Today Hain Celestial (HAIN) announced that they have agreed to acquire the Mona Group, a branded plant-based drink manufacturer in Europe for an undisclosed amount. Mona has two brands that they operate, Joya, which makes up a majority of the sales and Happy which is relatively unknown. In calendar year 2014 the collective Mona Group had $50 million in net sales.
The plant-based segment is a very competitive market, and as private label is getting more prominent it is imperative to have the top brand in your respective categories. Joya and Happy are not top brands and they face an uphill battle in the plant-based beverage business. Alpro, a top brand for WhiteWave (WWAV) is a clear leader in European plant-based beverages with #1 brand position and $510 million in net sales in FY2014. Furthermore, Alpro has a 43% market share in plant-based beverages across Europe and the nearest competitor has only 7% (HAIN or Joya are not even in the top 5).
This brings us to our next point, below is a quote from Irwin Simon, CEO of HAIN from the press release that is blatantly incorrect:
"We are excited by the acquisition of Mona, which expands our presence in plant-based products in Europe, solidifying our leadership position in the category with the addition of Joya® and Happy® to our Dream™, Lima® and Natumi® brands. This acquisition increases the scale of our plant-based operations to over $100 million net sales in Europe in a growing category of branded and private label products, while providing us with additional manufacturing capacity,"
HAIN is not even in a leadership position to solidify. Irwin is living in la la land, potentially doesn’t even know the competitive market or he is just deceiving investors, in our outreach to the company we didn’t hear anything back on this point.
GROWTH STRATEGY = ACQUIRE BUSINESSES TO MEET PROJECTIONS
There is no fundamental organic growth in Europe to support their projections so management turns to M&A. The UK revenues are deteriorating on a sequential basis, so HAIN is forced to acquire businesses to meet expectation. The sooner people realize this point the better, HAIN specializes in buying companies and just putting them on the shelf to rot.
HAIN is on our Hedgeye Consumer Staples Best Ideas list as a Short, this transaction further convinces us that management is using the same old tricks to meet expectations.