When Wendy Davidson laced up her shoes to run the Chicago Marathon in 2016, the challenge wasn't so much about scoring a fast time for the self-described non-runner. Davidson’s goals were far more personal and ambitious: stretching her limits and making herself uncomfortable.
Today, she’s aiming to bring the same philosophy and drive from that endurance race to the corporate office as the new CEO of Hain Celestial, a $1.5 billion leader in the natural and organic food and beverage space.
“I ended up learning [from the race] that you need to take big, bold moves, make yourself super uncomfortable,” Davidson said in her first media interview since taking over in January. “For me at [Hain], the biggest unlock is how do we make sure that we are consistently challenging our way of thinking. How might we do that differently, and not allow the status quo, even if it’s successful, to be a place where we get too comfortable.”
Davidson took over the top post from Mark Schiller who was instrumental in stabilizing Hain. During his four years at the helm, Schiller prioritized slimming down the sprawling food and personal care giant through the divestiture of non-core assets while curtailing a sharp slowdown in sales and shrinking margins.
Davidson’s agenda is far different: She’s been hired to grow the business. “That’s how I’m wired,” she said. “I’m the right person at the right time.”
Focusing on the big three
A seasoned CPG veteran, Davidson is no stranger to the food space, with experience at Kellogg, McCormick & Co. and Tyson Foods. The 53-year-old executive also has deep insight into healthier offerings like those sold by Hain after previously serving as president of the Americas for Glanbia Performance Nutrition, a maker of healthy food, drinks and other products including Think! Bars and SlimFast.
Davidson's agenda to grow Hain hinges predominately in three areas: driving more from its existing portfolio through innovation, boosting brand awareness and accelerating distribution. She's wasted little time making changes that could help Hain achieve the lofty goals she has set out.
In an effort to ramp up connections and build trust with employees, Davidson holds weekly tea talks with 10 randomly selected people to see what’s on their minds and what she should be thinking about. She also organizes monthly town hall meetings — her first one came just three days after starting — where employees are encouraged to ask her anything.
Hain also has embraced an operating model where product developers, packaging engineers, marketers and brand builders, among other employees, can work anywhere throughout the country — a practice designed to give the company access to the best people. Later, these individuals will come together at a central location to test, discuss and troubleshoot. The idea, Davidson said, will help get products to market faster, create more relevant items and improve execution when a product is launched.
Outside the company, Hain plans to increase public awareness starting in the second half of the year for many of its largest offerings such as Sensible Portions and Terra chips, several of which stopped advertising and promotions in the last year.
But an even bigger part of making the company’s products more top-of-mind will come through the wider distribution of its better-for-you offerings beyond just big-box stores and health and wellness retailers where the lion’s share of its items are sold.
These include getting its Celestial Seasonings teas into hotel rooms and its better-for-you snack brands into places like college campuses and school cafeterias.
It’s a strategy similar to Davidson’s time at Kellogg, where for seven years she was responsible for increasing consumption of the food maker’s brands, including Pringles, Cheez-Its, Rice Krispies Treats and Corn Flakes cereals, outside of the home.
Davidson also is eyeing a deeper presence for Hain in convenience stores where consumers are on-the-go but many of them are looking to eat healthier. Hain currently has a less than 1% share of this channel.
“We have a solid portfolio of brands in a solid group of categories that are big and growing, that have tailwinds because of where the consumer is at,” she said. “We need to drive from our core right now, and I think we have lots of potential to do that.”
Despite all the promise, Casey Lea, global director of quantitative research at ISS Governance, said Hain continues to face falling margins, three-straight quarters of losses and a stock price hovering near its lowest point in four years. Sales growth, while improving, remains negative.
During its second-quarter earnings released in February, net sales dipped 4.8% from the quarter a year earlier to $450 million despite an increase in North America, a region that contributes nearly two-thirds of the company’s overall business.
Lea said it could be “a tough road given the strong downward trajectory, but also a big opportunity” for Davidson and the company’s shareholders if she can turn Hain around.
“You're coming into a business that has clearly been, everything's been going the wrong way,” he said. “The expectations are pretty low for the company. So they are cheap. The market hasn't priced in a whole bunch of improvement."
Moving away from M&A
For years, Hain employed a strategy of rolling up brands that dramatically increased the size of its portfolio. The company’s growth-at-all-costs mentality proved disastrous.
After a half-decade where revenue grew more than 20% annually, Hain was suddenly facing a slowdown in sales and shrinking margins. Its stock came close to being delisted and an activist investor agitated for change.
At one time, more than a third of its nearly 60 brands were losing money and it owned a disparate group of offerings spanning 37 different categories.
Today, the company is vastly smaller, overseeing 32 brands globally.
In the U.S. alone, it manages 20 brands, including Celestial Seasonings teas, Sensible Portions Garden Veggie Straws and Greek Gods yogurt, and a personal care portfolio of cleansers, shampoos, sunscreens, and lotions. About half of these items are No. 1 or No. 2 in their category, according to the company.
“For me at [Hain], the biggest unlock is how do we make sure that we are consistently challenging our way of thinking. How might we do that differently, and not allow the status quo, even if it’s successful, to be a place where we get too comfortable.”
CEO, Hain Celestial
After her predecessor spent much of the last several years divesting brands, Davidson said there is substantial growth potential in the current portfolio without the need to make significant changes.
“I see it as more maybe a little bit of shaping in the portfolio,” she said. “But I don’t see any big, big divestitures that we need to do. And I don’t see any giant white space that we need an acquisition to fix.”
Davidson said she is reviewing Hain’s brands that are strong in one region, such as tea or snacking in the U.S. and meat-free items in the U.K and Canada, to determine whether they can play in other parts of the globe where the company has operations. She’s also assessing if any of its offerings could move into adjacent categories that are in demand with consumers, like bringing its snacking brands into bars or teas into on-the-go hydration.
Davidson acknowledges that Hain goes up against industry juggernauts, including Hershey, Mondelēz International, Campbell Soup and PepsiCo, that operate in many of the categories it sells products.
These same CPG companies have latched on to rising trends such as better-for-you snacking to launch their own offerings or to improve the quality of existing ones in their portfolio by cutting salt, sugar or adding other attributes like organic to make them more appealing.
Still, Davidson is undeterred, saying Hain operates in a sweet spot where the company is big enough to tap into the marketing prowess and innovation knowhow employed by her competitors while benefiting from the nimbleness and pinpoint focus valued by smaller upstarts operating in a specific niche.
Hain has a large variety of brands across various usage occasions to meet natural and organic needs throughout the day — snacks, cooking oil, soup, peanut butter, tea, yogurt and cookies. This gives Hain the scale it needs to have credibility important to increasing its reach with customers and piquing the attention of prospective retailers, Davidson noted.
The food manufacturer also has products with a lower price point in the premium better-for-you segment, making them more attractive to a wider swath of shoppers.
In addition, Hain operates only in the natural and organic category. It doesn’t have the distraction of some of its larger CPG competitors who have a few items commingling with other lesser healthy options as part of a much bigger portfolio, Davidson noted.
“We're not a big CPG. And we're not a small single-brand startup. We play in the middle,” she said. “So how do we out-small the big and use nimble and agile ways of working to move faster than they can move? And how do we help out-big the small by leveraging our scale and capabilities to punch above our weight?”
As she digs in at Hain, Davidson will inherit many of the same problems other food and beverage companies are facing: the continued emergence of the consumer from COVID-19, rising inflation and supply chain disruptions. Hain will be better positioned to accelerate its turnaround as conditions improve.
Davidson acknowledged in the past few years, the company “wasn’t fully ready to take the training wheels off to drive growth” with these outside distractions weighing on the business.
“I'm excited about the potential of the company, because I do think we have some really good building blocks,” she said. “We have great people. We have great brands, we have a great business, but all of them have opportunities for investment.”