Q2 2025 The Hain Celestial Group Inc Earnings Call
Good day, everyone and welcome to the Hain Celestial group incorporated fiscal 'twenty fiscal second quarter 2025 earnings call today's call is being recorded.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad and if he would like to withdraw your question press. The star one again. Thank you at this time I.
Alexis FCA: I'll now turn the call over to Alexis FCA. Please proceed.
Speaker Change: Good morning, and thank you for joining us for a review of our second quarter results I'm joined this morning by Wendy Davidson, Our President and Chief Executive Officer, and Lee Boyce, Our Chief Financial Officer.
Speaker Change: Two shows are forward looking statements disclaimer as you are aware during the course of this call. We may make forward looking statements within the meaning of federal Securities laws. These.
Speaker Change: These include expectations and assumptions regarding the company's future operations and financial performance.
Speaker Change: These statements are based on our current expectations and involve risks and uncertainties that could cause actual results to differ materially from our expectations.
Speaker Change: Okay.
Speaker Change: Please refer to our annual report on Form 10-K quarterly reports on Form 10-Q, and other reports filed from time to time with the SEC as well as the press release issued this morning for a detailed discussion of the risks. We have also prepared a presentation inclusive of additional supplemental financial information, which is posted on our website at Hain dot com under the investor.
Speaker Change: Okay.
Speaker Change: As we discuss our results today unless noted as reported our remarks will focus on non-GAAP or adjusted financial measures reconciliations of non-GAAP financial measures to GAAP results are available in the earnings release and slide presentation accompanying this call.
Speaker Change: This call is being webcast and an archive will be made available on the website and now I'd like to turn the call over to Wendy.
Wendy Davidson: Thank you Alexis and good morning, everyone I'll start the call by walking through today's key messages. I'll then review our second quarter results category performance progress on our Hain re imagine strategy and the building blocks to support our pivot to growth in the back half of fiscal 2025, we will then provide more detail on our financial.
Wendy Davidson: Our results along with our updated outlook.
Wendy Davidson: Despite a disappointing revenue quarter, we generated strong operating cash flow and continued our progress to further reduce net debt, we drove sequential improvement in baby and kids driven by the recovery in infant formula supply and in meal craft led by the continued momentum in our soup brands across both regions and growth in.
Wendy Davidson: Greek gods yogurt.
Wendy Davidson: However sales growth in the quarter was hindered by poor in store performance and snacks, driven by marketing and promotion effectiveness as well as short term supply challenges, particularly in our international segment, where demand outpaced our supply in several of our core categories and brands.
Wendy Davidson: Address these issues, we have improved in store marketing activation added production capacity to rebuild inventory and support growth and reorganized our customer service supply chain.
Wendy Davidson: We are confident that these actions combined with the previously communicated promotional shifts fully recovered infant formula supply in North America brand campaign momentum and confirmed distribution gains in both regions will drive organic net sales growth in the second half.
Wendy Davidson: Organic net sales declined 7% in the second quarter, while not satisfied with this result, we did generate free cash flow of $25 million and continued to make progress on net debt, reducing it by $12 million in the quarter.
Wendy Davidson: Adjusted EBITDA in the quarter was $38 million and adjusted EBITDA margin increased 350 basis points from the first quarter. We remain confident in the building blocks, we have in place to deliver topline growth in the back half however, due to the softer than expected front half and a more volatile macro environment. We feel it is prudent to approach our guidance with a more.
Wendy Davidson: Our cautious outlook for the full year, we will provide details shortly.
Wendy Davidson: Before I get into the detailed category performance I want to touch on our positioning which is particularly relevant in today's environment.
Wendy Davidson: For you trends continue to outpace traditional categories with consumers increasingly looking for healthier options without sacrificing taste convenience or affordability. We also acknowledge the evolving trend of individuals' opting for better for you products to align with their diverse dietary goals. Our purpose is to inspire.
Wendy Davidson: Healthier living through better for you brands, it's part of our ethos and something we've been focused on for more than 30 years, we view, the consumer demand shift and evolving regulatory space as a tailwind for him.
Wendy Davidson: Our positioning and free from artificial portfolio is a true differentiator, particularly in the U S.
Wendy Davidson: They are 100% of Haynes global portfolio is free from artificial colors. Historically, we've not used red dye number three in our portfolio and in the U S. We only use colors from natural sources, such as fruits and vegetables, and we do not use artificial flavors internationally more than 95% of our portfolio is free from artificial flavors.
Wendy Davidson: We don't use any artificial colors, we have partnered with experts to understand the unique nutritional needs of consumers on G. L. P. One treatments and assess our portfolio against those needs. We are currently developing our criteria to define what is G. L. P. One friendly based on available science and we have already identified a number of prop.
Wendy Davidson: <unk> in the U S that are a good fit for these consumers across our beverage soups and yogurt brands, we plan to begin marketing certain items within our portfolio to G. L. P. One users in the near future. These authentic better for you credentials position us well to meet increasing consumer demand for better for you products.
Wendy Davidson: Now review each of our categories and early signals in our pivot to growth in the back half of fiscal 2025.
Wendy Davidson: Sales growth in snacks was hindered by in store marketing activation and promotion effectiveness as we mentioned at the start of this fiscal year snacks were affected by a shift in our promotional activity on the garden Veggie brand and by key retailers shelving changes for garden, Veggie and Terra as we discussed last quarter Garden Veggie remains strong.
Wendy Davidson: Brand with high brand awareness and one of the highest levels of household penetration among better for you snacks the shift of our promotional activity from the first half of the year to the second half impacted absolute sales volumes in both time periods and had a carry on effect in overall velocity as a result, we have adjusted our in store activation.
Wendy Davidson: And shopper marketing for the second half of the year based on these learnings.
Wendy Davidson: Despite these impacts garden that you delivered mid single digit distribution growth in the quarter and continues to be a top velocity snack brand in convenience stores. We continue to expand in this important channel and have confirmed distribution expansion up 17% year on year in the back half of the year.
Wendy Davidson: <unk> saw strong base unit velocities up 9% and in the UK, our leading snack brand Harleys also delivered mid single digit distribution growth in the quarter.
Wendy Davidson: We expect to see accelerated snacks performance in the second half of the year driven by expanded distribution of our brands, including a 5% increase in distribution for snacks at our largest retail partner we.
Wendy Davidson: We will also have new innovation, including exciting flavors and garden Veggie flavor burst, which was recently named the top new product in the tortilla category by Newsweek beginning in this quarter, we have better placement in Io with key customer resets as well as increased merchandising and promotional activity across top customers to support consume.
Wendy Davidson: We are sticking to their healthier living resolutions, we have robust new year, new you campaigns in place for this quarter and we have actively shifted our marketing spend to social this shift enables us to expand reach across a broader set of usage occasions, and audiences and leverage influencers with user generated content to drive engaged.
Wendy Davidson: Okay.
Wendy Davidson: And baby and kids, we continue to see sequential improvement in year over year organic net sales trends Earth's best infant Formula supply has fully recovered with a return of all formulations and sizes at the end of December as planned as expected consumption of infant formula pivoted to growth in the quarter, increasing 29% year on year.
Wendy Davidson: Year further demonstrating the strength of the Earth's best brand outside of Formula consumption of Earth's best snacks, and cereal were each up double digits in the quarter and household penetration for Earth's best has increased.
Wendy Davidson: We believe in the return to leadership in infant Formula led by the strong brand awareness and loyalty and Earth's best in fact, 83% of Earth's best dairy Formula shoppers won't substitute for another brand, but will instead seek their preferred formula at another retailer what theyre looking for is an on shelf, we expect baby and kids trends.
Wendy Davidson: To continue to improve in the second half of the year driven by the full recovery of infant formula supply additional distribution gains increased marketing, especially in e-commerce and exciting new innovation with our Earth's best self feeding platform, which reinforces our leadership from birth to backpack.
Wendy Davidson: We're excited to continue our progress towards regaining leadership in organic infant formula Our Earth's best brand has been a pioneer in organic formula and a trusted leader in the growing powdered formula market for more than 35 years and Earth's best was recently recognized by Babycenter as best organic Baby Formula 2024.
Wendy Davidson: And Ella's kitchen, the leading baby food brand in the UK, we grew distribution by low single digits and outpaced the category on volumes in the quarter.
Wendy Davidson: Fiscal year to date Ellis has gained share in its core wet baby food category, and we are strengthening our storytelling and partnership with a large retailer with branded in aisle activation and more than 200 top stores early results are promising with sales up high single digits in the quarter.
Wendy Davidson: In the beverage category non dairy beverage sales moderated in the quarter with industry shifts to discount channels, where we are under indexed. Despite these category headwinds <unk> continued to grow share in the natural channel celestial seasoning sales in the quarter were impacted by short term service issues driven by a shortage of a long lead.
Wendy Davidson: Time raw material used in our blends which resulted in fill rate issues at the beginning of the hot tea season. This issue has since been resolved and consumption improved throughout the quarter as we moved past the service challenges and our taste our world brand campaign gained momentum.
Celestial seasonings has high brand awareness and our recently launched innovation celestial seasonings Lemon honey drop and the sleep time bias in beauty rest are both performing well we've seen continued strength in sleep time with melatonin launched last year, which remains a top 100 items in the category.
Wendy Davidson: Our efforts to reduce plastic waste led to recognition by beverage industry and we were named best beverage packages of 2024.
Wendy Davidson: We are leaning into our marketing on taste and wellness through our new Master brand campaign taste, our world building strong tea season programs and expanding our away from home presence to drive greater trial and awareness. Additionally, we will be expanding offerings in the second half with innovation focusing on all day wellness Women's health and G. L. P.
Wendy Davidson: <unk> support.
Wendy Davidson: And meal prep, our largest global category, we saw sequential improvement in year over year organic net sales growth trends Greek gods yogurt is showing healthy velocities at key mass customers and has lapped the impact faced last year from customer shifts the Greek gods brand remains strong with increased household penetration fiscal year.
Wendy Davidson: Year to date, we continue to see strong growth in branded soup in the U K with double digit dollar sales growth and share gains in each of our three leading brands. We grew distribution by 25% outpacing the overall category and our recent launch of destination lunch has delivered strong early results in market of 'twenty.
Wendy Davidson: And 2% in the quarter compared to 9% in the category at the same retailer demand was so strong in fact that we had to pull back on certain promotions in the quarter to ensure we could service our customers as we look to the balance of the year, we expect trends to improve in the back half as we fully lap the private label contract loss in our U K spreads.
Wendy Davidson: Then drizzles business.
We have increased soup capacity and are expanding our rollout of destination lunch merchandising based on the early success in quarter, two and Greek ads growth in the back half will be supported by our new brand campaign in the third quarter to support gains and incremental distribution in key channels.
Wendy Davidson: And finally personal care, our smallest category. The progress we have made towards stabilizing our personal care business is driving improvement in gross margin sequentially and in sales trends in our core channels of natural on E. Commerce with the goal of further advancing the focus pillar of our Hanrahan management strategy and simplifying our portfolio.
Wendy Davidson: Oh to concentrate on better for you food and beverage we are exploring strategic options for this business. We believe this is the best path to focus the organization simplify our business and create long term value for shareholders.
Wendy Davidson: We continue to make progress in the transformation, we outlined in our Hain re imagine strategy to position the company for growth.
Wendy Davidson: Our shift to growth has taken longer than initially anticipated we remain confident in the pivot to growth in the back half and in our ability to execute on our transformation strategy. The.
Wendy Davidson: The progress made to date under our focus pillar has simplified our operations and our portfolio. This includes today's announcement on personal care and last year's portfolio divestitures footprint consolidations and SKU simplification initiatives, some of which impacted year on year organic net sales in the first half of 2025 as expected.
Wendy Davidson: We estimate these actions account for an approximately 1% impact on organic net sales growth year to date.
Wendy Davidson: In addition, our new North America commercial structure designed to better align our go to market model for improved customer focus and consumer engagement was implemented in the first half of this fiscal year. We are seeing notable improvement in our customer engagement with increased distribution that major customers on our largest brands in the second half of the year.
Wendy Davidson: Quantitative and qualitative feedback from customers has been positive and we have innovation and collaboration sessions with top retailers scheduled over the next few months, including in our innovation experience Center recently opened in our Hoboken, New Jersey headquarters, we expect this new commercial structure to be a key enabler of our future growth.
Wendy Davidson: Underpinning our fuel pillar, we started fiscal 2025 strong delivering above target savings in the first half and for the full year, we expect to outpace the record delivery and savings we achieved in fiscal 2024, we expect to continue to enhance our revenue growth management capabilities, including trade optimization for improved.
Wendy Davidson: Price volume and mix as well as gross margin expansion.
Wendy Davidson: Within working capital management Youll recall, we unlocked approximately one third of the total Hain re imagine target of $165 million from working capital improvement in our first year and we continue to make progress in fiscal 2025 from our starting point in fiscal 2023, we have extended payables by 19 days and reduce <unk>.
Wendy Davidson: Inventory levels by five days in fiscal 2025, we continue to expect fuel to deliver gross margin expansion with further reduction in that improvement in leverage and investments in our brands and our capabilities.
Wendy Davidson: We are seeing continued progress under the build pillar in our channel expansion strategy, especially away from home. We have recent distribution wins with strategic convenience to our customers and will have at least two snack items in 11 of the top 15 C store retail chains by year end up from five in fiscal 2024 and the fiscal <unk>.
Wendy Davidson: Quarter away from home net sales grew 38% in North America, and 52% and International Garden Veggie remained strong in convenience stores with dollar volume up over 40% in the quarter, gaining over 200 basis points of better for you salty snack share.
Wendy Davidson: We have a clear line of sight to growth in the back half of fiscal 2025, we have a number of second half initiatives in place, including the previously communicated promotional activity shifts adjustment of our marketing actions increased promotional activity on brand campaigns known distribution gains and a return to full supply of our infant formula business.
Wendy Davidson: We remain focused on execution to deliver growth and drive operational improvements across the business in particular through our enhanced commercial go to market model in North America, our supply chain team over delivered on our fuel pillar in fiscal 2024, and we are confident in the work being done to address the short term supply challenges and internet.
Wendy Davidson: National and now I'll turn it over to Lee to discuss our second quarter financial results and updated fiscal 2025 outlook in more detail.
Lee Boyce: Thank you Wendy and good morning, everyone.
Lee Boyce: For the second quarter, we saw our organic net sales declined 7% year over year.
Lee Boyce: The decline was driven primarily by lower sales in the North American segment.
Lee Boyce: The decline in organic net sales growth reflects a five point decrease in volume mix.
Lee Boyce: The two point decrease in price.
Lee Boyce: Okay.
Lee Boyce: We delivered adjusted EBITDA of $38 million in the second quarter, compared with $47 million a year ago.
Lee Boyce: Adjusted EBITDA margin was nine 2%, a 350 basis points increase from the first quarter.
Lee Boyce: Adjusted gross margin was 22, 9% in the second quarter.
Lee Boyce: A decrease of approximately 60 basis points year over year.
Lee Boyce: The decrease was driven by cost inflation and pricing due to higher trade spend on promotional activities.
Lee Boyce: In efforts to execute winning portfolio actions.
Lee Boyce: Partially offset by productivity.
Lee Boyce: SG&A decreased 5% year over year to $17 million representing.
Lee Boyce: Representing 17% of net sales for the quarter as compared to 16, 3% in the year ago period.
Lee Boyce: The decrease was primarily driven by lower employee related expenses on efficiencies from our integrated operating model.
Lee Boyce: During the quarter, we took charges totaling $7 million.
Lee Boyce: <unk> Ics with actions under the restructuring program.
Lee Boyce: Including contract termination costs asset write downs employee related costs and other transformation related expenses.
Lee Boyce: To date, we have taken $75 million in charges associated with the transformation program.
Lee Boyce: Which is comprised of $72 million of restructuring charges and $3 million of expenses associated with inventory write downs.
Lee Boyce: Of these charges $29 million were noncash.
Lee Boyce: As previously discussed the total transformation program charges are expected to be $115 million to $125 million by.
Lee Boyce: By fiscal 2027.
Lee Boyce: Inclusive of potential inventory write downs.
Lee Boyce: Absolutely $25 million related to brands and category exits.
Lee Boyce: Restructuring charges, excluding inventory write downs are expected to be $90 million to $100 million by fiscal 2027.
Lee Boyce: And are excluded from adjusted operating results.
Lee Boyce: Interest costs fell 21% year over year to $13 million in the quarter.
Lee Boyce: Driven by lower outstanding borrowings and the reduction in interest rates.
Lee Boyce: As a reminder, we have hedged our rate exposure on more than 50% of our loan facilities with fixed rates at five 6%.
Lee Boyce: We continue to prioritize reducing net debt over time.
Lee Boyce: Adjusted net income, which excludes the effect of restructuring charges amongst other items was $8 million in the quarter.
Lee Boyce: Eight cents per diluted share.
Lee Boyce: As compared to $11 million or <unk>.
Lee Boyce: <unk> per diluted share in the prior year period.
Lee Boyce: Turning now to our individual reporting segments.
Lee Boyce: In North America organic net sales declined 9% year over year.
Lee Boyce: The decrease was primarily driven by lower sales in snacks.
Lee Boyce: In store activation and promotional timing shifts.
Lee Boyce: As well as by lowest sales in personal care.
Lee Boyce: Due to SKU simplification initiatives.
Lee Boyce: We expect North America to return to growth in the back half of the year driven by snacks on the promotion timing shift improved shelf placement and distribution and execution of marketing.
Lee Boyce: Infant formula on recovered supply and T on recovery from supply chain issues innovation and the new brand building campaign.
Lee Boyce: Second quarter adjusted gross margin in North America was 25, 2%.
Lee Boyce: A 40 basis point increase versus the prior year.
Driven by productivity, partially offset by pricing due to trade spend as discussed.
Lee Boyce: Adjusted EBITDA in North America was $25 million.
As compared to $31 million in the year ago period.
Lee Boyce: The year over year decline resulted primarily from pricing and deleverage on lower volume, partially offset by productivity.
Lee Boyce: Adjusted EBITDA margin was 11%.
Lee Boyce: 60 basis point increase year over year.
Lee Boyce: In our international business organic net sales declined 4% in the quarter, driven primarily by lower sales in meal prep and short term service challenges.
Lee Boyce: We expect the international segment to return to growth in the back half of the year as we lap the loss of the private label spreads contracts accelerate growth in hotly snacks.
Lee Boyce: Ella's kitchen accelerates on increased Cdp's in brand building.
Lee Boyce: And we realize the benefits of innovation and new contracts and non dairy beverage.
Lee Boyce: International adjusted gross margin was 20% approximately 160 basis points below the prior year period.
Lee Boyce: Driven by inflation and deleverage on lower volume and mix.
Lee Boyce: Partially offset by productivity.
Lee Boyce: International adjusted EBITDA was $23 million.
A decrease of 13% compared to the prior year period.
Lee Boyce: Deleverage on lower volume and product mix more than offset productivity.
Lee Boyce: Adjusted EBITDA margin was 12, 4%.
Lee Boyce: Down approximately 160 basis points year over year.
Lee Boyce: Turning to cash flow and the balance sheet.
Lee Boyce: Free cash flow in the second quarter was $25 million.
Lee Boyce: Compared to $15 million in the year ago period, and an outflow of $17 million in the first quarter.
Lee Boyce: The increase was primarily due to improved cash flow from accounts receivable and accounts payable.
Lee Boyce: Partially offset by a reduced benefit from the inventory related to short term supply challenges.
Lee Boyce: We continue to see the benefit of our days payable outstanding as well as an improvement in our days inventory outstanding in the second quarter.
Lee Boyce: Days payable outstanding improved to 56 days from 37 days in fiscal 2023.
Lee Boyce: Days inventory outstanding improved to 77 days from 82 days in fiscal 2023.
Lee Boyce: We continue to make progress against our hangar you imagine targets of 70, plus days payable outstanding and 55 days inventory outstanding by fiscal year 2027.
Lee Boyce: Capex of $6 million in the quarter was in line with the prior year period, we now expect the expenditures to be less than $40 million.
Lee Boyce: Fiscal 2025.
Lee Boyce: Finally, we closed the quarter with cash on hand of $56 million and net debt of $672 million.
Lee Boyce: Our net leverage ratio as calculated under our credit agreement ticked up modestly to four one times.
Lee Boyce: We expect leverage to end the year in the high threes.
Lee Boyce: We remain comfortable that we have sufficient headroom under our existing covenants.
Lee Boyce: Paying down debt and strategically investing in the business continues to be our priorities for cash and we reduced net debt by $12 million in the quarter.
Lee Boyce: Our long term goal remains to reduce balance sheet leverage to three times adjusted EBITDA less as calculated under our credit agreement.
Lee Boyce: Turning now to our outlook.
While we continue to expect to pivot to growth in the back half of the year.
Lee Boyce: Given our performance year to date and the challenging macroeconomic backdrop, we are adjusting our full year outlook.
Lee Boyce: For fiscal 2025, we now expect organic net sales to be down 2% to 4%.
Lee Boyce: Adjusted EBITDA to be flat year over year.
Lee Boyce: Gross margin to expand by at least 90 basis points year over year.
Lee Boyce: And free cash flow of at least $60 million.
Lee Boyce: Please note that while changes in exchange rates do not impact organic net sales growth.
Lee Boyce: It does impact adjusted EBITDA.
Lee Boyce: The impact on adjusted EBITDA of exchange rate movements. Since we gave our initial guidance is approximately $2 million unfavorable.
Lee Boyce: Unfavorable.
In terms of cadence for the balance of the fiscal year, we expect gross margin and adjusted EBITDA to improve sequentially with a material step up in Q4.
Lee Boyce: While we have made significant progress in executing our haynesville imagine strategy.
Lee Boyce: This has taken longer to realize as we have discussed.
Lee Boyce: As such we want to provide an update to our haynesville imagine growth algorithm.
We expect that organic net sales growth will improve throughout the hain, we imagine time horizon.
Lee Boyce: Sustainable exit rate of 3% plus by fiscal 2027.
Lee Boyce: We continue to expect gross margin of at least 26% by fiscal 2027.
Lee Boyce: We continue to expect 12% plus adjusted EBITDA margins by fiscal 2027.
Lee Boyce: And we also continue to expect to unlock a $165 million in working capital improvement by fiscal 2027.
And we continue to expect to achieve leverage between two and three times by 2027.
Wendy Davidson: And now I'll hand, it back over to Wendy for closing remarks.
Wendy Davidson: Thank you Lee.
Speaker Change: With leading brands and better for you paint is well positioned to meet increasing consumer demand for better for you products. We have made progress against our Henry imagine strategy, particularly in the focus in fuel pillars of our transformation, we have simplified our portfolio of brands and Skus, our geographic footprint and our operating model, we launched our fuel program.
Speaker Change: Delivering strong cash flow, which we have used to reduce net debt, while investing in our brands and capabilities to drive future growth. We are confident in our portfolio of brands and categories that are positioned for growth with ample white space to drive distribution, we have strengthened our relationships with top customers and are partnering to enable them to support <unk>.
Speaker Change: Consumer trends and better for you.
Speaker Change: We're focused on driving improved commercial execution and supply chain reliability to enable our pivot to growth in the back half of fiscal 2025.
Speaker Change: Before I close I want to acknowledge our team members our supply partners and our customers. We believe that better for you doesn't have to mean sacrificing taste convenience and availability together, we can deliver on the promise to inspire a healthier living operator. Please open the line for questions.
Speaker Change: Thank you the floor is now open for questions. If you have dialed in and we'd like to ask a question. Please press star one on your telephone keypad to raise your hand and joined the queue.
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Speaker Change: And your first question comes from Jim <unk> with Stephens. Please go ahead.
Jim: Hi, good morning, Thanks for taking my question.
Speaker Change: When you had mentioned on the snack side.
Jim: Just some support in.
Speaker Change: <unk> performance driven by marketing and promotion effectiveness can you just give us a little more detail on what you saw specifically and then maybe what gives you confidence that some of the promo you have shifted into the back half of the year will be more effective.
Jim: We progressed through the year.
Jim: Good morning, Jim.
Jim: When we look at the three brands in the portfolio you would have heard us talking about the strength of those brands in their awareness and that our biggest challenge was actually driving distribution, while they were beloved brands. We made it very hard for you to find them.
Jim: Shift in promotional activity from quarter, one into the back half of the year didn't just have an absolute dollar impact of just those.
Jim: Activities from front half to back half, but it also impacted the awareness.
Jim: Rodley with consumers because those feature and display actually had a disproportionate impact on overall velocities in our brands and that was learning that we got in quarter. One I would also say that we identified that we had strong awareness and what we needed was to actually have.
Jim: Conversion driven marketing activation in store rather than awareness building. So what does that look like it looks like in quarter. One we did a master brand campaign on garden Veggie, what we really needed to be doing with driving specific conversion and reaching consumers where they were in driving occasion.
Jim: <unk> marketing so we've done a pretty dramatic shift in the overall snack portfolio. We have the non distribution gains and then non promotional activity that moved from front half into back half we have incremental distribution that comes in the back half in C stores alone. We will go from five chain chain piece.
Jim: Doors with two of our Skus to 11 of the 15 largest chain C stores.
Jim: We also picked up 5% distribution in our largest retail partner and we've added the value channel with 20000 stores beginning in March. So we have some really good incremental distribution and incremental availability, what we've done to shift our marketing is to actually drive it in lower funnel active.
Jim: So much more on social which you should start seeing actually be seen in the last couple of weeks to really drive awareness and reach to a broader consumer cohort in driving conversion.
Jim: Okay, Great and then maybe a follow up on that.
Jim: Sember three in particular, there was a little bit of softness in salty snacks is that something that also impacted this or is it really just what you guys saw from.
Jim: Store effectiveness, just trying to parse out category impact relative to <unk>.
<unk> specific event.
Jim: Yeah.
Speaker Change: There is the overall in the snacking category there was softness in in the December time period, what's interesting, though is better for US <unk> continues to perform and we think actually those are tailwind overall for better for you, but also for Haynes, but we don't see a lot of transfer between conventional snacking.
Speaker Change: And our brands so for us it really was about availability in all the right places promotion.
Speaker Change: Display and promotional effectiveness I think I've told you before our brands don't respond for deeper discounts. They do respond to feature and display so more frequency available more often and thats, what youll see us driving in the back half.
Speaker Change: Alright, I appreciate the color I'll hop back in the queue.
Speaker Change: Thanks, Tim.
Speaker Change: Your next question comes from the line of Andrew Lazar with Barclays. Please go ahead.
Speaker Change: Great. Thanks, so much.
Speaker Change: When do you in the last several quarters.
Speaker Change: You've talked a lot about the execution issues in various segments.
Speaker Change: I can appreciate some of the wins you have in distribution coming up and having put some of the supply issues in the rearview.
Speaker Change: I guess Im curious if youre building in some flexibility in your back half guidance for any other potential unforeseen challenges that may arise, particularly in light of what as you've noted is still very dynamic sort of packaged food environment.
Speaker Change: Yeah to be quite honest and as we said in the prepared remark we built in some caution in the back half vote given the history. We have on some of the execution challenges, but also in the broader marketplace and I think we've appropriately guided for that in the back half.
Speaker Change: What I would also say, though is that <unk>.
Speaker Change: Each one of the challenges we faced really since we launched pain re imagined the team have addressed those.
Speaker Change: With pace and we were ahead in our commercial execution turnaround and internationally you saw that reflected in the international numbers up until this last quarter the impact of international in quarter. Two were all about service challenges and those have since been addressed North America was about a year later and some of the commercial.
Speaker Change: Our go to market shifts, but given the results that we've seen in international go to market changes. It gives me a lot of confidence.
Speaker Change: And a very different commercial execution.
Lee Boyce: Got it and then Lee.
Speaker Change: You talked about the cadence in the back half of the year on gross margin and adjusted EBITDA I was hoping you can.
Speaker Change: Put some perspective around the cadence when it comes to organic sales growth. Thanks, so much.
Speaker Change: Yes, so I mean as we as we look through the second half second half versus the first half I mean, we did say, we would actually pivot to growth.
Speaker Change: From an EBITDA perspective, I think it was the first part of the question. The EBITDA perspective, I mean, we expect to see that sequentially improve as we go through the balance of the year.
Speaker Change: We see that also just from a high.
Speaker Change: Margin perspective, I think is consistent with prior calls we said we'd have a.
Speaker Change: Step up productivity steps up as we go through the balance of the year. So what youll see is.
Speaker Change: The sequential improvement in the step up in particularly as we get into the fourth quarter.
Speaker Change: Got it so it sounds like organic no sort of pivot to growth.
Sounds like your expectation there would be even starting in the third quarter and if I'm hearing you right yes.
Speaker Change: Yes, yes, we should we should be we should be pivoting to growth.
Speaker Change: Okay. Thank you so much.
Speaker Change: Your next question comes from the line of come out Gosh Rolla with Jefferies. Please go ahead.
Gosh Rolla: Hey, guys good morning.
Gosh Rolla: I guess a couple of things on.
Gosh Rolla: Snacks and I guess this.
Gosh Rolla: Is it more on the conversion side.
Gosh Rolla: How much flexibility do you have in managing.
Gosh Rolla: The P&L on the margins with this shift in promo activity. It looks like when you go top of funnel bottom funnel.
Gosh Rolla: Certainly understand how you would get an increase in volume, but at the same time, you're managing our balance sheet and margin. So can you maybe just talk about the calculus there.
Gosh Rolla: Yeah, We've said before that we felt good about the amount of money that we have allocated for marketing spend that we needed to shift to more effectiveness. So working versus non working end to spend it better with better effectiveness before we simply increase that spend so what you are.
Gosh Rolla: You're seeing US do is actually shift from what I would say, we're more awareness driving activities to more conversion type activities, but inside the envelope of our normal spend within marketing so just driving effectiveness first and foremost.
Speaker Change: Okay understood and is there some.
Speaker Change: When we think about some of the I guess some of that slowdown or some of that is it.
Speaker Change: Sort of what was maybe the logic on.
Speaker Change: Having sort of the pendulum more on the awareness side now moving it to the conversion side, maybe the logic for the awareness piece initially.
Speaker Change: Yeah, I would say that a year ago. The belief was that we needed to drive greater brand awareness around our three three primary snack brands and that was the biggest challenge that we had driving both distribution and awareness. We've had a really good run on picking up distribution in quarter two we.
Speaker Change: Distribution mid single digits and as I mentioned earlier, we had substantial distribution gains coming in the back half that were either no distribution gains shift in promotional activity known innovation launches or incremental distribution gains, especially in the value channel and in convenience stores.
Speaker Change: What we learned though last summer when we did remember we thought that was the first multi brand promotion that we did the saver. Your summer promotion. What we found from that was that we were driving awareness, where we already had high high brand awareness and in garden Veggie, we actually have.
Speaker Change: The top household penetration of better for you snack brands. So our issue isn't that consumers know the brand. It isn't that consumers are regularly buying the brand. It's the frequency they are buying it and are they buying it for a whole family or are they buying it just for their kids. So we needed to drive more occasion based marketing and more converged.
Speaker Change: And marketing and really lean into social.
Speaker Change: Lee and better for you brands and in more nimble social activation is much more effective than traditional media and we really needed to pivot more quickly. So what youre seeing is I think the team leaning into that kind of strategic agility.
Speaker Change: Got it thank you.
Speaker Change: Your next question comes from the line of Matt Smith with Stifel. Please go ahead.
Matt Smith: Hi, Good morning, Wendy Thank you for taking my question so.
Speaker Change: Good morning, <unk> morning.
Speaker Change: Yeah.
Speaker Change: When it comes to the second half organic sales pivot you called out initiatives across the major product categories. If we look at just the U S business would you expect growth organic topline growth in the second half to be broad based as you benefit from Formula distributions next distribution and the promotion shift any of the recovery in the beverage supply chain.
Speaker Change: Are there other categories or some of those categories, where you've got a lot more confidence in that pivot to growth or more risk around them.
Lee Boyce: I think there is a I'll start and I'll, let Lee add a little bit of color behind it, but we've talked before about full recovery and infant formula.
Lee Boyce: December and we've actually had a really nice pickup in distribution and we've said before that our velocities are back where they were prior to the supply disruption. So you have a very meaningful pivot in Earth's best in the back half from the front half and snacks, we've talked before about the disc.
Lee Boyce: Are the promotional activity that shifted from quarter, one into quarter, three and quarter. Four so that is also a very meaningful shift in just the optics of the year I think with beverage in both international and in the U S business, there's incremental activity promotional activity in <unk>.
Lee Boyce: <unk> and then the branding work that Youll see drive some growth and then we have the continued success in our soups category across all three brands in International and then our U S brands that continue to grow so I would say those are probably the biggest drivers and then the last I would say is Greek gods yogurt, we had a shift.
And customer distribution earlier last year, and we lapped that now so now the increased distribution we've seen in other customers you now start to see that play out in the velocities are very strong in that brand and I guess I guess just supporting that so.
Lee Boyce: The challenges in golf Veggie and Terra brands, we did see mid single digit distribution growth. So as we look forward.
Lee Boyce: You've got accelerated performance driven by the expanded distribution innovation launches and then increased promotional activity.
Lee Boyce: In baby and kids, and we talked about baby and kids repeatedly on prior quarter, we have seen the supply fully recovered.
Lee Boyce: And we expect to see the second half.
Lee Boyce: Continued distribution gains.
Lee Boyce: And an increased marketing environment.
Lee Boyce: On beverages, we did actually have some some short term challenges that we resolved them companies leaning into the marketing on taste and wellness.
Lee Boyce: New Master brand campaign.
Wendy Davidson: And then as Wendy mentioned on meal prep I mean, we're seeing really good trends.
Lee Boyce: <unk> household penetration on Greek gods.
Lee Boyce: Good momentum on the international side as well.
Speaker Change: Thank you and then as a follow up the initiatives you've taken on the personal care business have gotten to that business to a place where you're now able to undergo a strategic review there.
Speaker Change: I'm curious if the learning through that process, if youre at a point, where you can look across your portfolio and see opportunities for similar actions across other product categories or geographies and if that's part of the shift in the Hain re imagine organic sales target, where you're now moving to more of an exit.
Speaker Change: Right, rather than our sales growth rate across the period.
Speaker Change: I would say from day, one of Henry imagine, we and the focused pillar had identified that we needed to appropriately drive an intense focus on stabilization of particular parts of the portfolio and once those businesses are stabilized we would then determine where in the portfolio they said or.
Speaker Change: They fit somewhere else.
Speaker Change: Outside of the company would be a better place for that and you've seen us do that over the last year and a half we moved non dairy beverage from stabilization into our maintained categories infant formula up until this quarter, we had in stabilized because we needed to get the supply and the overall recovery of that was moved that back into grow.
Speaker Change: In fact, we had some of our snack brands and some of our personal care brands that we divested they rent stabilized and then we divested of those and now the personal care portfolio margin expansion is actually ahead of where we expect it to be and significant work is you would see in the earnings slides that the team have done.
Speaker Change: You tightened up the footprint tightened up the SKU mix in portfolio and really improve the overall shape of that business. The divestiture of that will allow us to gain share play food and beverage company and better for you and so I think we will always evaluate parts of the portfolio that are below our algorithm.
Speaker Change: Either in topline or in margin and decide what is the best way for us to improve the overall shape of those businesses.
Speaker Change: Whether that's in our portfolio or somewhere else.
Speaker Change: And I guess, just as a tiny piece I mean.
Speaker Change: We said this before I mean, we believe we are in the right geographies and when the right category platform. So I guess to <unk> point, we will continue just to look just to continue to optimize.
Speaker Change: Then in terms of stabilized right now I mean, it's about 10% of our portfolio is still sitting in stabilized. So we continue to assess it.
Speaker Change: Thank you I'll pass it on thanks.
Sure.
Speaker Change: Your next question comes from the line of Michael Lavery with Piper Sandler. Please go ahead.
Speaker Change: Hello.
Michael Lavery: Good morning.
Speaker Change: Morning.
Speaker Change: You've touched a lot on distribution gains and how important that is.
Speaker Change: In snacks in the second quarter, you already had mid single digit gains and so maybe can you just help us understand a little more clearly what's different.
Speaker Change: The expected gains versus what you already had in hand because.
Speaker Change: Obviously, the sales declines accelerated despite that in the quarter.
Speaker Change: Yeah. The issues, we had in snacks in quarter, two were less about distribution absolute points of distribution because we continue to grow those it was the velocity on shelf, where the real driver was and that's where marketing activation and effectiveness and promotional activity play such a key role.
Speaker Change: So that's why in the back half the continued growth in distribution is a good thing, but even more important is the promotion display shift in marketing activation and driving purchase activity will be that much more important in driving that turnaround and snack.
Speaker Change: And then just two more.
Speaker Change: Maybe unpack that a tiny bit further obviously the promotional activity.
Speaker Change: Usually has a pretty quick consumer response, where.
Speaker Change: Some of the marketing execution can can build more over time, how should we think about.
Speaker Change: As you mentioned some of the ways you want to kind of pivot the marketing approach.
Speaker Change: How quickly do you expect to get to.
Speaker Change: The results there.
Speaker Change: For me a quicker response time then.
Speaker Change: Kind of historically other marketing approaches or.
Speaker Change: Is that really kind of a little bit of a longer term build too so that we shouldn't expect anything too quickly.
Speaker Change: You will see some improvement in absolute growth in snacks and quarter three the distribution gains will be a benefit in the promotional activity will be a benefit to your <unk>.
Speaker Change: Going around social we will see that continue to build especially as we have an always on social activation rather than always on traditional media, but you'll see that build over time, but I think that is the absolute distribution gains any absolute promotional activity will be a bigger driver for us in quarter, three and quarter four.
Speaker Change: And maybe just lastly, a quick follow up on the distribution side.
Speaker Change: The press release, a week or so ago.
Speaker Change: But any sense of the magnitude of savings that might generate for you.
Speaker Change: I don't think we've quantified it I would say it falls within the overall margin expansion goals that we outlined and Henry imagine remember, we said we had about an 800 basis point disadvantage to industry peer benchmark, we established a 400 to 500 basis points around.
Speaker Change: <unk> cost reduction through the Hain re imagine plan and that part of what will be included in that sort of overall I would tell you I think the bigger benefit is the fact that it allows us to be a better partner to our customers by putting our products closer to the market. So we can have speed to shelf so as.
Speaker Change: Volumes peak as we have peak promotional periods.
Speaker Change: We're in some cases, three or four days from re supply to some of our key markets. So now having distribution nodes in all the various parts of the country allows us to be a better partner to our customers.
Speaker Change: Okay. Thanks, so much.
Speaker Change: You bet.
Speaker Change: Your next question comes from the line of Alexia Howard with Bernstein. Please go ahead.
Alexia Howard: Good morning, everyone.
Speaker Change: Good morning.
Speaker Change: So the first question is really about.
Speaker Change: What indications youre already seeing in the marketplace to show that this pivot in promotional and marketing spending.
Speaker Change: <unk> is working we're already about five or six weeks into the third quarter are you seeing evidence that the new pivot is actually working on on the topline.
Speaker Change: We are seeing improved consumption trends in market.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: And then secondly.
Speaker Change: On the distribution announcements that you put out a few days ago.
Speaker Change: That sounds like a fairly significant reduction in delivery route mileage of 66% and it seems as though it's opening fairly quickly is that going to have a material impact on.
Speaker Change: Productivity improvements cost savings in the back for until they were all the benefits in terms of service levels and so on the new distribution center could bring thank you and I'll pass it on.
Speaker Change: It absolutely has a twofold impact it is a part of our productivity outlook and as we've said before at the back half margin expansion is largely driven by both the pivot to growth, but also by our productivity pipeline. The team have a very good track record in delivering the productivity.
Speaker Change: <unk> pipeline and we are in good we're in a good place as we go into the back half of this year. This distribution expansion is a key part of that as well so it ties into that pipeline and more importantly, it will improve our speed to shelf and our fill rate on shelves with our customers and as we lean into really trying to be our customer.
Speaker Change: <unk> preferred partner in better for you brands. This is a great great opportunity for us to be better positioned by having product resupply within one or two days of our customers rather than three or four days.
Speaker Change: Great. Thank you I'll pass it on.
Speaker Change: Beth.
Speaker Change: If he would like to ask a question. Please press star one on your telephone Keypad. Your next question comes from the line of Andrew Wolf with CLK. Please go ahead.
Andrew Wolf: Thanks, Good morning.
Andrew Wolf: Continue on the North American snacks weakness in the quarter.
Andrew Wolf: Could you.
Andrew Wolf: Scott.
Andrew Wolf: What extent.
Andrew Wolf: If any the category captain issues that you just got.
Andrew Wolf: Got it.
Andrew Wolf: That occurred last quarter.
Andrew Wolf: Sure thing resolved yet.
Andrew Wolf: Impacted the <unk>.
Andrew Wolf: Sales there I think that was probably your largest.
Andrew Wolf: Your customer.
Andrew Wolf: How has the category had been reset.
Andrew Wolf: Or when would that be reset.
Andrew Wolf: It absolutely had a material impact on that particular at that particular account because of shelf placement, but also assortment. It impacted the velocities in that large retail partner those will be resolved in a reset that happened inside this quarter, but we did have some.
Andrew Wolf: It'll promotional activity with them for new year, New you as a potential ramp up into those store resets, but you should see those resets as we hit the latter part of this quarter that give us confidence as we go into quarter four.
Andrew Wolf: Okay now the vendor who ran the camp who was responsible for the category.
Andrew Wolf: Captaincy.
Andrew Wolf: Is that vendor or anyone else kind of done a copycat type of product to the flavors.
Andrew Wolf: Absolutely.
Andrew Wolf: We have not actually seen anyone tried to replicate flavor burst, we actually have two new flavors. One is an exclusive with one customer that launches. This quarter. We have another variant that actually launches in this quarter as well. So so stay tuned for now for flavor varieties of flavor.
Andrew Wolf: First I think I mentioned in the prepared remarks that it was named the top new.
Andrew Wolf: New product and the tortilla category by Newsweek.
Andrew Wolf: Okay, and just last thing is on celestial the ingredient shortage.
Speaker Change: Could you give a little more background on that.
Speaker Change: Why it's fixed things that in the market or could you maybe go to single source there and.
Speaker Change: Just sort of what occurred in <unk>.
Speaker Change: Why why that's.
Speaker Change: Is there any prophylactic income issue with it you have to go to double source in something or or is it more just something happened in the market with a certain ingredient.
Speaker Change: It actually wasn't end market I would tell you that it was actually an internal execution mistake as a long lead time ingredient.
Speaker Change: Had enough wasn't purchased to have on hand.
Speaker Change: As demand picked up at the start of tea season, we were unable to source the ingredient fast enough to be able to resupply I would say that as of the end of December we were back in supply of that ingredients and we're able to then re pipe into the marketplace on celestial seasonings tea. So it was a short term blip it impacted quarter.
Speaker Change: But it isn't an ongoing concern yes, we have additional steps to mitigate the risk in the future.
Speaker Change: Okay. Thank you I appreciate it.
Speaker Change: Your next question comes from the line of Jon Andersen with William Blair. Please go ahead.
Jon Andersen: Yes, good morning, everybody.
Wendy Davidson: Good morning Wendy.
Speaker Change: When do you you talked during your at the top of your prepared comments.
Wendy Davidson: About.
Wendy Davidson: Better for you as a tailwind.
Wendy Davidson: Overall in food.
Wendy Davidson: Referenced.
Wendy Davidson: The kind of ingredient profile of your products and I think for the first time.
Wendy Davidson: Really called out also.
Wendy Davidson: <unk>, so I'm just wondering.
Speaker Change: Could tell us a little bit more about how you view, how youre defining kind of better for you within the context of your portfolio.
Speaker Change: And what that's doing or not doing perhaps to shape your perspectives on innovation.
Speaker Change: And messaging importantly, too to the consumer also Charlie the GOP one angle in there as well thanks.
Speaker Change: Yeah, absolutely. This is one that I think we've mentioned before that we started a piece of work about a year ago with consumer research to really understand what consumers are looking for and better for you.
Speaker Change: Because we continue to say that we're a leader in better for you, we believe and healthier living but we wanted to make sure that we had real science and real consumer insights and back that up we learned from that very clear attributes. The consumer who is looking for they don't want to sacrifice taste. They don't want to sacrifice convenience, they don't want to sacrifice availability and affordability.
Speaker Change: Not want pure health, but they do want healthy nudges. So it is a presence of positives and a little bit of a nudge down of the negatives and so we will be really re looking at our portfolio through that lens to ensure that our products are providing a better then.
Speaker Change: What option two items that consumers would want in their pantry and regular part of their diet routine. So we think that we have products that actually taste as good. They are as convenient they are available for consumers without having them have to sacrifice good health and good and <unk>.
Speaker Change: Radiant profile, we 100% of our North American portfolio has an absence of any artificial flavors or colors and our international portfolio is 95%. We have a few artificial sweeteners in some products, which will actually be removed over a period of time. So we really are going to lean in.
Speaker Change: Do better for you and positive for the consumer without sacrifice as it relates to <unk>, it's almost like every other diet.
Speaker Change: Tito.
Speaker Change: High protein gluten free dairy free etcetera consumers have particular needs and we want to make sure that it is easier to shop, our portfolio to make it easier for them to eat without sacrifice for whatever diet. There on as we've worked with our experts to look at our portfolio through the lens of a G. L. P. One.
Speaker Change: What products do we have that are ideal for that first three months of DLP. One whatever products. We have that are really good for in the middle and then what are those products that are ideal for maintaining and we will message openly to the marketplace to make it again easier for consumers to be able to be on whatever diet there on.
Speaker Change: And Haim will be there to help support their healthier living.
Speaker Change: Great. Thanks.
Speaker Change: I guess.
Speaker Change: You've done.
Speaker Change: A good job of explaining a lot of it.
Speaker Change: The execution related matters.
Speaker Change: External or internal.
Speaker Change: Debt.
Speaker Change: Our leading you to kind of revise your outlook on the top line for the current fiscal.
Speaker Change: But.
Speaker Change: What are we to make of the revision to kind of a long curve algo.
The top line what are you maybe try baking in there.
Speaker Change: And what are what are you trying to kind of maybe communicate.
Speaker Change: From an expectation standpoint, we may not get that kind of 3% plus run rate until we're exiting fiscal 'twenty.
Speaker Change: Yeah, I would say and you've been really good as well.
Speaker Change: Or is that asking me the question of so as you go along and Henry imagine what have you learned what's working what's not working how is that adapting as you go and as we've looked at both the changes we've made in the portfolio, but also execution challenges and then importantly, the macro environment.
Speaker Change: We have tweaked some expectations around parts of the portfolio based on that we still believe very strongly in our fuel delivery, we feel very strongly and our focus initiatives, we've announced to date and the focused initiatives that we are exploring we also feel very good about the margin expansion in the future I would say we are.
Speaker Change: <unk> ahead at productivity pipeline in supply chain, particularly in procurement and in our operations. We are behind where I would have expected us to be in revenue growth management, and youll see us aggressively leaning into that around price pack architecture pricing trade effectiveness in trade promotion.
Speaker Change: We're doing well in overall marketing awareness of our what we call our hero brands I would say we're doing.
Speaker Change: Improvements based on learnings to drive real execution of marketing into convergence conversion and purchase.
Speaker Change: And we are doing a fantastic job on the commercial side and building an improved relationship with our top customers that I feel confident will lead to better outcomes. As we go forward, but I think we've tried to then build an outlook that is acknowledging the areas that are taking longer to turn.
Speaker Change: While at the same time the areas that are continuing to deliver well as Lee said, our exit rate at three plus it doesn't mean that we won't get there before then it's just us trying to set an expectation.
Speaker Change: A a rate basis on an annualized number rather than a CAGR over the life of Hain re imagine so I would I would view it through that lens.
Speaker Change: Okay. That's helpful. I know you asked for two questions I'm going to try and squeeze in a third if I could.
Speaker Change: Im.
Speaker Change: Just back of the envelope math it looks like.
Speaker Change: Again, we may be off on this but.
Speaker Change: The guidance for fiscal 'twenty five on the top line almost call for flattish kind of organic in the second half of the fiscal I guess, depending on where you come out of the range. So I guess my question is on the pivot to growth in the second half.
Speaker Change: What that really means does that mean.
Speaker Change: Full second half basis does it mean, you pivot somewhere in the quarter or in the second half, meaning maybe the third third quarter is flat or down in the fourth quarter is up just some more help with the cadence of this I think from a modeling perspective is really important at this point.
Speaker Change: Yeah.
Lee Boyce: I'll, let Lee answer the specifics, but I would say, we're looking at it and the range is pretty wide as you can tell because we are acknowledging the challenges in the front half and the macro environment. We're not assuming that we will cover all of the challenges in the front half, but we will pivot to growth.
Speaker Change: In the back half on a full back half basis and I'll, let Lee.
Speaker Change: I mean, we're looking to pivot as I said earlier in Q3.
Speaker Change: So you can kind of.
Speaker Change: Wanted to give guidance again on the back half, but we are looking to pivot to the growth in Q3 timeframe.
Speaker Change: Great. Okay. Thanks, Thanks, Ed.
Speaker Change: Thanks, John.
Speaker Change: Your next question comes from the line of John Baumgartner with Mizuho Securities. Please go ahead.
Speaker Change: Good morning, Thanks for the question.
Speaker Change: Good morning.
Speaker Change: I wanted to come back one day to the macro environment. Some clarification there it sounds as though better for you continues to outperform and one of Haynes merits as the skewed towards higher income households. So are you seeing some incremental headwinds for this hiring a group at the shopper level or is the macro commentary directed more at sort of like the retail category competition.
Speaker Change: At the shelf.
Speaker Change: I think it's more acknowledging that in general there's a lot of volatility right now.
Speaker Change: Consumer sentiment in general and in the marketplace and so we're trying to be fairly cautious related to that what we are seeing and probably the same thing. You are is this real bifurcation of the consumer that at the high end, we're seeing premium and Super premium continue to grow and then we're seeing on the low end Val.
Speaker Change: O U N.
Speaker Change: The value channels, and discounters as well as value products continue to grow it's that middle that's really gotten squeezed in general and that's more of a general comment not just specific to the hain portfolio and so as we look at our portfolio. We tend to play at that entry price point to premium, which we think is an ideal position we think.
Speaker Change: The consumer tailwind as it relates to better for you and health concerns are real tailwind for Hain and we.
Speaker Change: We've leaned into making our products more accessible and available to more people youll see our distribution gains in the discount channel and in the value channel as well as driving distribution and growth online will continue to help us meet the needs of both consumers.
Speaker Change: It all value price point.
Speaker Change: Okay and for my follow up I wanted to come back to the comments on ingredients and I understand Haynes point of differentiation for clean ingredients, the red number three and so on but in an environment, where the regulatory backdrop, let's say Titans. When you have larger companies required to eliminate more of these artificial is either by government directly or by consumers.
Speaker Change: I think that would sort of narrow the playing field a bit dilute haynes differentiation on the shelf for quality. How do you think about the playing field potentially changing on the ingredients side and how would it maybe require hate to pivot or adjusted in terms of how to differentiate in the future.
Speaker Change: Well I would hope that more and more companies are leaning into those ingredient claims so I'm not viewing free from as a.
Speaker Change: As a moat that we want to maintain I'd like everybody to move in that direction, especially as a company that believes in inspiring healthier living but we are ahead.
Speaker Change: And we think that we have brands that deliver on great taste and convenience and our goal is to drive greater availability of those as the consumers are leaning in but I think our focus against.
Speaker Change: And it improved ingredient profile for all makes it easier for all.
Speaker Change: Okay. Okay. Thanks, a lot.
Speaker Change: You bet.
Speaker Change: Your last question comes from the line of Anthony Vendetti with Maxim Group. Please go ahead.
Speaker Change: Thank you.
Speaker Change: I know, it's been a little over an hour. So I'll just just a very.
Speaker Change: High level question, I guess related to an earlier question Wendy.
Speaker Change: As you move into the second half.
Speaker Change: Talked about that a little bit but.
Speaker Change: Okay.
Okay.
Speaker Change: If you had to.
Speaker Change: Talk about and there is lots of variables your level of confidence are you highly confident that with these reduced expectations.
Speaker Change: You can.
Speaker Change: It sort of the guidance you have out there for the second half and if you are highly confident what are the.
Speaker Change: Yes.
Speaker Change: If you could foresee.
Speaker Change: Or.
Speaker Change: Sort of look at the second half challenges what would be the one thing or a couple of things that could.
Speaker Change: Make the second half not.
Speaker Change: Strong as you think it could be.
Speaker Change: I believe that we have set the right guidance for.
Speaker Change: The things that could go well and the things that could be a risk in the back half. So I think we have given the appropriate range I feel very confident about our Earth's best and Ella's kitchen. So the baby category I feel very confident in our beverage category as we go into the back half and I feel good about the momentum that we have in Greek gods yogurt.
Speaker Change: And the meal prep category in particular soups in the international business, I would say, where I am cautious in snacks, we have very good distribution gains and assortment gains in the back half, but we definitely need to see the improvement in our productivity of our marketing actions play out and.
I think we've built that into our outlook for the back half to appropriately account for that.
Speaker Change: And then just a quick question on personal care, obviously that was that was very weak this quarter.
Speaker Change: When did you decide.
Speaker Change: Or.
Speaker Change: So as you're looking for strategic alternatives.
Speaker Change: And how far along is that as that process just starting.
Speaker Change: And do you think that will take.
Speaker Change: Six months, a year or are you aggressively trying to figure out what to do with that segment.
Speaker Change: Thank you.
Speaker Change: Yeah, well first I would want to say remember in quarter, two some of the impact and personal care relate to the SKU simplification, but for Skus that don't get organic treatment. So there is a disproportionate impact on the personal care portfolio optics.
Speaker Change: Because of some of that SKU cleanup that doesn't get reversed out for organic treatment that said, we feel really good that we have stabilized the top line that that we've done a nice job in expanding our margins in that business is in a better shape for us to be able to explore optionality, we began the process actually.
Speaker Change: And quarter, two we have engaged a bank to begin moving forward with that we would hope to be able to execute that inside this fiscal year, but you know how those things go. So we'll see how that plays out in the meantime, we are 100% focused on continuing to run that business well.
Speaker Change: To execute well with our customers and take care of those brands.
Speaker Change: Okay. Thanks, very much I appreciate it you bet.
Speaker Change: We have no further questions at this time I will now turn the conference back over to Wendy Davidson CEO for closing remarks.
Speaker Change: Yeah.
Really want to reiterate my thanks, and appreciation to our Hain team to our supplier partners and to our customers. As we said we don't believe that better for you means you have to sacrifice flavor convenience availability or affordability and we look forward to working together to inspire a healthier living thanks for this morning.
Speaker Change: Ladies and gentlemen that does conclude today's conference call. Thank you for your participation and you may now disconnect.
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Speaker Change: Uh huh.
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