The Hain Celestial Group has become the darling of Wall Street even though its growth through acquisition strategy is making less and less sense (unless of course you think buying not one, not two but three natural body care companies is wise).
Turns out the fusionists love the company too. Okay well maybe it’s just that oh so darn cute you just want to hug him Sleepy time Bear. Or maybe they have a damn good publicist because <a www.wwd.com/notavailable/archive?target=/search/article/113362&articleId=113362&articleType=A&industryKw=search&industryKw2=searcharticle Women’s Wear Daily the trend-setting-est. magazine of the NYC zeitgeist praised the company for becoming “a bona-fide player” in the natural personal care segment. What they don’t mention is that buying Jason, Zia and Avalon is not so different from buying three cars for your only child’s 16th birthday.
Growing through acquisition only makes sense when a few things happen. Namely, that the new owners can grow sales beyond the entrepreneurs who started the company and, that the category shows growth. On both points we think the measures are wrong. Hain Celestial’s disability to manage newly acquired brands is historic. (With apologies to our friends who work there) And furthermore the natural body care segment, while darling and cute has two problems. When compared to a % of total sales in conventional stores, body care sales in natural supermarkets under perform. And furthermore in conventional stores these products, jammed in so many lousy sections that offer little excitement fare even worse.
The fact is that high style soccer moms and fashionable corporate types may buy all their groceries at Whole Foods but their lotions and potions are being purchased at Sephora, Macy’s and Nordstrom’s and glassy ground floors of every major department stores instead.
So if you’re shopping for natural stocks, we’re not bullish on Hain. We think that there the company might be just a sleepy old bear dressed up to look mean, lean and aggressive.