Nutrition Business Journal

Sales were up but profit was way down for The Hain Celestial Group during the company’s 2009 fiscal second quarter, the company reported February 4. Sales for the quarter, which ended December 31, 2008, increased 14.2% to $315.6 million. Net income slipped significantly, however, with the company reporting a 48% decline from $16 million to $8 million for the quarter.

Hain cites inventory reductions, high grain costs associated with the Hain Pure Protein division and the lag in fully realizing price increases implemented in August as reasons for the loss of profit. Gross profit margin also took a dive, from 28.7% for the fiscal 2008 second quarter to 23.4% for the 2009 fiscal second quarter. Cost of sales and administrative expenses cut into the company’s margin, as did a disappointing performance in the United Kingdom. Net sales for the six months ended December 31, 2008, grew 16.8% to $605 million, while gross profit margin was down four percentage points to 24%.

Analysts with Argus Research, an independent research firm, downgraded Hain’s stock rating from a buy status, to a hold, upon the release of the Q2 earnings. “We downgraded Hain to hold as we expect the weak economy to catch up with Hain’s sales and earnings,” Argus noted in a release. “Thus far in the recession, Hain has reported strong sales growth, while earnings have only been hit by cost inflation. However, Hain’s recent price increases and the slowdown in consumer spending may ultimately lead consumers shifting to lower-priced alternative products, hurting the company’s sales.”

I view the downgrade of Hain’s stock as a clear indicator that the effects of the consumer downturn are finally impacting the nutrition industry and the natural & organic segment. Last week, NBTY, the largest supplement manufacturer in the United States, announced that its profit margins were down 8% for its 2009 fiscal Q1. Now Hain, one of the largest manufacturers in the natural & organic food and personal care markets, has seen a hit in its profit and is beginning to lower its 2009 earnings guidance ($1.38 to $1.42 per share). The extent to which Hain’s earnings are affected over the next two fiscal quarters should be a good indicator as to how much consumers are willing to pay price premiums for natural & organic products in the face of an extended recession. Just as Whole Foods is a bellwether retailer for the industry as a whole, and NBTY acts as a gauge for supplement manufacturers, so too does Hain for manufacturers in the natural & organic space. Stay tuned for Q3 and Q4 updates.

Related Links:

SunOpta and Hain Celestial Keep the Acquisitions Coming

Hain Announces Sales Windfall, Decline in Profits

Organics, Acquisitions Fuel Strong Growth for Hain Celestial

Are you a Facebook or LinkedIn “Power-User”?

Well, maybe you have been thinking of setting up an account?

If so, be sure to join The NBJ Summit LinkedIn Group as well as The NBJ Summit Facebook Group and the Nutrition Business Journal Facebook Group.

We’ll be using these social networking websites to keep you informed of new NBJ Summit and NBJ developments as well provide a forum for NBJ Community Members to interact year round.

Take a look!

-Patrick

Yesterday was a tough day for vitamins and multivitamins in the mass media. This really started in the 2nd half of 2008.

Here are a few links to stories in the news.



Vitamins: No help in preventing cancer, heart disease



Massive study casts doubt on health benefits of multivitamins



Should you keep taking that multivitamin?

F.D.A. Finds ‘Natural’ Diet Pills Spiked With Drugs

The cratered economy is dishing out bad economic news for almost every product category. Car sales, restaurant visits, jewelry and clothing purchases—they all were down in 2008 and are expected to fall further in 2009, as this big, bad recession gets worse before it gets better. As a bit of bright light in an otherwise gloomy consumer environment, however, dietary supplements appear to be bucking the negative sales trend in the United States, according to the most recent sales data from Nielsen Co. For the 52 weeks ending December 27, 2008, vitamin and other supplement sales were up 5.9% to $3.8 billion in food, drug and mass merchandiser stores, Nielsen reports.

U.S. consumer sales of dietary supplements across all sales channels grew almost 6% to $23.7 billion in 2007, according to Nutrition Business Journal research. Much of this growth was fueled by the sale of new specialty products, such as omega-3 supplements targeted to specific health conditions and juice supplements featuring the latest super-fruit stars. NBJ will present our final 2008 sales and growth estimates for the U.S. supplement industry in our U.S. Nutrition Industry Overview issue, which will publish in July, and at the 2009 NBJ Summit. But our early estimate is that U.S. consumer supplement sales grew about 7% to $25 billion in 2008.

So what’s in store for 2009? Anecdotally, Nutrition Business Journal has been hearing that retailers are being much more cautious with supplement inventory levels, placing smaller orders from manufacturers and waiting longer to restock their shelves. Manufacturers, in turn, are setting the bar higher for new product development to ensure that the new offerings they do roll out can survive in a tough consumer environment. Still, the Nielsen and other reports showing that consumers continue to equate dietary supplements with health and wellness—despite the economy and the recent barrage of negative research stories questioning the efficacy of supplements—have us at NBJ feeling cautiously optimistic about how the category will fare in 2009 and what its resiliency will mean for the overall health of Americans.

Given the current economic environment, NBJ’s research and editorial team is looking forward to strolling the supplement aisles at this year’s Natural Products Expo West in Anaheim, California. You can be sure we will be speaking to as many finished-product manufacturers, ingredient supply companies and retailers as possible, asking them what effects they are feeling from the downturn and what they are doing to ensure their organizations come out on the other side of 2009 stronger and better positioned than ever before.

NBJ will moderate several education panels at Expo West, including NBJ’s State of the Industry: Hot New Products and Industry Trends. We look forward to seeing you at one of our panels, on the show floor or during one of the many social and networking events planned for this year’s Expo West.

Just when you thought the Whole Foods/Wild Oats merger story could not grow any weirder, it does. The Associated Press reported today that the FTC will ask the U.S. District Court to stop Whole Foods from integrating Wild Oats until their merger challenge is completed.

For more on NBJ’s coverage of Whole Foods acquisition of Wild Oats, click here.

But I highly suggest you read our analysis of the deal…that is the numbers analysis: Whole Foods & Wild Oats Merger - Does the FTC get it?