Inside Hain Celestial’s fight to regain its swagger

This story is the first in a two-part series examining the turnaround of Hain Celestial. The second piece will profile company CEO Mark Schiller, a Pinnacle Foods and PepsiCo executive, who brought to Hain his expertise of rehabilitating down-on-their luck brands to make them relevant again for modern-day consumers. Mark […]

This story is the first in a two-part series examining the turnaround of Hain Celestial. The second piece will profile company CEO Mark Schiller, a Pinnacle Foods and PepsiCo executive, who brought to Hain his expertise of rehabilitating down-on-their luck brands to make them relevant again for modern-day consumers.

Mark Schiller describes himself as an “adventurer” and a “thrill seeker.” He’s gone skydiving twice. In 2016, Schiller hiked the strenuous 33.7-mile Inca Trail to Machu Picchu in Peru, and he’s making plans to climb Mount Kilimanjaro in Africa with his son.

But for the 59-year-old, his biggest challenge yet may be found inside the headquarters of Hain Celestial, where Schiller is orchestrating a multiyear turnaround of the healthy food and beverage maker.

“It’s been quite a ride,” the seasoned food industry executive said with a laugh at the beginning of a nearly 90-minute interview with Food Dive. “I like to kind of go into places that make me uncomfortable. And I get great satisfaction out of conquering things that I’m afraid of … I like to push the envelope. And for me, this was a career envelope push this late in my career.” 

When Schiller took on the president and CEO roles of Hain in November 2018, the maker of Celestial teas, Terra chips and Sensible Portions Garden Veggie Straws was in disarray and in danger of losing its enviable position as the leader in organic and natural foods.   

After more than a half decade where revenue grew more than 20% annually, Hain was suddenly facing a slowdown in sales and shrinking margins. Large CPG manufacturers such as General Mills and Nestlé were flooding into the health and wellness channel in an attempt to offset slowing sales elsewhere in their businesses. 

Optional Caption

Christopher Doering/Food Dive

 

It was an abrupt awakening for Hain, which was founded by Irwin Simon in 1993 before the better-for-you category was trendy. For much of its history, the company was the go-to player in natural and organic with its products lining shelves at health and wellness stores, specialty retailers like Whole Foods and later online at Amazon.

As eating better grew in popularity, other seasoned food manufacturers and countless startups began crowding into the category. Suddenly, Hain was no longer the only game in town. Competition for acquisitions, shelf space and customers was suddenly amplified

“That’s when we really needed to be a good operating company, and we didn’t have that kind of philosophy,” Schiller said. “We didn’t have the skills.”

Hain felt pressure not only outside from its competitors but also internally with a drumbeat of self-inflicted financial headaches. The company’s profits in North America had plunged, sliding 75% in the two years before Schiller arrived. 

Hain went a year without reporting earnings after it uncovered potential irregularities in how it accounts for revenue dating back to 2014 that needed to be reviewed. A 2017 company assessment found no internal wrongdoing or need to materially revise old statements, but Hain did announce it would be updating some of its prior reports. The delay in reporting its financial results meant Hain was only a few weeks away from having its stock delisted. 

To compound matters, the company announced the U.S. Securities and Exchange Commission also was looking into its accounting practices. The regulatory agency later chided Hain for weak end-of-quarter sales practices designed to meet internal targets but it did not administer a fine.

Investors fled Hain’s high-flying stock, pushing its share from nearly $70 in 2015 to under $16 just three years later. 

“It just collapsed,” Anthony Campagna, director of research at ISS ESG, said of Hain. “That’s kind of the story of the business. They were this darling of the ‘greenification’ of snacks and then the sales stopped.” 

Back to the basics

Schiller inherited a company that was overly complicated and lagging behind its competitors when it came to innovating. It was throwing millions of dollars at brands that were “hemorrhaging cash” and had no business being in Hain’s portfolio, he said.

“The great thing that I love about food is it’s not rocket science, right? It really is about figuring out what the simple problem is to solve and go solve it,” Schiller said. “My mandate from day one has been figure out how to turn this back into a profitable growth company.”   

For years, Hain had employed a strategy of rolling up brands that rapidly increased the size of its portfolio. During a 25-year period it made 55 acquisitions. The growth-at-any-cost mentality supercharged sales but left Hain with a disparate group of brands in 37 different categories and a portfolio with little coherence. 

More than a third of its nearly 60 brands were losing money, with its 10 biggest offerings responsible for generating nearly two-thirds of its sales. Hain also had a presence in categories that strayed far from its center of expertise in chips, teas and baby food. At one point, it was raising and slaughtering turkeys, and selling fresh fruit, and frozen and refrigerated products.


Retailers “were all saying you guys are the hardest company to do business with, you got to make it easier. You’re not delivering on the promises you make. And so we spent the first 18 months just trying to reestablish credibility.”

Mark Schiller

CEO, Hain Celestial


Left in its wake was a complex and decidedly inefficient business. Many brand divisions had their own way of forecasting sales and submitted revenue figures to Hain using different formats and at different times of the quarter. They worked with their own ad agencies and co-manufacturers, and operated a distribution system unique to their brand. 

The difficulties plaguing Hain’s broader operations were spilling over into its relationships with retailers, who were growing increasingly frustrated with the natural and organic supplier, he said. 

When a customer like Walmart or Kroger wanted to purchase items from Hain, it had to order each individual product on a separate invoice. The items often came from different distribution centers and were delivered on multiple and often partially empty trucks — an expensive and challenging process that frustrated retailers with limited space at their stores to unload products. 

“They were all saying ‘You guys are the hardest company to do business with, you got to make it easier,’ ” Schiller said. “You’re not delivering on the promises you make. And so we spent the first 18 months just trying to reestablish credibility, and get them to see that we would do what we said we were going to do, and then bring them things that would grow their category.”

Cleaning house

Within days of joining Hain, Schiller quickly went to work overhauling the company. He tapped into prior relationships he cultivated while working as an executive at Pinnacle Foods and PepsiCo to improve Hain’s strained relationship with mainstream retailers. 

Schiller started selling off brands, and has since divested 20 of them including Tilda riceArrowhead Mills baking products and poultry brand Hain Pure Protein — eliminating roughly 1,000 of its 2,500 SKUs to focus on the most profitable and best-selling lines. He consolidated Hain’s sales force from five groups into one, and reduced its 40 distribution centers into three main locations.

Schiller put in place incentives to encourage retailers to fill up their trucks — making the ordering process more efficient and cost-effective for Hain, which is already paying for gas, the truck driver and maintenance on the vehicle. Schiller also did away with exclusives for retailers, which in the past would increase Hain’s revenue but often cause it to lose money. Instead, it gave them a window to sell the item before it was made available to other companies. 

Hain Celestial’s profit margins have grown steadily during the last two years

Profit margin percentages from quarterly earnings reports

Scott Mushkin, a retail analyst at R5 Capital, said Schiller and his hand-picked management team brought a much-need “kind of discipline” to Hain that has left the business financially stronger and better positioned to compete in an increasingly crowded organic and natural products category.

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