, Breadshop’s and Sahara brands. Sales for fiscal 1998 grew 97.5 percent, as the company continued to flourish.
Merging with Celestial and Forging On: The New Millennium
In May 2000, Hain acquired Celestial Seasonings, the largest manufacturer and marketer of herbal teas in the United States, which had introduced roughly 50 tea varieties throughout the world. Chiefly responsible for creating the herb tea industry in the United States, Celestial Seasonings was founded by Mo Siegel and Wyck Hay, who introduced the country’s consumers to colorfully packaged, decaffeinated herb teas that offered “soothing teas for a nervous world.” During the mid-1990s, Celestial Seasonings controlled an estimated 51 percent of the herb tea market. By the time of the acquisition by Hain, Celestial Seasonings had reached $109.8 million in revenue for 1999. Together, Hain and Celestial Seasonings became the largest natural foods company in the United States, and was renamed The Hain Celestial Group. In fiscal 2000, sales reached $404 million, and promised to be even greater in the future with Celestial Seasonings in the mix. According to Simon, “The transaction combines Hain, with its experience in selling to specialty natural foods markets, and Celestial Seasonings, which has great expertise in successfully reaching the retail mass market.”
In 2001, Hain Celestial sought to grow its international markets by engaging in key acquisitions and ventures, to help grow its brand presence and distributions channels abroad. It bought Netherlands-based Fruit Chips, maker of Gaston’s fruit, vegetable, and potato chips, and then changed its name to Terra Chips to grow the Terra brand in Europe. In June of that same year, the company acquired Vancouver, Canada-based Yves Veggie Cuisine, Inc., a manufacturer and distributor of meat-and cheese-alternative food products that are made instead with soy protein. Hain Celestial could take advantage of the Canadian company’s extensive and established infrastructure, sales force, and distribution network. Soon after that acquisition, Hain Celestial announced a join-venture with Grupo Siro, Spain’s largest snack company, to further expand its distribution channels in Europe.
AMI Operating, Inc.; Arrowhead Mills, Inc.; Celestial Seasonings; Dana Alexander, Inc.; DeBoles; Nutritional Foods, Inc.; Earth’s Best; Garden of Eatin’, Inc.; Hain Pure Food Co., Inc.; Harry’s Premium Snacks; Health Valley Company; Kineret Foods Corp.; Little Bear Organic Foods, Inc.; Natural Nutrition Group, Inc.; Terra Chips B.V.; Westbrae Natural Foods, Inc.; Westbrae Natural, Inc.; Yves Veggies Cuisine, Inc.
The B. Manischewitz Company; Bestfoods; Campbell Soup; ConAgra Foods; Frito-Lay; Galaxy Nutritional Foods; Garden-burger; General Mills; Guiltless Gourmet; Kellogg; Kraft Foods; Nestle; Proctor & Gamble; Quaker Oats; Tofutti Brands.
- Hain Pure Food Company is founded.
- Company introduces Hollywood vegetable oils.
- Hain is acquired by Kineret Acquisition Corp.
- Company begins alliance with Heinz.
- Company acquires Celestial Seasonings and becomes The Hain Celestial Group.
- International expansion includes purchase of Yves Veggie Cuisine.
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—Robert Halasz (Hain),
Jeffrey L. Covell (Celestial Seasonings)
—update: Heidi Wrightsman