Hain Celestial Group: A Firm Focused on “Organic” Differentiation

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Ch apte r 4. Mini -Case

Hain Celestial Group: A Firm Focused on “Organic” Differentiation

Bus iness -leve l strateg y, this chap ter’s focus , de tails ac tion s a firm take s to co mpe te

success fully in a pa rticu lar indus try or indus try seg men t by us ing its resou rces , capab iliti es , an d

co re co mpe tenc ies to crea te a co mpe titi ve advan tage . Hain Celes tial Grou p use s a

differen tiation strateg y to co mpe te aga ins t its riva ls. As exp laine d in this chap ter, the

differen tiation strateg y is on e throug h which the firm seek s to differen tiate itse lf from

co mpe titors in way s tha t crea te va lue for which targe t cus tomers are willi ng to pa y. By

deve lop ing an d us ing capab iliti es an d co mpe tenc ies to produc e an d distribu te un iqu e type s of

na tural an d organ ic foods , Hain differen tiates itse lf from co mpe titors. Hain’s strateg y take s

advan tag e of a ne wly evo lving preferenc e amon g so me consu mers in terms of the type s of foo d

produc ts the y bu y. Th is consu mer preferenc e change , which in essenc e is a preferenc e for foo d

tha t is hea lthier an d in so me case s more respons ive to env iron men tal cha llenges , affec ts a

nu mbe r of firms inc lud ing thos e growing foo d produc ts, groce ry stores tha t se ll thos e produc ts,

an d res tau ran ts in which peop le consu me the produc ts.

Irwin Simon is Hain Celes tial’s founde r an d CEO. At the time of found ing , Simon sa id tha t he

“kne w tha t the cho ice to ea t more who leso me food s an d live a hea lthier lifes tyle was n’t a fad or a

trend . It’s a trans formation peop le wan t to mak e for the lon g term.” Th e co mpan y grew throug h

a se ries of acqu isition s of small organ ic an d na tural foods ’ produce rs. Thes e acqu isitions , as

Simon pu ts it, are “no t GE or Heinz or Campbe ll’s … . Growth is co ming from co mpan ies like

Ell’s an d BlueP rint— en trep reneu rial start-ups .” Th e larges t acqu isition to da te was Celes tial

Season ings , a supp lier of tea s an d juices . Th e firm’s success ful acqu isition strateg y ha s

focuse d on “buy ing brand s started by so meon e else ” an d the n “figu ring ou t ho w to grow the m

from the re.”

Th roug h thes e acqu isition s an d the produc ts assoc iated with the m an d becaus e of effec tive

marke ting prog rams, Hain is the larges t supp lier to na tural foo d retailer W ho le Food s Marke ts

(no w owne d by Amazon ). BlueP rint, the co mpan y men tione d above , focuse s on na tural juice s

marke ted to consu mers to ‘cleanse ’ the ir bod ies . Brand s suc h as Terra vege tab le ch ips , Drea m

non -da iry milk, an d Celes tial Season ing s tea are househo ld na mes for the hea lth-orien ted

shoppe r. Sa les of Hain’s po rtfolio of produc ts resu lt in Hain Celes tial be ing the world’s larges t

na tural food s co mpan y.

Th e de man d for na tural foo d in gene ral an d for Hain’s produc ts in pa rticu lar find s Hain se lling its

brande d produc ts to trad itiona l groce ry store cha ins ; thes e sa les accoun t for abou t 60 pe rcen t of the firm’s U.S. sa les . In 2014 , sa les ou tside the United States acco un ted for the remaining 40

pe rcen t of Hain’s revenue .

Mean while, large brande d foo d firms withou t as intens e of a focu s on na tural foo d produc ts are

expe rienc ing revenu e an d ea rnings ’ cha llenges . Kraft Foods , Campbe ll Sou p Compan y, an d

J.M. Smucke r Compan y are exa mples of thes e firms. Fo r thes e an d similar firms, ea rning s

hav e stalled in pa rt becaus e the ir brand s do no t focu s on the na tural an d organ ic items tha t

appea l to so me of toda y cus tomers, at leas t no t to the deg ree tha t is the cas e for Hain Celes tial.

Pa rtially becaus e of this, Hain’s ea rning s an d stoc k price hav e climbe d muc h highe r on a

relative bas is.

To dea l with the slump in revenu e an d ea rnings , large brande d firm co mpan ies are

implemen ting differen t strateg ies . Smucke r’s, for exa mple, acqu ired Big Hea rt Pe t Food s

(make r of Milk-Bon e do g trea ts an d Meo w Mix ca t food ) as a mean s of en tering the pe t foo d

marke t qu ick ly. Othe rs, suc h as Nes tlé (make r of Crunc h an d Bu tterfinge r cand y ba rs an d othe r

choco lates ), are remov ing artifi cial ing red ien ts suc h as co lors an d dye s from cand y an d

choco late. Hershe y Compan y an d Mars, Inc ., which co llec tive ly accoun t for app rox imately 65

pe rcen t of the globa l marke t sha re in package d cand y, are reduc ing the amoun t of high fruc tos e

co rn sy rup in the ir foo d items. Monde lēz is seek ing to reduc e sa turated fats an d sod ium in its

snack s by 10 pe rcen t. Howeve r, thes e change s do no t allow thes e firms to ove rco me the

prob lem of rap idly chang ing consu mer tas tes toward organ ic an d na tural foods .

Groce ry stores , suc h as Kroge r, Sa feway, an d W almart, are also seek ing to en ter the na tural or

organ ic seg men t. Give n its co mm itmen t to us ing the cos t leade rsh ip strateg y, W almart’s

dec ision to introduc e low-price d organ ic food s is no t su rprising . W almart is joining W ild Oats

Marke tplac e (an independen t produce r in the na tural foo d seg men t) “to plac e abou t 10 0

organ ic produc ts into its store” an d the “W ild Oats line will be price d 25 pe rcen t lower tha n

co mpe ting na tiona l organ ic brands .” Compe titi on from a firm with succes s us ing the cos t

leade rsh ip strateg y (suc h as W almart) will cha lleng e Hain Celes tial to emphas ize the va lue of

differen tiated produc ts to cus tomers wan ting to pu rchas e na tural or organ ic.

Th e tren d toward organ ic food s is occu rring in res tau ran ts as well. Chipo tle Mex ica n Grill, Inc .,

for exa mple, co mm its to prov iding cus tomers with “Foo d with Integ rity.” Fo r Chipo tle, this

mean s se rving food s mad e with loca l, sus tainab ly produce d organ ic produc ts an d us ing mea ts

from na turally raised — no t fac tory farm— an imals.

To add res s wha t ha d beco me so mewha t un impress ive sa les growth beg inn ing in 2016 , Hain

Celes tial con templated the poss ibilit y of se lling its organ ic mea t bus inesse s in mid-2018 .

Ins tea d of mea ts, execu tive s eva lua ted the poss ibilit y of expand ing the firm’s efforts to prov ide protein op tion s to cus tomers throug h so me of its othe r produc ts suc h as an array of organ ic

nu ts.

Sou rces : 2018 , Founde r’s message , Hain Celes tial Homepage , ww w.ha in.co m, Feb rua ry 28 ;

2018 , Hain Celes tial repo rts secon d qua rter fisca l yea r 201 8 financ ial resu lts, Hain Celes tial

Homepage , ww w.ha in.co m, Feb rua ry 7; A. Gaspa rro & A. Hufford, 2018 , Hain look s to se ll mea t

bus ines s as U.S. sa les fall, W all Stree t Jou rna l, ww w.wsj.co m, Feb rua ry 7; J. Bacon , 2015 ,

Brand s cap italize on hea lth-drive n reso lutions , Marke ting W ee k, ww w.marke ting week .co m,

Janua ry 29 ; A. Che n & A. Gaspa rro, 2015 , Smucke r’s lates t foo d firm hu rt by chang ing tas tes ,

W all Stree t Jou rna l, Feb rua ry 14 –15 , B4 ; A. Gaspa rro, 2015 , Ind iges tion hits foo d gian ts, W all

Stree t Jou rna l, Feb rua ry 13 , B1 ; A. Gaspa rro, 2015 , Nes tlé ba rs artifi cial co lor, flavo rs, W all

Stree t Jou rna l, Feb rua ry 18 , B6 ; M. Es terl, 2015 , Peps iCo ea rnings , revenu e drop on

foreign -exchang e impac t, W all Stree t Jou rna l, ww w.wsj.co m, Feb rua ry 12 ; L. Ligh t, 2015 , How

to rev ive McDona ld’s, W all Stree t Jou rna l, ww w.wsj.co m, Feb rua ry 11; M. Alva , 2014 , Organ ic

growth co mes na turally to Hain Celes tial Group , Inves tor’s Bus ines s Daily, Ju ly 24 , A5 ; A.

Kings ton , 2014 , Ju ice junk ies , Mac lean ’s, Jun e 30 , 64 –66 ; SCTW eek , 2014 , W almart to se ll

low-price organ ic food , 2014 , SCTW eek , Ap ril 11,

4.

Cas e Discuss ion Ques tion s

1. W e no te in the Mini-Cas e tha t Hain Celes tial is implemen ting the differen tiation strateg y.

Prov ide exa mples of the co mpe titi ve dimens ion s on which this firm focuse s while

implemen ting its differen tiation strateg y.

2. On wha t env iron men tal trend s did Hain Celes tial bas e its bus iness -leve l strategy ? W ha t

env iron men tal trend s cou ld hav e a nega tive effec t on this firm’s strateg y in the future?

W hy ?

3. In yea rs to co me, shou ld Hain try to grow primarily organ ica lly, throug h co llabo rative

strateg ies suc h as joint ven tures an d strateg ic alliances , or throug h merge rs an d

acqu isitions ? Exp lain you r ans wer. (Glanc e ahea d to Chap ter 7 to lea rn abou t merge rs an d

acqu isition s an d to Chap ter 9 to lea rn abou t joint ven tures an d strateg ic alliances .)

4. W ha t are the mos t se riou s co mpe titi ve cha llenge s yo u an ticipa te Hain Celes tial will fac e

ove r the nex t ten yea rs? How shou ld the firm respon d to thes e cha llenges ?