Hain Celestial sells Arrowhead Mills and SunSpire to private equity for $15M

Dive Brief:

  • Hain Celestial offered its Arrowhead Mills and SunSpire manufacturers to Hometown Foods, a portfolio firm owned by private equity agency Brynwood Partners, for $15 million. 
  • The deal contains better-for-you breakfast, baking and chocolate merchandise. The sale additionally features a manufacturing facility in Hereford, Texas and its workers.
  • Hain Celestial has been specializing in trimming its unwieldy model portfolio and enhancing the profitability of its enterprise, promoting off 4 of its different manufacturers earlier this yr.

Dive Insight:

With a product portfolio that spans every part from self-care to snacks, Hain Celestial has been dogged by the data that though there may be curiosity in particular person manufacturers, the better-for-you firm’s total portfolio just isn’t a pretty agglomeration.

Hain Celestial’s earnings have been wanting. This most up-to-date quarter, reported in August, noticed a web gross sales lower of 10% to $557.7 million in contrast to the prior yr interval.

The firm is conscious that one thing wants to change and has been working diligently on its Project Terra SKU rationalization effort since 2015, shedding manufacturers and streamlining its product choices. The final three quarters, because of this, have seen improved adjusted margins, indicating simplification is bringing optimistic change.

Still, the change has not been quick sufficient. Share worth tumbled virtually a fifth on a single day when it had a disappointing earnings report in February, which CEO Mark Schiller informed analysts was “truly disappointing.” The firm’s inventory worth has ticked again up since then, however most just lately cratered on the August earnings report. It’s been slowly constructing again worth since then. 

The sale of Arrowhead Mills and SunSpire marks the fifth and sixth manufacturers the corporate has divested within the final six months. Hain Celestial has additionally offloaded Tilda rice, Plainville Farms turkey, WestSoy and poultry model Pure Protein. The sale of Plainville and Pure Protein mark the corporate’s freedom from poultry, rumored to be a barrier to a speculated 2017 sale to Nestlé.

This slimming down of the portfolio is probably going to make the pure meals firm extra enticing to consumers. It’s value noting that the CEO Mark Schiller, who took over a yr in the past from the corporate’s founder, beforehand labored as a turnaround architect at Pinnacle Foods. That firm was bought by Conagra Brands final yr for $10.9 billion in money and inventory.

Even if Hain Celestial stays impartial, the lack of these manufacturers furthers the work of Project Terra and may put the corporate nearer to holding regular, moderately than registering losses. It can also be unlikely that that is the ultimate divestiture from an organization that has held many numerous manufacturers.

In any case, ridding itself of breakfast and baking manufacturers — even better-for-you ones — could also be a sensible transfer in a market through which customers search comfort and are not eager to spend time baking from scratch or consuming chilly cereal.

Brynwood Partners has demonstrated a rising curiosity in investing within the meals house and oversees manufacturers together with Sunny Delight, Juicy Juice, Little Hug juices, and Daily’s Cocktail by way of its spun-off division Harvest Hill Beverage Company. In 2018, the private equity agency spun off Hometown Food following its $375 million acquisition of JM Smucker’s baking manufacturers portfolio, together with Pillsbury, Funfetti, Hungry Jack, White Lily, Jim Dandy and Martha White.

Arrowhead Mills and SunSpire will doubtless be built-in into Hometown Food as Brynwood Partners appears to be like to reinvigorate the manufacturers. Although a dangerous transfer, Brynwood has the chance to function this enterprise privately and quietly construct the manufacturers, a bonus the publicly traded Hain Celestial didn’t have. The manufacturers additionally match extra neatly into Hometown Food’s portfolio, providing Hain Celestial extra of likelihood to construct on the teas and pure merchandise that make up its core.

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