LAKE SUCCESS, NY. – The Hain Celestial Group’s Hain 3.0 strategy that was introduced in September 2021 and involves segmenting the company’s portfolio of brands and investing behind those with the best growth potential has made progress despite volatile market conditions.

“You’ll recall that on investor day, we identified six categories we’re focusing on for growth, (including) plant-based snacks, tea, baby, yogurt and personal care,” said Mark L. Schiller, president and chief executive officer, during a May 5 call with securities analysts to discuss third-quarter results. “Our growth brands in these categories, which make up about 80% of our volume and profits, delivered dollar consumption growth of almost 16% versus a year ago — more than double the rate of their respective categories. Compared to pre-pandemic, consumption of these growth brands is up 23%, with velocities up 20%, underscoring the strength of the brands and their relevance.”

Sensible Portions, the company’s largest brand, has grown household penetration 23% versus a year ago and 70% since the beginning of the pandemic, according to the company.

“Our Earth’s Best Baby Food brand was also particularly strong with consumption of 35% and household penetration up 17% versus the same quarter last year,” Mr. Schiller said. “Dollar market share grew 1.9 points and unit consumption was up double digits, while pricing was also up double digits.”

The strong brand performance helped Hain Celestial overcome numerous labor and supply chain challenges during the quarter. For the period ended March 31, the company earned $24.5 million, equal to 27¢ per share on the common stock, down 29% from $34.3 million, or 34¢ per share, in the same period a year ago.

Sales rose 2% during the quarter to $503 million.

“During the quarter, we experienced higher-than-expected inflation and continued industry-wide disruption and warehouse cost pressures driven by labor shortages, freight carrier availability and other freight cost issues that we incurred as we chose to prioritize customer service, resulting in a reduction in adjusted gross margin of about 400 basis points,” said Chris Bellairs, chief financial officer.

Hain Celestial’s North America business unit sales rose 13% during the quarter to $326 million, primarily due to stronger sales in baby foods, snacks and personal care, according to the company. Segment profit fell 4% to $75 million.

“While the industry-wide supply chain challenges impacted the profitability of the quarter, the year-to-date pricing actions we have taken and our robust productivity pipeline are beginning to catch up with inflation, which was a 740-basis point headwind versus the prior year period,” Mr. Bellairs said.

International business unit sales fell 14% during the quarter to $177 million. Segment profit fell 21% to $41 million. Mr. Bellairs said issues leading to the decline include challenging retail trends in the United Kingdom, the loss of a non-dairy beverage customer and the impact of halting shipments to a customer during price increase negotiations.

“In that negotiation, we made the tough decision to say, ‘if you’re not going to accept our price increases, we’re not going to ship your product,’” Mr. Schillers said. “The good news is after a couple of weeks of back and forth and us not shipping, we were able to get all of the retailers to accept the price increases, and those are now firmly in place.

“So, a lot of it is really what’s the macro environment and what’s the retailers’ perspective on whether the inflation is transitory or not. I think we’ve clearly learned from this war that inflation is getting worse.”

Hain Celestial expects low- to mid-single digit adjusted net sales growth during the fourth quarter, said Mr. Bellairs.

“This implies continued sequential improvement in Q4 adjusted net sales growth versus Q3 and significant growth versus the first half of the year,” he said. “Sales in North America are expected to grow double digits behind continued strong consumption. And International should be less negative as we get the full benefit of pricing.”

To reduce future costs, Mr. Schiller also announced the Hain Celestial Group will be restructuring.

“As part of that restructuring, we’re reassessing our org design and resource allocation with the goal of accelerating growth, increasing efficiency and effectiveness and reducing costs,” he said. “Among the changes already underway, we are: one, increasing resources within supply chain and our purchasing co-manufacturing and productivity teams to deliver additional cost reductions; two, adding additional resources on capacity planning to support feed growth categories; three, eliminating the chief commercial officer role (and) elevating other sales leaders to report directly to me; four, integrating the That’s How We Roll brands into Hain, eliminating many redundant roles and redeploying many of their teammates to fill critical open positions at Hain; and five, rightsizing our infrastructure in Europe to reflect some of the short-term headwinds there.”