Hain Celestial (HAIN -1.30%) operates in a growing market driven by consumer trends toward healthier living.
The following chart illustrates Hain's tremendous growth:
HAIN Revenue TTM data by YCharts
Hain recently reported results that were better than Street estimates in the fourth-quarter as well. With an aging and health-conscious population being driven toward the concept of organic & natural food for healthier living, Hain's sales have been pretty strong.
Organic food market growth
On the whole, the food retail market is slated to grow at an estimated CAGR of 5.5% globally for the period of 2011-2016, as compared to 5.7% for 2007-2011. The market is estimated to be worth approximately $7 trillion by the end of 2016.
The Rest of the World (ROW), which includes Latin America, Australia and other regions, is expected to grow at a CAGR of 16.5 %. Rising health concerns will be the main driver for growth in the organic food industry globally. The Americas will account for more than 50% of the market.
Acquisitions driving growth
Hain Celestial has been on a buying binge as it looks to make the most out of the opportunities in the organic food space. Last year it acquired Premier Foods to expand in the United Kingdom; this positioned the company among the top 40 food and beverage suppliers in the U.K.
In December last year, Hain acquired the BluePrint Juice brand. BluePrint products generated sales of approximately $20 million in 2012, and Hain Celestial will look to build upon the rapid growth of the brand's BluePrint Juice line, which is sold at a number of national, natural and gourmet retailers, including Whole Foods (WFM). Hain Celestial is Whole Foods' biggest supplier .
In May this year, Hain Celestial purchased Ella's Kitchen Group, a maker of organic baby food with 80 products offered in the United Kingdom, the United States, and Scandinavia. Ella's posted sales of $70 million in 2012. Now that it's in control, Hain Celestial looks to increase Ella's sales to $200 million within a couple of years. Hain Celestial's acquisitions are known to perform well, and this acquisition is expected to be accretive from 2014 onward.
These expansions are a positive
Organic food and beverages have gained so much popularity across the globe over the past few years that they can now be considered mainstream. Supermarkets such as Wal-Mart (WMT 0.57%) carry an ever-increasing range of organic food product lines.
Wal-Mart also increased its focus on the introduction of private label organic products at lower prices, in order to increase their accessibility for consumers. This means that organic food, drinks and personal care products also form a channel of growth for a retail chain like Wal-Mart.
In addition, Wal-Mart's South African unit, Massmart, plans to take a majority stake in Kenya-based supermarket chain Naivas. This will give Wal-Mart a strong foothold in the fast-growing east African economy. Currently, Naivas operates 28 stores, and plans to add two more by the end of the year.
In addition, Wal-Mart has also been expanding internationally, particularly in emerging economies through new stores and accretive acquisitions. Hain Celestial supplies Wal-Mart as well, so any expansion of Wal-Mart is also going to be a win for Hain.
Similarly, Hain also stands to benefit from the rapid expansion of Whole Foods. Whole Foods plans to triple its store count in the next few years and grow to more than 1,000 locations from the current 340 stores. Moreover, Whole Foods looks to penetrate smaller markets that have populations of around 75,000 people. Whole Foods is also looking to improve its presence in Canada, and recently stated that it intends to open 40 more stores in the nation. Hence, these initiatives of Whole Foods should ultimately benefit Hain Celestial, since it is a distributor of Hain's products.
Conclusion
Hain has a lot of opportunity going forward. It is targeting a fast-growing organic food market with acquisitions, and the ever-growing network of its distributors should aid its growth. The stock's appreciation of almost 50% this year is a testament to its strong performance. Considering the opportunity ahead, Hain can go higher.
