Hain Celestial said the meat-free category is displaying some positive undertones as sales and market share gain traction.
Market share for the company’s Yves alternative-protein brand in Canada rose 270 basis points in the first quarter in the fresh segment and 70 points in frozen, despite what president and CEO Wendy Davidson described as “softness” in the broader category.
In the UK, Hain Celestial’s Linda McCartney’s brand “increased velocities” in frozen by 20%, with an uptick in distribution of 12% ahead of the retail meat-free launch of the Linda’s Best Burger set for next year.
“As we see consolidation in this category, consumers are returning to leading brands in this space,” Davidson said as she discussed first-quarter results yesterday (7 November) with analysts.
Davidson, who took up the reins at US-headquartered Hain Celestial in January, reiterated her commitment to meat-free amid “encouraging signs of stabilisation” in the category, which has seen a number of manufacturers fall by the wayside in the US, Canada and Europe this year.
“We continue to believe in the long-term growth potential of the global meat-free category as consumers are seeking veg-forward, flexitarian and vegetarian options that deliver on taste and convenience,” she said.
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Despite those positives, infant formula in North America was a weight on Hain Celestial’s $425m in global first-quarter sales and is anticipated to remain a drag in the second quarter before picking up in the back half of the 2024 fiscal year.
Sitting within the better-for-you company’s baby and kids segment, infant formula partly contributed to a 3.3% decrease in Hain Celestial’s group net sales and a 2.9% drop on an organic basis.
“The net sales decline in the first quarter was driven predominantly by baby and kids. The entire [formula] industry has experienced supply constraints. While we are working closely with industry partners to accelerate availability and bring on additional supply, we are now expecting these challenges in supply to continue into the second quarter, and to begin to recover sometime in the second half of the year,” Davidson explained.
Lee Boyce, who replaced Chris Bellairs in September as finance chief, said infant formula is likely to be a $10m drag on second-quarter revenue.
Baby and kids, however, did see “strength” in baby food and purées, particularly in toddler snacks under Hain Celestial’s Ella’s Kitchen brand in the UK and Earth’s Best in the US.
Hain Celestial seeing “progress”
The sector is one of five core focus areas introduced by Davidson under her Reimagined 2027 strategy for the branded and private-label business, along with snacks, meal-prep, which includes meat-free, beverages and personal-care products. Hain’s Celestial’s markets are now based around the US, Canada, the UK, Ireland and Europe.
Despite the decline in organic sales, the drop was within Hain Celestial’s own guidance of low single digits, while a 33% decrease in adjusted EBITDA to $24.1m in the quarter was “ahead of our expectations”, Davidson said.
The 2027 strategy envisages achieving “at least” a 3% CAGR in organic sales and “at least” the low double-digit equivalent in both adjusted EBITDA and the connected margin. The margin fell 250 basis points in the quarter to 30 September to 5.7%.
On the bottom line, Hain Celestial delivered a $10.4m loss, versus a $6.9m profit a year earlier.
Davidson added: “With Hain Reimagined, we will invest as we go. Starting in quarter two and over the balance of the year, we plan to utilise the over-delivery from quarter one to invest back in the business. This is consistent with our stated plan to fund our strategy as we unlock fuel through accelerated growth and efficiencies.
“Excluding the formula supply challenge, we are seeing progress across the business, driven by our strategic focus on brand building, channel expansion, and innovation.”
Part of the strategy is a greater focus on the foodservice and convenience channels, along with colleges, universities and the travel segment, where Hain Celestial “gained incremental distribution” in the first quarter.
“We said all along that the back half of ’24 was where we were really going to see a lift. That’s when we would see our fuel programmes start to really lean in, it’s where we would start to see some of the early investments in channel expansion and innovation start to play out,” Davidson said.
“The shape of the year does very much have a quarter three, quarter four lift, compared to a quarter one, quarter two.”