Hain Celestial Group reported fourth-quarter earnings this week, with net sales of $222.8 million and net income of $6.7 million. For the full fiscal year ended June 30, Hain earned $28.6 million on $917 million in sales. Irwin Simon, Hain’s President and CEO, attributed the company’s strong performance to sales momentum in North America and Europe, and improving consumption trends for healthy foods overall. According to company statements, Hain generated $18 million in sales from new products at Hain Celestial U.S., and recent acquisitions (Sensible Portions, Greek Gods Yogurt) position the company in high-growth categories with natural products complementary to core product offerings.

Wall Street responded favorably to the news, sending Hain’s stock up about 4%. Analysts also responded favorably to improved guidance from Hain for FY2011 by raising their estimates for sales and earnings per share. Hain upped its revenue guidance for FY2011 to $1.025-$1.05 billion, and earnings per share guidance to $1.24-$1.31.

NBJ spoke to Simon a few weeks ago in reporting our current issue on the finance & investment climate for nutrition companies. When asked about his company’s strategic response to the economic downturn, Simon said: “When the turndown hit a year and a half ago, we saw the consumer trading down and buying private label, so we knew we had to take our products to other classes of trade. Our model shifted to go out to more and more of the mass market. At the same time, we continued to work closely with Whole Foods on innovation, new products, and pricing to make sure there was value there. Whole Foods is our biggest retail customer today, so that was clearly important. There’s good growth among the mass market, good growth among club stores, and we are absolutely seeing growth come back in certain retail supermarkets.”

Two industry analysts would concur with this optimistic outlook. Scott Van Winkle of Canaccord Genuity sees reaccelerating growth for Hain. “I’m expecting much better sales and earnings performance over the next 12 months,” said Van Winkle. Andy Wolf of BB&T Capital Markets thinks the company’s recent moves in the U.K. will turn that business around to at least break-even status. “Hain is really well positioned to have a good turnaround in the next couple of years,” said Wolf. “The stock performance has lagged, but we think it could play catchup.”

Wolf also sees the investment in Hain by Carl Icahn—Icahn owns about 5.65 million shares representing about 14% of the company—as a way to bring more financial acumen to an already well-run company. We asked Simon about that investment from Icahn. “I think Carl Icahn is a smart guy,” said Simon. “He likes what we’re doing and likes our brands. I look at him as an opportunistic investor. This is one of his first forays into this category. I think he walked around Whole Foods, saw our presence there, and that’s what got him excited.”

NBJ tackles consumer research in our next issue, slated for publication in September. We’ll focus our critical eye on the modern wellness consumer, and strategies to best utilize research to meet a complex array of global consumer demands.

Related NBJ links:

The Hain Celestial Group’s Irwin Simon Talks Acquisitions with NBJ

2010 Healthy Foods Report

2010 Nutrition Industry Overview Archived Web Seminar

NBJ tackles the complex topic of finance & investment in the nutrition industry with our next issue, now on its way to the printer. As we digest all of the research and trending that surfaced in the reporting of that issue, expect some discussion in the coming weeks on the blog about such topics as holistic investing, moving upstream through the murky waters of deal flow, and the modern challenges of being a nutrition entrepreneur. Today, though, let’s talk about the equity markets.

I spoke to Scott Van Winkle of Canaccord Genuity and, on a separate call, Andy Wolf of BB&T Capital Markets to gain some visibility into smart money’s opinion of the road ahead for nutrition stocks. Excerpts from those conversations follow below.

NBJ: Let’s look at the major industry categories in nutrition and talk about year-to-date performance. How about natural & organic foods?

Scott Van Winkle: In general, healthy-living stocks have outperformed the market this year. Natural & organic has the best sector performance, up about 12%. These stocks didn’t start to come back until later in the cycle, but now they are beginning to reflect improved growth in the category.

Andy Wolf: Natural & organic is about 80-90% recovered, in terms of underlying growth trends. It’s really come back as a category. You can see it in the industry numbers and in the company numbers. There’s been a little bit of channel play, and you can still see some slack in demand at conventional stores, but that too is starting to show a rebound. The demand never went away for natural & organic, but in the recession, even dedicated users were worried about finances. Now most of them have made the budget allocation and returned to the category.

NBJ: And supplements?

SVW: Supplements are down about 12%, but the 40% move in NBTY improves that number dramatically. Supplements performed well last year with strong industry trends, and those trends persist, but investors lack faith. Strong category growth brings increased competition, and as we anniversary the jump in sales from swine flu, people expect a slow down. Vitamins were up 18% in October/November 2009. That kind of growth was obviously driven by the cold and flu season, in turn driven by swine flu.

AW: Supplements have had a multi-year run as consumers adopt these healthy lifestyle choices. People want to live better and feel better. Supplements also enjoy a countercyclical demand. As unemployment goes up and consumers lose more health-care benefits, more people use supplements as a substitute for doctor visits—which are down, by the way. It’s a prophylactic approach. Demand looks robust to me across all sales channels for supplements.

NBJ: What are you seeing for multi-level marketers (MLM) and ingredient suppliers?

SVW: Ingredients are up about 3% through the end of July. Last year, the farther down the supply chain you were from the consumer, the likelier you were to see your customers deload or reduce inventory. Ingredient suppliers had a tough time in 2009. There weren’t a lot of new product launches, and customers were cleaning out their inventories. There are signs of more aggressive ordering now, so the fundamental businesses are stronger than they were coming out of last year.

As for MLMs, they’re up about 5%. These stocks outperformed early, because their business was stronger on a relative basis. With weak economics, everybody buys less, but there’s more unemployment and more people looking for part-time work. In a weak economic cycle, more new distributors come online, even though their average sales level drops. Net-net, MLMs were less impacted by global economic issues.

NBJ: What about functional foods?

AW: Functional foods have really lagged. Why? Mix. Most functional products are sold through conventional stores, and demand hasn’t picked up as well in the mass market. I don’t see a real recovery for functional foods until the broader economic recovery is more firmly entrenched sometime in 2011.

NBJ: Looking ahead, where do you see the best performance and the biggest challenges?

AW: The big issue for 2011 is converts. For 20 years now, consumers have been moving, in one way or another, from conventional to organic. The demand curve is still there, but all of the core customers have already come back. Whole Foods Market and other retailers are seeing new customers come into the channel, but for that to continue, well, the economy will have something to say about that as well.

SVW: Retailers are in a very good position in general. They are demanding price concessions from suppliers, and suppliers are giving them. Whole Foods Market and Vitamin Shoppe are in good position, thanks to this competitive advantage over suppliers. Over the next six to 12 months, I think the MLM sector is going to perform quite well. Natural foods will perform well. Supplements will tread water due to Wall Street’s impression of decelerating growth.

Related links:

Quick Take on NBTY Acquisition

2010 Healthy Foods Report

2010 Direct-to-Consumer Selling in the Nutrition Industry Report

I thought about titling this post—“Fat and foreign? Let’s make a deal!”—but that seemed a bit too sensational and disrespectful to Monty Sharma, CEO of Atkins Nutritionals, who inspired the thought. In a recent interview for our upcoming issue on the overall nutrition industry, Sharma discussed global obesity rates and how certain countries, unfortunately, present better growth opportunities for Atkins than others.

In 2009, Atkins expanded operations to Spain, Portugal, the Middle East and India. “The reason these countries are important for us,” says Sharma, “is that obesity and diabetes are rampant there.” He pointed to the Gulf Cooperation Council (GCC) countries in and around Dubai as some of the highest incidences of diabetes and obesity in the world. “These countries have serious issues because of food habits,” says Sharma.

International revenue at Atkins is trending toward 15% of total revenue, up from about 5% in the past two years, when Atkins began a reinvention of itself as a weight-management platform far removed from its ‘no-carbs’ origins. Though specific figures remain unspecified—Atkins is privately held by North Castle Partners—Sharma does verify 45% annual growth on the trailing 52 weeks of data. That’s no small feat given the pernicious softness of the U.S. economy.

Looking forward, Sharma sees potential in the Benelux countries, Sweden, Norway, South Africa and Germany. “We will continue to grow internationally in 2010,” says Sharma. “The markets we look at are all very good markets in terms of their obesity.”

A further sobering thought from Sharma that I can’t seem to shake: “The number of people overweight and obese overseas is far greater than that in the U.S. The opportunity overseas is greater, one would argue, than the sales opportunity here in the U.S.” There are too many ways to digest a statement like that in a mere blog post, but let’s just say that the growing trend toward wellness has some big hurdles to overcome far beyond the usual suspects of consumer education, regulatory scrutiny and competitive pressures.

Related NBJ links:

SNWL Sales Suffer Blow from Recession and Flurry of Negative News Events

Spain: An Innovator in the Global Functional Food Market

Healthy, Lesser-Evil & Functional Foods

I spoke recently to Rene LeClerc, Vice President of Sales at Ascenta Health, about the world of fish oil. In the process of researching an upcoming story about traceability tools in the supplement industry, I came across Ascenta’s Pure Check platform, featured prominently on its website and packaging. Pure Check lets a consumer track, with just a few clicks, the specific ingredient content and quality markers of the very bottle he purchased at the store. It’s a compelling and friendly approach to building consumer confidence, and verifying that NutraSea products (Ascenta’s branded line of fish oil supplements) are as pure and potent as they claim to be.

“The reason we launched Pure Check?” says LeClerc. “We were frustrated. Every fish oil company was saying the same thing. They all claimed to have the purest, the highest-quality fish oil. Everyone was saying it, but no one was backing it up.” It’s easy to get frustrated in today’s world of supplements, where marketing claims sometimes stretch beyond legal and responsible limits, but it’s also becoming easier to separate the wheat from the chaff.

I talked to several companies in the past few weeks with new, web-based traceability tools at the top of their priority lists. These companies tend to be industry leaders. They tend to be the very sorts of companies you’d expect to have the resources and expertise to provide more transparency into their manufacturing process. Ascenta, a powerful player in the Canadian market now making major inroads into key distribution accounts across the U.S., appears to be among their ranks.

Maybe a company’s genuine commitment to quality has something to do with its ability to achieve and maintain a leadership position, and maybe innovations on the traceability front will have something to do with steering the entire industry toward more transparency and credibility in the months and years to come. Says LeClerc: “With Pure Check, we simply wanted to put our money where our mouth is, and show our consumers that, when taking NutraSea, they were getting a quality, clean product, every time, every batch. We wanted to go so far as posting the results of every batch online—full transparency, full disclosure. I don’t have one batch of product in the marketplace anywhere where you cannot get the third-party quality report for that batch on our website. That is by far the most powerful point of difference about our line.”

Be sure to check out the next issue of Nutrition Business Journal, our annual overview of the entire nutrition industry, for more about Ascenta and the trend toward traceability. Subscribe now, or come back in July when the issue goes on sale.

Related NBJ links:

NBJ Video Interview: Gaia Herbs Introduces ‘Meet Your Herbs’

2010 Archived Practitioner Supplement Sales Web Seminar

2009 Supplement Business Report

In a little over a week, nutrition industry executives from all over the world will be gathering in Anaheim, California, for the 2010 Nutracon Conference and Natural Products Expo West tradeshow. The Nutrition Business Journal team will be there to meet with industry participants, peruse the massive tradeshow floor, and bone up on the latest issues and trends shaping the global nutrition industry during the Nutracon and Expo West education sessions. We’ll also be presenting our annual NBJ State of the Industry session, during which we will share some of NBJ’s proprietary market data and get down to the “nitty gritty” with a panel of experts about some of the key strategic issues affecting dietary supplements, natural & organic products, and functional foods and beverages. Details about the session are below. We hope to see you there!

NBJ State of the Industry

10:30 a.m. – 12:00 p.m., Friday, March 12, Room 204AB

We’re changing things up a bit for this year’s NBJ State of the Industry presentation, which has become a must-attend education session for many industry executives at Expo West. NBJ Publisher and Editorial Director Patrick Rea will open the presentation with an analysis of how sales of dietary supplements, natural & organic products, and functional foods and beverages fared in 2009 and what we are expecting for 2010. Then, I and Nancy Coulter-Parker, editor in chief of Delicious Living magazine, will interview a panel of industry experts about key issues affecting supplements, natural & organic, and functional products.

On the panel will be:

• Julie Smolyansky, CEO of Lifeway Foods

• Todd Norton, chief operating officer at A.M. Todd Botanical Therapeutics

• Laura Batcha, chief of policy and external relations at the Organic Trade Association

• Mark Fergusson, CEO and chief financial officer at Down to Earth, Hawaii’s only vegetarian natural & organic food store chain

The questions we will be posing to our panelists (and the audience) include:

• Since the election of Barack Obama, the FDA and FTC have stepped up their enforcement of the label claims being used by food and beverage companies. Is this ultimately a good thing for the functional food and beverage industry? What are you expecting in 2010?

• If passed, what ramifications would McCain’s Dietary Supplement Safety Act of 2010 bring about for the industry and consumers? Would the bill do what is needed to weed out the bad players?

• In a statement defending his bill, McCain Dietary Supplement has said that, despite what opponents of his proposed legislation are claiming, “If you take a vitamin now, this bill will in no way restrict your ability to take that vitamin.” Is this true?

• McCain’s bill would require retailers to obtain written evidence from supplement manufacturers documenting that products are registered and adhere to all new FDA requirements. Would such a rule affect a retailer’s ability to offer a wide variety of legitimate supplements?

• The functional food and beverage industry continues to grow at a healthy pace, with new food and beverage products being launched every week. The problem is, however, that some companies will put just a small amount of a functional ingredient into a product just so that they can charge a price premium and promote the ingredient on the product’s packaging and label. How big of a problem is this for the functional food and beverage industry? Is “pixie dust” dosing a common practice? What are the ramifications for the functional food and beverage industry? What’s the solution?

• What really happened to organic during the recession? How did organic sales fare compared to natural sales in 2009, and what is expected for 2010? In what ways were consumers able to save money and still buy organic?

• In 2009, several organic companies introduced a “natural” product or dropped their organic content all together. Do you believe there was a large scale shift from organic to natural, or were these isolated examples?

• Even if only a few companies moved from organic to natural, how do these actions impact consumer perception of the value of organic compared to natural? Some organic companies I’ve spoken with have said consumers are so confused that they believe, in some instances, that natural is actually superior to organic. What are your thoughts on this?

• Does having multiple standards and certifications for natural & organic personal care result in too much consumer confusion?

Is there a question or issue you would like to hear NBJ and our panel of experts address during the State of the Industry presentation? If so, e-mail the question to cmast@nutritionbusiness.com.

Related NBJ links:

Global Supplement & Nutrition Industry Report 2010

February 2010: Functional Food and Beverage Issue

Organic Is Not Immune to Recessionary Woes