After a difficult few years in the UK, Hain Celestial believes it is on track with a handful of key deals

After a difficult few years in the UK, Hain Celestial believes it is on track with a handful of key deals

The US can be regarded as a graveyard for UK businesses but, often, a journey in the opposite direction can prove just as challenging.

One US food company that has found the going tough in the UK is Hain Celestial. The group, best known in the US for brands like Earth's Best organic baby food and Celestial Seasonings tea, first crossed the Atlantic in 2006.

In May that year, Hain bought a fresh prepared foods business from Heinz based in Luton, where it still has a UK base. A month later, the US group bought the Linda McCartney brand and a wider meat-free business from Heinz. That November, Hain also snapped up meat-free and non-dairy beverage business Haldane Foods from Archer Daniels Midland.

Hain had high hopes for its UK business but, four years on, it has yet to make a profit in the market, suffering as consumer demand for convenience food tailed off in the downturn. The company also lost its key private-label contract with Marks and Spencer and a co-packing deal with Heinz, which hit sales and forced it to restructure its UK business.

Earlier this year, Hain moved to end production at a site in London it acquired through its 2008 acquisition of foodservice sandwich supplier Daily Bread and move production to its facility in Luton.

Nevertheless, Hain's board in the US is upbeat about the company's prospects in the UK. The company has won listings with Tesco and last week (16 June) announced the acquisition of UK food-to-go business Churchill's Food Products. Hain believes that, with the help of Churchill's, its UK arm will become profitable again in its next fiscal year, starting in July.

The acquisition of Churchill's is the first Hain has made in the UK since Peter McPhillips, executive chairman for Hain Celestial Europe, joined the business in the summer of 2008. Hain does have a presence on the continent but it is in the UK where the company has had a tumultuous couple of years.

Speaking to just-food in the week the Churchill's deal was announced, McPhillips says the acquisition of Churchill's fits into Hain's sandwich-making business and adds customers to a business that had to readjust in the wake of the loss of the M&S contract.

"It wasn't the easiest of challenges that I've had to take up in my career to lose 100% of the business and then have to replace it," McPhillips says of the loss of the M&S sandwich contract. "We were fortunate that we were able to transfer the Daily Bread business into Luton. Daily Bread had a good history [and] I was non-exec chairman of Daily Bread and joined Hain via that route. We absolutely had to start again and say 'how are we going to rebuild this?'."

McPhillips says Hain's food-to-go business has been re-branded under the Daily Bread brand and believes the Churchill's deal will add to that part of the US group's UK operations.

"The acquisition of Churchill's was in our core competence of sandwich making. What I don't want to try and do is be all things to all people. I want to try and remember what we're famous for and that's for making fantastic sandwiches," McPhillips explains. "The acquisition ... gives us more mass in the market areas we want to be in. Daily Bread supplies none of the three major customers that Churchill's is supplying."

However, McPhillips, a former executive at UK private-label food group Uniq, says Hain has ambitions to supply not just own-label sandwiches to retailers and to foodservice outlets but branded products as well.

The Daily Bread brand is more prevalent in the foodservice sector but Hain already sells baguettes and bagels under the Daily Bread bread into Tesco stores in London. After the loss of the M&S contract, Hain is looking to move away from its past as purely a private-label sandwich supplier and McPhillips says the business is targeting a fifty-fifty split between branded and own-label sales.

There have been signs that convenience food and food-to-go are seeing demand return after the depths of the downturn and McPhillips believes consumers are prepared to buy sandwiches but warned his company and its peers against complacency.

"People are still prepared to buy sandwiches at lunchtime - they want to have quality and convenience. [But] product development has to be very focused. You have to be careful you don't have a proliferation of esoteric products. But the good staple products are still doing very well," he says.

Hain's UK business is not just baguettes and bagels; the company also sells the Linda McCartney meat-free brand. McPhillips says the company has worked hard at repackaging and adding to the range to "re-establish the Linda McCartney brand credentials" and insists the line has seen "really good growth".

However, McPhillips points to a wider own-label frozen meat-free range, as well as a foray into private-label frozen desserts, as proof the Hain business is moving forward.

"We are a player in the marketplaces that we have chosen to be in - food-to-go, the frozen meat-free sector, both under brand and private label, and frozen desserts, which is predominantly private label. We're going into Tesco and Sainsbury's and Asda and people know us now, they know who Hain are," McPhillips says. He estimates that, next year, Hain's UK business could "hopefully" generate annual sales of "in excess of GBP50m".

Given all the change Hain's UK business has gone through in recent months, perhaps it is little surprise that the operation is yet to turn a profit. McPhillips declines to give his own estimate on when the business could move back into the black, preferring to stick to Hain's official guidance but he is optimistic about the future.

"Are we what we want to be? No, but we're on the journey of getting there. I'd like to think in another couple of years we would be talking about several brands, all of which are in the organic, natural, healthy-eating or personal care areas," McPhillips says, suggesting the company could make further acquisitions in the future.

But does he think Hain should have made a profit in the UK by now? "We'd all like to be bigger and quicker but the reality is we lost all of our Marks and Spencer business. This wasn't like we lost 20% and we had to make it up," McPhillips insists.

"On the frozen food side, we had no representation in any major retailer of any size under Linda McCartney or private label. These weren't little hills we had to get up - these were a couple of bloody big mountains. I'm absolutely delighted with the progress we have made."