Using a recession to break into the mainstream
In last winter's epic Canada-U.S. Olympic hockey final, no spectator was rooting harder for Canada than New York businessman Irwin Simon. Mr. Simon was an enthusiastic participant at the Vancouver Olympics, using it as a stage to promote the natural and organic food brands produced by his company, Hain Celestial Group Inc. It is the corporate entity behind Celestial Seasonings tea, Yves Veggie meatless hot dogs, Arrowhead Mills bread, Earth's Best organic children's food and a host of other food and personal-care items.
Mr. Simon's appetite for the food business, and for hockey, can be traced to his upbringing on Cape Breton Island, where his father ran a small corner grocery store. Today, the son is an industry leader in natural-organic products, running a multinational food processor and marketer with $1-billion (U.S.) in annual sales.
What did you learn from your father in his store in Glace Bay, N.S.?
He was a nice person and knew how to treat people right. And he was a great father. Whatever he could bring or do for his children, he would do it. My father never made a lot of money but he would say he was a millionaire five times over because each of his kids was worth a million dollars.
I remember his kindness and time for his family, but I also learned what I didn't want to be. My father was not a risk-taker or a good businessman. I wanted to be a risk-taker. I wanted to be able to make things happen and that is how I got to where I am. Hain has been built with my strategy, drive and energy.
Is there something that sticks in your mind?
I used to watch my father as the banks would call him up. He would be overdrawn on his store account and I am talking $25-$30 at that time. They would give him such a hard time. So I have always been very cautious not to become beholden to a bank. Two years ago, when the world went the way it did, the banks were reeling everybody in. At Hain, we were never in a position where the banks had us in a stranglehold and I couldn't continue to grow and develop my business. So in many ways, my father might not have been the best businessman, but he did teach me some very valuable things.
As a supplier of healthy food, do you eat well yourself?
Because of my travel schedule, I watch what I eat. I only eat antibiotic-free meat and chicken. I'm very big into healthy meals and a high-fibre diet. I recently took off 20 pounds because I really went on some high-fibre diets. I work out at least five days a week and I feel good. I believe how you eat is how you feel and how you function.
Did the recession affect your business, to the extent that cost-conscious consumers were shunning your higher-priced products?
When the recession hit in November, 2008, the consumer turned away from healthier foods, and so did retailers, by skinnying down those sections in their stores. The consumer started eating conventional foods, trading down to products like Spam and stuff like that. Then they realized, "Oh my God, what am I doing to myself?" So what Hain did was to break our business out [of its normal channels.] We expanded much bigger into Wal-Mart, much bigger into Target, much bigger into Babies R Us and Toys R Us. Our sales grew tremendously in those [mainstream] places, which showed that people in middle America want more and more healthy food.
So are you less dependent on the natural-food stores now?
[Giant natural-organic retailer] Whole Foods is still our biggest customer. If you walk into a Whole Foods store, you will find more than 1,800 of our products, whereas at Wal-Mart you will find maybe 100. At a Kroger store, you will find 600, or at a Loblaw, maybe 200 to 300.
Loblaw controls about 27 per cent of the Canadian market and our business with them is up by double digits, as it is with Costco and Wal-Mart. We are seeing good growth in all classes of trade. What happened is the consumer has come back and is eating healthier food now. We're all concerned with our health and nutrition.
And I spent a lot of money at the Olympics in Vancouver. We had a very successful Olympics - it was, in many ways, a "green Olympics." We sold a tremendous amount of products there.
What about your prospects for China?
In January, I launched a big partnership with [Hong-Kong based conglomerate] Hutchison Whampoa Ltd. and that for us will be major. We are launching baby food and infant formula in October-November and I expect good things out of Asia for us. The next market we will go into is India and we are selling in South America right now. In India, we will look at tea, at snacks and at non-dairy products; we will look at nut butters.
What is the next big trend in your market?
One of the hottest for us is the Mediterranean Greek yogurt business. Consumers are confused these days with cereals, with so many different ingredients and products. You have to have a healthy breakfast, and it is so important to look at things like probiotics and flax seed in your diet. Consumers are not eating so many cereals, but they are eating a Mediterranean diet and Greek yogurt is a category on fire.
Also, consumers like to reduce their milk intake, which means drinking more and more non-dairy. Our non-dairy business, with rice milk, almond milk, cashew milk, hemp milk and oat milk, is a great growth category. Also, they are looking to snack but they want a lower-fat, healthier product. So it is increasingly about products that are high in fibre, that are gluten-free and that don't contain dairy.
And we see a tremendous number of food recalls in the industry, so consumers ask: 'What do I trust out there and how do I know this product won't be recalled?' Another big thing you see in certain restaurants and among fast-food vendors is antibiotic-free poultry, and there is the concern over animal welfare - 'Do I know the animal has been treated fairly?'
Are Canada and the U.S. basically the same market?
They are very similar. The big difference is that in Canada, Loblaw controls that 27-to-28 per cent of the market, and, in the U.S., Whole Foods drives a lot of the trends in the natural-organic category.
How is your relationship with activist investor Carl Icahn, who has bought 13 per cent of Hain Celestial?
He is a smart guy, and, with that, I've got to manage it. He and I have the same objectives: How do we grow our share price? Some people get funked out about it, but I don't. It's how you manage it. I went out and negotiated an agreement with him, with two board seats. I work with him and go run the business and don't get caught up in a proxy fight or some other fight. So far we've had a great relationship.
That's my Canadian upbringing, my Canadian niceness. I'm a lover, not a fighter. I'm not territorial or arrogant and there is a lot I can learn and a lot I can utilize with him.
Where will you take Hain Celestial?
There is so much runway for this company. In technology, we have seen the rise of Google and Microsoft but there has been no real new food company that has been created out there. There is the opportunity to take this to a $5-billion (U.S.) company [from about $1-billion in annual revenue today]. Part of that is bringing infrastructure and people in, and that's going to happen.
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IRWIN SIMON
Title: President, CEO and chairman, Hain Celestial Group Inc., Melville, N.Y.
Born: Cape Breton Island, N.S., 50 years old.
Education: Bachelor of commerce, St. Mary's University, Halifax.
Career highlights:
Spent early career in Canada with William Neilson Ltd.
1983: Moved to New York to join ice-cream marketer Haagen-Dazs.
1990-1992: Served in marketing jobs with Slim-Fast Foods Co.
1992: Started company to acquire specialty food businesses; bought Hain Pure Foods from Pet Inc.
2000: Bought Celestial Seasonings, leader in specialized teas. Other brands include: Terra chips, Garden of Eatin', Health Valley, Hollywood, Linda McCartney Foods, Natural Skincare, Avalon Organics, Alba Botanica.
