Stock of the Week: Hain Celestial

An attractive acquisition target that’s better than the sum of its parts.

Andrew Willis 7 September, 2021 | 4:48AM
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You’ve got to hand it to Hain Celestial (HAIN). They’ve gone into almost every aisle of the grocery store and sought to just make food and personal care products… better. But that well-intentioned holistic approach has come at a cost to the company.

With brands from Sleepytime tea, to Sunripe fruit, and Alba Botanica skincare, Hain’s been ahead of its time operating a niche spot across the natural and organic product spectrum – resulting in a complex company, with marketing resources spread thin. And that could limit future growth prospects to niche-like levels.

Equity analyst Rebecca Scheuneman says there’s been underinvestment in brands, which has resulted in a lack of brand equity and pricing power. Until recently, Hain spent just over 1% of revenue on advertising, compared with a 4.5% average for packaged food peers.

But recently, with a new CEO, Hain has begun restructuring to simplify the portfolio and strengthen marketing and innovation, among other improvements. After a 2% decline in 2019, we now see the company ramping up to 5% growth by 2025 – which will keep pace with mainstream peers.

With a healthier long-term outlook and a fast-growing natural and organic product category, this company built with a long string of acquisitions now itself looks ripe for acquisition.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
The Hain Celestial Group Inc38.43 USD-1.21Rating

About Author

Andrew Willis

Andrew Willis  is Editor for Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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