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According to Statista, the organic food market in the U.S. is expected to be worth $42 billion next year. On a global scale, this market is expected to be worth $104.7 billion in 2015, according to Transparency Market Research. Looking at these numbers, it isn't surprising to see why food industry players such as General Mills (NYSE: GIS  ) and Kellogg have been increasingly focused on including healthy food items in their product portfolio.

However, General Mills and Kellogg aren't pure-play organic food players. Hence, investors looking to benefit from the rapid growth of the organic food industry should consider either Hain Celestial (NASDAQ: HAIN  ) or Annie's (UNKNOWN: BNNY.DL  ) , both of which have done really well this year. Hain Celestial could turn out to be a better pick, as the company is bigger, more diversified, and cheaper than Annie's. Also, Hain has been growing at a pretty good pace and a look at its recently released first-quarter results will illustrate the same.

Hain's breathtaking growth and strategies
The strong performance of its existing brands and recent acquisitions helped Hain achieve 33% year over year growth in revenue in the previous quarter while adjusted net income grew 32%. Ella's Kitchen and BluePrint, two businesses that Hain had acquired in the previous fiscal year, contributed to its impressive growth. Hain launched Ella's products across 4,000 stores in the U.S., and it is now preparing to launch the brand in continental Europe as it looks to move beyond the U.K. 

Hain was named the second-fastest growing food company in the U.K. recently, from where it derives almost a quarter of its revenue, and it is not stopping at that. Hain has once again started selling its New Covent Garden Soup at Tesco, almost a year after it was axed from the store when Tesco launched its own brand. In addition, Hain also invested in a non-dairy facility in Germany earlier this year as it intends to roll out coconut milks, nut milk blends, almond milks, rice milks, etc. 

Hain sees great opportunity to grow its business further in the U.S., which accounts for almost 66% of its overall revenue. According to Nielsen, more than 90% of Americans have purchased organic or natural products, but just 25% of them have tried out Hain's offerings. As such, management is looking to increase its distribution channels and increase the width of its product portfolio, which is what it did when it launched Ella's Kitchen and met with success.

As a result of product introductions and better distribution, Hain witnessed an 11% jump in the consumption of its products in the previous quarter. The fact that Hain has more than 20 brands in its portfolio gives it an advantage when it comes to entering new markets, while also giving consumers a wide array of choices. In fact, 14 of Hain's brands grew in either double digits or high single-digits in the U.S. in the previous quarter.  

Looking ahead, the company expects to have 50 new products in its stores before New Year's Day, with special items such as an antibiotic-free turkey lined up for the Thanksgiving holiday.  This strong product pipeline and presence across different markets puts it in a good position to benefit from the growth of the organic food market and compete against the likes of bigger food companies such as General Mills.

General Mills -- Bigger is not always better in this industry
General Mills has been focusing on improving the health quotient of its product portfolio. It has been reducing sodium content in its food offerings and is focused on reducing sodium in its top 10 product categories by 2015 by 20%. General Mills is also expanding its organic food offerings, acquiring Yoplait and Yoki Alimentos over the past couple of years.

Both these acquisitions have driven General Mills' growth, with Yoki driving Latin American sales and Yoplait leading to better performance in Canada. However, Hain Celestial's own Yogurt brand -- Greek God -- has been growing at a good pace. Greek God saw strong growth in its distribution in the previous quarter and is approaching $100 million in global sales. It still has a lot of room to grow in the $6.2 billion yogurt business in the U.S.

Hain is a better pick
Hain's diversification makes it a potentially better pick than peer Annie's. Annie's has around 135 products under its belt. This doesn't seem to be great when one considers that Hain is slated to launch 50 new products (more than a third of Annie's existing line up) in a very short time frame as mentioned above. Moreover, at a trailing P/E of almost 73, Annie's is twice as expensive as Hain, but its growth isn't as impressive.

Even on a forward P/E basis, Annie's is expensive with a multiple of 39x, while Hain's forward P/E is much more reasonable at 24. In the previous quarter, Annie's revenue grew 24% year over year to $58.7 million while adjusted earnings grew 19%, which is less than what Hain had reported. Hence, Hain seems to have a better risk-return profile because of its diversity and superior growth rate.

Hain's performance has been outstanding so far this year with the stock appreciating more than 50%. However, as we saw, it still trades at a relatively inexpensive level when compared to its peer. Moreover, Hain's geographical diversification and well-established brands are its strengths and the company can continue to get better in the long run.

Hain isn't the only high growth company to watch
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Related Tickers

10/21/2014 7:59 PM
BNNY.DL $0.00 Down +0.00 +0.00%
Annie's CAPS Rating: ****
GIS $64.65 Down -0.41 -0.63%
General Mills CAPS Rating: ****
HAIN $34.98 Down -0.18 -0.51%
Hain Celestial CAPS Rating: ****