When organic was transitioning from "granola" to gourmet in the late 1990s, Hain Celestial Group Inc. scooped up soy milk producer Westbrae Natural Inc. just as larger corporate players took aim at customers roaming natural food store aisles.
Hain turned Westbrae's brands bought for just $23.5 million in 1997 into the cornerstone of its grocery division, which rung up net sales of $341 million last year, slightly more than half of Hain's total. Those torrid sales were at least partially due to mainstreaming of organics, which even now fill the shelves of Wal-Mart Stores Inc.
Today, Hain could be standing on the precipice of another leap from hippie to yuppie, this time in the natural and organic personal care segment.
Starting with the purchase of Jason Natural Products two years ago, Melville, N.Y.-based Hain has been picking up niche brands and rolling them into its personal care division in Culver City, which is projected to hit $100 million in sales in the next couple years.
"As popular as organics are, it is still a small part of the overall food world as natural care is still a small part of the regular personal care world," said Andrew Jacobson, the division's president. "But we have growth where the mass or drug side of personal care is sleeping."
Jacobson is well aware of organics' maturation process.
He was president of Westbrae when it was swallowed by Hain and has seen the organic food industry increase at an annual average rate of 15 to 20 percent since 1997 to reach $14 billion in sales last year, or 2.5 percent of all retail food sales, according to the Organic Trade Association. The natural personal care segment is now showing similar growth, with the Natural Marketing Institute estimating sales jumped almost 23 percent to $4.9 billion last year from $4 billion the prior year.
But it's also a segment that is being noticed by large, mainstream companies, posing a risk for smaller natural food mainstays more used to battling against themselves for store space.
"Due to the attractiveness of the categories in which Hain competes, further entry by larger food marketers is likely and poses risks of share losses," wrote Scott Van Winkle, an analyst with Canaccord Adams, in a recent research note.
Still, Van Winkle has a "buy" rating on the company, which trades on the Nasdaq National Market and has generated 15 consecutive quarters of positive EBITDA. The stock closed at $26.18 on June 1, up from $17.84 a year ago.
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