Although Hain Celestial's fiscal Q1 results showed strong sales growth over the previous year, rising costs led to a 5.5% profit reduction. Nevertheless, Hain remains confident of its strategy. Indeed, as it integrates the acquisition of its first personal care company, the company may well have plans to corner the entire natural and organics market.

Natural and organic products company Hain Celestial has shown strong growth over the first quarter of its 2005 fiscal year, despite an actual decline in profits. First-quarter sales for the New York based company grew 8.3% to US$137.6m from sales of $127.1m in the previous year.

The first quarter saw total cost of goods sold (COGS) rise to $98.6m from $89.9m a year ago. This, combined with higher selling, general and administrative expenses, has led to a drop in gross sales margins, from 29.2% to 28.3% this quarter. The company cited higher ingredient and freight costs as the reason for the rise in COGS.

Nevertheless, Hain remains upbeat about its prospects for the future, thanks to strong October sales and further progress in integrating its latest acquisitions. These include the Ethnic Gourmet brand of natural frozen meals and the Rosetto brand of frozen Italian products from HJ Heinz, as well as JASON Natural Products, a natural personal care company; purchases that reflect Hain's ambitious expansion plans.

Indeed, its foray into the personal care market is an interesting move for the company, which was previously exclusively food and drink oriented. In acquiring JASON Natural Products, Hain might well be a testing the waters of a wider diversification into the entire natural and organic products sector.

The natural and organic trend is certainly one suited to cross-category initiatives. The consumer base attracted to such food and beverage products overlaps significantly with those wanting natural ingredients in their personal care products. Other natural and organic personal care companies should beware; Hain Celestial has a strong historical record of picking up winning natural and organic companies and brands. A strong entry into the segment could prove highly lucrative for the company, and worrying for competitors.

(c) 2004 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.