Fresh off its first purchase in four years, Hain Celestial is "actively looking for other acquisitions," the CEO of the organic and natural foods maker said.
Mark Schiller has overseen the manufacturer of Celestial teas and Sensible Portions Garden Veggie Straws since November 2018, and has spent much of his tenure divesting brands. His goal: Refocus the sprawling food and personal care giant, which at one point was "hemorrhaging cash" and involved in businesses that didn't fit in its portfolio, including slaughtering turkeys and selling fresh fruit.
But in December, Hain spent nearly $260 million for That's How We Roll, the producer of Thinsters cookies and cheese snack brand ParmCrisps. The acquisitions are likely to be the beginning of an active period of deal-making for Hain, with the company prioritizing the snack, plant-based meat and non-dairy beverage segments.
"We're going to continue to look at other acquisitions," Schiller said in an interview. "We've got a lot of firepower."
The former Pinnacle Foods executive said Hain has roughly $1 billion in cash on its balance sheet and money it could borrow to fund more acquisitions. Despite the financial heft at its disposal, Schiller said he would likely target smaller companies with sales between $50 million and $150 million.
Such companies, he said, are often at a pivotal point in their development where they need access to capital to scale their businesses and may be more interested in selling to help them grow.
The competition for assets, and high price tags being demanded by potential targets, has created "valuation targets that are pretty high," Schiller said.
But for Hain, which posted $1.97 billion in net sales in its 2021 fiscal year, finding the right brands at an attractive price could help immediately grow its business. Hain also has found its size as a mid-cap company plays to its advantage. Acquisitions that may be a good strategic fit for Hain might not pique the interest of a bigger CPG that would need to invest more time and money to make the brands big enough to meaningfully impact its bottom line.
“By the time we get these things up to a half a billion in sales, they're too big for the big guys to knock off at that point, so I really liked our position," Schiller said. "Obviously, we've got a lot of work to do to make sure all these things are successful, but we're in a very unique space in the market given our size and our unique focus on health and wellness.”
Schiller underscored that Hain is looking for high-growth brands that complement its existing businesses, allowing it to tap into synergies between its food offerings. It's also looking for brands that help it enter new categories. The purchase of ParmCrisps, for example, gets Hain into snack mixes, while the brand's high-protein, low-carb attributes enable it to compete with bars and beef jerky popular with consumers.
"I've got enough small brands that are projects. I don't need another one," he said. "I want to buy something that's got a growth trajectory in front of it.”
The food and beverage space has been a hotbed of M&A activity during the past few years. While CPGs have abandoned the multibillion-dollar deals popular just a few years ago, smaller bolt-on purchases are now in vogue as companies expedite their presence in high-growth segments such as snacks or better-for-you offerings.
During the past year alone, Mondelēz International purchased Hu, a maker of premium snacks and chocolates made from simple ingredients. And Hershey announced plans to buy fast-growing Dot’s Homestyle Pretzels and its Midwest co-manufacturer Pretzels Inc. for $1.2 billion — a combined deal that would be the second-largest acquisition in its nearly 130-year history.
As Hain looks to add to its business, the company is eyeing a more measured approach compared to its last acquisition binge. For much of its existence before Schiller took the helm, Hain's strategy involved rolling up brands — at one point it made 55 acquisitions within one 25-year period. While the growth-at-any-cost mentality boosted sales, it also created a group of unrelated brands in 37 different categories and a portfolio with little coherence.
Even as Hain looks for companies to acquire, Schiller said it has another $100 million of businesses in its portfolio it wants to divest.
Hain will "likely" exit its personal care business that includes shampoos, sunscreens, cleansers and lotions in the future, he added. The segment, which makes up less than 10% of its sales, remains a high-growth business with strong margins so if any buyer "wants it, they're going to have to pay for it," Schiller said.
"There's no synergies between a personal care business and a food business," he said. "And so while we like it, and it's a great business and has a lot of growth potential, it's complexity in a company that's striving for simplicity."