Snacking on Success
July 1, 2004
Snacking on Success
How aggressive new product strategies drive success at Hain Celestial
by Lori Dahm
The Hain Celestial Group Inc., Melville, N.Y., is the result of brilliant insight coming true. That insight belongs to CEO Irwin Simon, who had the vision to form a natural and organic foods conglomerate 10 years ago, long before the natural and organic foods industry was demonstrating its current 8.9% annual growth.
Now, while mainstream food companies are scrambling to create natural and organic versions of core products, Hain Celestial is in the catbird’s seat, boasting 29 natural and organic brands in more than 30 different categories, well-established and profitable product lines and loyal consumer audiences.
“Ten years ago, after spending many years in corporate America working for bigger companies, I believed I could compete with those same companies by creating value in categories they weren’t considering, like Kosher and natural products,” says Simon. “I felt that healthy eating was not a fad or a trend, but was due to become a major part of our lives. Noting that the big guys weren’t in that market yet, I saw this as my opportunity to take that category to another level, and acquisitions were a way to do this. My timing was right, I was lucky and I put in a lot of hard work. Ultimately, my intuition and gut feel were on target.”
With annual revenues of Hain Celestial tallying $500 million last year, Simon’s foresight was well placed. The company continues to grow steadily through acquisitions — the means Simon employed for the company’s original debut — and new products, which are integral to the equation.
“New products are the lifeblood of every brand, the lifeblood of the company. This year we are looking to grow between 17 and 18%, partially from organic growth such as expanded distribution, but at least $10 million to $15 million from new product sales in 2004,” says Simon. “New products have always been essential to Hain Celestial and will continue to be so.”
There is a reason that new product development is second nature within Hain Celestial. As the company’s growth has been fueled by acquisitions over the past decade, the company’s protocol with acquisitions is to immediately begin product line evaluation, subsequent reformulations and new product introductions that improve the brand. This rigorous practice has ensured that new products are, indeed, the life force pumping through the veins of the creature known as Hain Celestial.
Snacking Way of Life
Americans are continuing to make snacking a way of life, and Hain Celestial has a few powerful brand equities in the snack category, including Terra chips and Health Valley snack bars and other products. Health Valley is an example of Simon’s infamous “complete overhaul” upon acquisition.
“In 1999, when we acquired Health Valley, we wanted to keep the box and not the product, so we did a complete makeover of every product in the line. A lot of the products were fat free, which wasn’t as important to the consumer and was causing taste issues,” says Simon. “The equity in Health Valley was that consumers believed the products were healthy, so we reformulated every product to become low in fat, but each one was great-tasting. The products remain healthy because they are natural and free of trans fats and genetically modified ingredients.”
This past year, Health Valley continued to offer consumers healthier alternatives to mainstream snack products, as new introductions included Health Valley Peanut Butter & Jelly Bars in Grape, Strawberry and Chocolate varieties; Mini Cookies in Chocolate Chocolate Chip, Chocolate Chip and Peanut Butter. Due to be introduced in 2004 are Cookie Bars in Strawberry Shortbread, Chocolate Vanilla Crème and Peanut Butter Swirl varieties.
Overall Strategic Vision
Simon entered the natural and organic foods industry with four brands and a prayer in 1992. His strategy then, as now, was to keep the acquired brands true to their brand identity with every new product introduction.
“I came into the natural foods industry because I truly believed in it. With every acquired brand I tried to make sure new products upheld what the natural industry was all about, rather than taking a brand and developing a mainstream product line with it,” Simon says. “That has been one of my keys to success, that we retain natural and organic as the primary attributes in our new product introductions, and also that we emphasize keeping the equity of each brand steadfast.”
Sometimes maintaining brand equity involves reformulation of an entire product portfolio following its acquisition. For example, one of the company’s largest acquisitions, Arrowhead Mills in 1998, underwent a complete product line reformulation after becoming part of Hain Celestial.
Simon and his staff determined that the original brand identity of Arrowhead — organic, gluten-free options for consumers — had been obscured as the brand progressed. Bringing the brand name back to its original equity became the first priority for Hain Celestial.
“Our key has always been to improve products and packaging upon acquisition, and then bring new products into the brand line,” Simon notes. “Improving taste is where it begins, especially because in a lot of the cases with brands we acquire you want to eat the box and not the product. Taste is key — your products have to taste good. With the technological capabilities being developed every day, there are a lot more ingredients that can help with that.”
Hain Celestial acquires brands by considering the categories in which the company’s brands are leading and which categories do not currently have a Hain Celestial force. He is pleased that the company leads in 13 of the Top 15 natural and organic categories.
The company’s expected new product release count for the first half of 2004 is to be more than 80 in all. Within those 80 new products will be a significant number of low-carbohydrate products as well as new varieties of favorites like Terra chips, Health Valley snacks and cereals and new ventures from baby and toddler food brand Earth’s Best. And the expectation for each upcoming new product introduction is high — the precedent at Hain Celestial is that this emphasis upon growth through new products translates to profitable results.
New Product Strategy
Not only does Hain Celestial place great emphasis upon developing new products, but the company delivers. New products are developed quickly — sometimes in as little as six weeks — and are developed against strict criteria for taste and quality.
Last year saw at least 47 new product introductions within the Hain Celestial brands, including new products from Earth’s Best, Terra chips, Health Valley snacks, and Garden of Eatin’ snacks among others.
Although Simon has built his company through differentiation from mainstream corporations, new products often result from studying what mainstream competitors are doing and pledging to do it better, more naturally and with healthier ingredients. The result is a plethora of new products each year that find a receptive audience.
“Our point of differentiation is always that our products are healthier than their traditional counterparts. We don’t use hydrogenated oils or genetically modified ingredients and often our products are all-organic or at least natural,” says Simon. “We look at what the competition is doing, and I’m a big believer in discovering how to do something better, make your product taste better, build a better mousetrap. A lot of big companies fall behind when it comes to new product innovation because the products don’t have a reason for being. Our natural and organic focus is our reason for being.”
The new products being released this year include a major emphasis on low-carbohydrate products, with 47 of the 80 new products carrying the new “CarbFit” designation, which functions as a co-brand with the company’s regular brand lines. Realizing that the window for low carbohydrate products may be limited, once the decision was made to develop CarbFit versions of regular brands, development was swift.
“Our product development cycles are extremely rapid when necessary, and we will work on all aspects of a product’s introduction simultaneously in order to conflate the development cycle. We work on product development, packaging, sell sheets, distribution channels, all parts of the product at once,” says Maureen Putman, general manager of Hain’s grocery business unit. “Sometimes you have to break the rules and not adhere to due process for the sake of speed to market. If we weren’t being flexible like this we wouldn’t be introducing 80 new products across so many different categories in the next few months.”
Putman says that introducing 80 new products might be slightly more fast-paced than usual, but not much. Ideas for new products come from everywhere — all functions within the company, consumers, suppliers, and even from the medical advisory board that Hain Celestial has in place.
“Innovation comes from keeping your finger on the pulse of the trends. I would like to claim that Hain Celestial is smarter than any other company, but I think it is more accurate to say that we are insightful. We look at trends and make better, all-natural and organic versions of what is happening in the food industry,” Putman adds. “This is our point of difference, and what makes us innovative. We take mainstream products and make better variations.”
The consumer trends that Hain Celestial deems relevant include the current obesity crisis — both for children and adults — which is influencing the consumer outcry for food products that are sugar-free, low-carb, and low in fat. The company predicts that the next trend due to influence the food industry will be a focus upon caloric intake.
“The company environment here is unique. We are dedicated to ensuring that our products remain relevant to the consumer, not just by being natural or organic, but by following relevant consumer trends,” says Putman. “We must be responsive to the consumer while maintaining our natural and organic focus, and continue to promote our company environment where we can break rules in order to get the right products to market.”
Fitting in with Low Carb
New product introductions from Hain Celestial encompassed many categories in 2003. The biggest news was the creation of the CarbFit designation, which functions as a co-brand and crosses multiple Hain Celestial brands.
“We went back and forth on the co-branding decision with CarbFit. Ultimately we decided that we didn’t want to hang the low-carbohydrate designation on a single brand, because each brand has its own unique and distinct personality,” Putman explains. “We also remembered the no-fat/low-fat days. That trend lasted a few years and when it was over, the brands associated with low fat also died. We didn’t want to make that mistake.”
Last year’s low-carbohydrate product introductions included Hain PureSnax CarbFit All Natural Soy Nuts and Health Valley CarbFit Low Carb Cookies.
“One of the reasons that our speed to market is so impressive with CarbFit is because all of the low-carbohydrate products were developed by the existing brand’s R&D team,” Putman suggests. “We did not pull development away from the brand group with expertise in developing great-tasting products for that category, and so these products were all developed within a six-month time frame.”
CarbFit products are the only natural, GMO-free low-carbohydrate products on the market. In addition, the priority during development was to create the best-tasting low-carbohydrate products, rather than achieving the lowest possible carbohydrate count at the cost of taste. The company also pledges to focus on core brands and not get carried away with the low-carbohydrate trend.
Editor’s Note: This story was originally published in the January 2004 issue of New Products magazine, a Stagnito Communications publication. Lori Dahm is the magazine’s executive editor.