US/UK: Daniels deal "beefs up Hain's retail presence"
The US$230m acquisition, announced yesterday (26 October), will add brands like New Covent Garden soup to Hain Celestial's UK stable, which includes the Linda McCartney meat-free range.
Hain Celestial will also attain a presence in categories like desserts and soft drinks, with the deal taking its UK sales from GBP55m to around GBP335m.
Speaking to analysts yesterday, Simon, Hain Celestial's president and CEO, admitted the company's UK business had had its "challenges". Hain Celestial entered the UK in 2006 and made a profit in its first year in the market but has since been loss-making.
When asked if the Daniels deal was done to solve its UK problems, Simon said: "The current problem in the UK has been on its way to being solved and it's on its way to break-even," Simon said.
However, he added: "The problem was breaking even may have been one part of it but we had infrastructure in place that was too large for a GBP55m business. You're kind of fish or fowl there, you're not important to the retailers. My phliosophy was you either sell and get out or you get bigger."
Simon said the Daniels deal would give Hain Celestial a presence in the "fastest-growing category" in the UK - chilled foods - and give it greater clout with the country's retailers. "If you walk into a Tesco and say you're part of the Daniels Group, they're not going to say 'Who?' anymore," he said.
As well as diversification and scale, Simon said the company saw opportunities to use the Daniels business to expand its own UK business. He hinted that Hain Celestial could look to use Daniels' presence in chilled foods to take the Linda McCartney brand into chilled ready meals and said the company's Daily Bread sandwich business could benefit from Daniels' wider customer base.
However, the company is also looking to achieve "synergies" from the acquisition. Hain will look to consolidate back-office and innovation functions and use its own facilities in Fakenham and Luton to manufacture some Daniels products.
"We have excess capacity at Luton. There's capacity needed in some of Daniels. Putting more volume through Luton will help it tremendously," Simon said. "Daniels is about to build a new facility for fresh desserts and we can do some of those immediately at Fakenham, which is a big capex avoidance and get us in there much quicker."
Nevertheless, Simon emphasised Daniels' innovation and said there were opportunities to take some of the UK firm's products into the US market. He said there was a possibility of using Daniels' experience in chilled soup in the US. "We would look to bring some fresh soups into the US. The canned soup category is going through some challenges and if we can get the distribution it's a big opportunity."
The acquisition is the latest this year for Hain Celestial. In February, the company bought French organic foods maker Danival and Norwegian cracker firm GG UniqueFiber.
Simon also pointed to opportunities for the combined business in Europe. He said Hain could roll out Daniels' products throughout Europe through its existing distribution network on the continent.
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