Hain Celestial

THE HAIN CELESTIAL GROUP

By: Tracy Daoud, Melanie Hugoo, Michelle Pham, Louise Wardrop & Justin Yu

Introduction

WHAT DO YOU CONSUME

&

HOW IMPORTANT IS IT FOR YOU?

Agenda

• American ORGANIC food company
• Categories:

-Grocery

-Protein

-Snacks

-Tea

-Personal Care

• CEO: Irwin Simon
• Date founded: 1993

• Market Cap: $4.130B, January 5th 2016

Economics

EXTERNAL

Economics

EXTERNAL

UK Business Confidence

US Business Confidence

UK Unemployment rate

US Unemployment rate

Jan 2016: 48.6

Jan 2015: 54.3

Jan 2014: 52.4

Jan 2016: -4

Jan 2015: 15

Jan 2014: 21

Jan 2016: 4.9%

Jan 2015: 5.7%

Jan 2014: 6.6%

Jan 2016: 5.1%

Jan 2015: 5.7%

Jan 2014: 7.2%

OBSERVING TRENDS

Economics

UK. Customer Confidence

US. Customer Confidence

UK growth rate

US growth rate

1) Intro & External-Observational trends → Tracy

2) Porter's five forces → Melanie

3) Strength & Weaknesses → Michelle

4) Internal → Louise

5) Alternatives & Solutions → Justin

Jan 2016: 4

Jan 2015: 1

Jan 2014: -7

Jan 2016: 92.0

Jan 2015: 98.1

Jan 2014: 81.2

2016 Q1: 1.6%

2015 Q1: 3.3%

2014 Q1: 1.6%

Avg: 2.16%

2016 Q1: 1.6%

2015 Q1: 2.8%

2014 Q1: 2.6%

Avg: 2.33%

Demographics

Millennials- Born between 1980 and 2000

-individual who are concerned with Better-for-you-products

PORTER'S FIVE FORCES - Organic/natural foods

Porter's 5 forces

Customer Management

Substitutes - HIGH

- All conventional foods

- Natural/organic foods are usually 15-25% more expensive

Social/Culture

New entrants - MEDIUM

• In 2014, US sales showed that Better-for-you products was composed of 4% of their sales.
• Growing at twice the rate of conventional foods

Social/Culture

• Shift in Retail channels
• Used to be sold through health food, natural, and specialty stores
• Moving toward mass-market grocers, warehouse clubs, convenience stores, and e-commerce site

- CPG companies entering 'better-you-you' categories (high)

- Gowth of the industry (high)

- Cost of entry is LOW - "Anyone with an idea and a mission can find a co-packer to make something" (high)

- Hard to obtain suppliers due to 1) transition periods; 2) lower yields and 3)difficulty of managing organic farms (low)

-"Hard to crack retailers without being acquired" (low)

-Price volatility of ingredients is often an issue (low)

Rivalry - MEDIUM

MEDIUM

- Influx of competitors from traditional CPG industries

- High growth industry reduces rivalry

PORTER'S FIVE FORCES- Organic/natural foods

MEDIUM

HIGH

Suppliers' Power - HIGH

- "Not simple finding new suppliers"

- Organic ingredients in limited supplies; less than 1% of farmland was certified organic in the US

- This shortage of suppliers means they have greater bargaining power and can charge a higher price

better-for-you-products

• Higher in nutrition
• Lower calories
• Non GMO,
• Non allergen
• More sustainable

Buyers' Power - HIGH

HIGH

-Buyers are not loyal therefore producers need to constantly please their customers by finding out what it is they want

-Customers want transparency, making it more expensive for sellers

Life Cycle - SHAKEOUT

• Past decade
• Millennials concerned with eating right and exercising
• health, quality, transparency
• LESS willing or able to pay premium prices
• Pursuing diets: vegetarian, raw, or paleo
• Less brand loyalty to big brands
• The need for manufactured local food
• Food safety concerns (pesticides) due to the use of artificial chemicals
• Buying less bottled water= negative environmental impact
• Packaged foods give representation of loaded sugar

- Most consumers are aware about organic/natural

- Many acquisitions taking place

- 2000-2010 CAGR = 12.5% VS. 2010-2013 CAGR = 7.9%

Human Capital

Innovation

Summary of Industry:

- Relatively HIGH barriers to entry

- Suppliers and consumers have a lot of power making it harder to push higher prices on the consumer

-The industry is at the start of the shakeout stage, which means that profitability will be slowing down and companies which will lead to more rivalry

-Now is the time where companies need to acquire competitors or they will have to sell

Legal/Political

Technology

Information Technology

• Millennials use their apps in order to getting product information before purchasing the product
• Get more information on food social media:

-Facebook

-Twitter

-Blog sites

• Instead of asking advice to others
• E-commerce retails such as Amazon

USDA accredited MUST meet requirements

-Organic meat producers

-> No use of antibiotics

-> No Growth hormones

-> No genetically modified organisms (GMO)

-> Prohibited pesticides

- Mixed organic food must contain 95% organic content

-Period audits

SWOT ANALYSIS

Organization Capital

Threats

Opportunities

-

COMPETITORS

Social Responsibility/Regulation Compliance

Financial

INTERNAL ANALYSIS-

Operations

Production/Conversion

Supplier Network

KSF-

Key Success Factors

2- Ensuring supply and prices

Current Strategy

1- Efficient Inventory management (expiry date)

MAIN Strategy: Look for emerging trends and then capitalize on those trends by ACQUIRING SMALL producers of better-for-you products that bigger firms are not interested in due to lower production volume

3-Ensuring proper certificates and meeting regulatory requirements (USDA)

Future Plans

Globalization:

-> Grow annual sales by 8%-10% in its existing businesses

-> Develop paths to retail markets oversees

-> E-commerce has become an increasingly important distribution channels

-> Increased efforts to do international acquisitions

-> I.e: Hain recently made a joint venture with Hutchison China Meditech to

distribute infant formula products in china and other Asian markets

-> Use economies of scale & new distribution channels to increase sales

-> Set limits to what they're willing to pay to ensure don't overpay

-> strategy for rapidly growing companies after acquisitions

-> forecasting is therefore critical for managing raw material sourcing

->Use CO-PACKERS (150 independent companies which manufacture Hain's products)

-> make up 39% of its revenues

->Advantages: Low volumes products, high learning rate, flexibility

->Disadvantages: Take 10-15% margin

-> Never deviates from a health and wellness focus and has avoided most vertical integration

opportunities (don't want to compete with retailers)

->Has also started moving towards international expansion

With their e-commerce retails they are able to go Global

Company meeting Success Factors?

Issues

SWOT ANALYSIS

Weaknesses

Strengths

VRIO ANALYSIS/COMPETITIVE ADVANTAGE

- Rely heavily on co-packers

-

Alternatives

- First-mover advantage

- Strong entrepreneurial culture

- Diversified brand portfolio and products

- Large and powerful distribution channels ( Walmart, Whole Foods, Amazon, Costco, etc.)

- Efficient management style

- Young talent workforce

- Good relationship with suppliers

- Early adopter of new technology in food business

- Strong product lifecycle approach

• Category management and consumer insight using big data strategy
• Ensure regulatory requirements and customer satisfaction

Implementation

Solutions

Questions?