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If you own HAIN today you have to be scratching your head as to the rational for the company to buy an insignificant brand in the plant-based beverage category.

We have long argued that HAIN is overvalued on the sum-of-the-parts basis because the UK business is anything but organic in its product line and growth rate.  The Mona Group acquisition does nothing for HAIN strategically.  In the short run all it does is make the business look better optically.   

Looking at HAIN UK revenue growth better explains why HAIN is making this acquisition.

In 2Q15, HAIN UK revenue growth was 4%, and we’re looking for it to decline 2% in 4Q15.  For the year 2015 HAIN UK revenues will grow ~18%, bolstered by the acquisition of Tilda, which was fully built into comps starting in 3Q15.  As we look five quarters out to full year FY16, HAIN UK is expected to grow at a modest industry average of 2%. So if you are a management team that wants to make trends look better optically (to keep your multiple) what do you do?   Mask the reality of no organic revenue growth with another acquisition and hope nobody notices!

HAIN | ORGANIC DECEPTION PART TWO - CHART 1A

HAIN will never be a significant competitor in plant-based beverages in Europe.  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).

HAIN | ORGANIC DECEPTION PART TWO - HAIN CHART 1