USA: Hain Celestial: the cost containment challenge (COMMENT)

As food companies jostle for organic product market share, one company is confidently snapping up important minor players. Hain Celestial's latest acquisition of Acirca Foods reinforces its position as a major force in the specialty market, but cost containment will remain a major challenge for Hain's and the entire organics and specialty products industry.

The Hain Celestial Group is continuing with its strategy of growth through acquisition. Barely six months after it acquired Imagine Foods, Hain's has now acquired the privately held organic foods specialist Acirca Foods.

Imagine specialises in aseptic and refrigerated rice and soymilks, organic and aseptic soups and broths, and organic frozen desserts, while Acirca owns the Walnut Acres brand of organic fruit juices, soups, pasta sauces and salsas. Both purchases are helping Hain Celestial solidify its position as one of the leading US specialty foods companies.

Owned in part by HJ Heinz, Hain's is clearly steeling itself for battle with other food industry giants. The popularity of organic and natural foods among consumers is continuing to grow in stores both inside and outside of the specialty channels. Companies such as General Mills, ConAgra and Publix are stepping up their own organic product development and marketing, thereby slowly squeezing out the smaller market players.

However, major stumbling blocks remain for the US organics industry. The introduction of the National Organic Program, intended to standardise product content and labelling, is proving unexpectedly onerous and increasingly costly for US farmers. The new costs of ensuring US crops and products remain free from genetically modified organisms and pesticides are impacting production and retail prices. While consumers are willing to pay some price premium for these products, manufacturers are under increasing pressure to curtail costs and prevent these premiums from spiralling too high.

The next few months will prove critical in terms of integrating Acirca's Walnut Acres brands into Hain's own portfolio and also in terms of how the organic industry and loyal consumers deal with pricing pressures. Hain's singular focus on, and experience within, the specialty market means it is well positioned to make the deal work, and this in turn is likely to ultimately strengthen the industry as a whole.

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