Boulder Brands Inc (BDBD), The Hain Celestial Group, Inc. (HAIN): The Right Diet Can Be a Matter of Life and Death

The Hain Celestial Group, Inc. (NASDAQ:HAIN) is a leading organic and natural foods products company with operations in the U.S. and Europe. It delivered record financial results for fiscal 2013, with net sales of $1.7 billion and diluted earnings per share of $2.41, representing growth rates of 26% and 39% respectively. This was achieved on the back of balanced growth across its multiple brands and channels. Hain guided for diluted earnings per share to increase by 16%-20% for fiscal 2014.

Despite the good results, I believe that customer demand for Boulder’s gluten-free products should be more sticky than most of The Hain Celestial Group, Inc. (NASDAQ:HAIN)’s organic and natural foods products. This is because the gluten-free diet is largely driven by medical needs, while the perceived health benefits of general organic products might not appeal to everyone. Although The Hain Celestial Group, Inc. (NASDAQ:HAIN) has its own line of gluten-free products, it is more of a proxy for organic and natural foods products, rather than specifically gluten-free products. According to Euromonitor 2012 market share data, The Hain Celestial Group, Inc. (NASDAQ:HAIN)’s gluten free pasta brand, DeBoles only has a 1.4% share of the North American gluten-free market.

The health & wellness market is not limited to natural, organic, and gluten-free food products. Vitamin Shoppe Inc (NYSE:VSI) has carved out its niche in sports nutrition and specialty supplements as a specialty retailer. In the second quarter of fiscal 2013, Vitamin Shoppe Inc (NYSE:VSI) registered positive comparable store sales for the 31st consecutive quarter and it is targeting a low to mid single-digit comparable store sales growth for the full year.

New stores sales growth will also be another key driver. As of August 2013, it opened 23 new stores and should be on track to meet its full-year target of 50 stores. Vitamin Shoppe Inc (NYSE:VSI) believes that its strategy of locating stores in high traffic stand-alone locations instead of shopping malls gives it more visibility than stores in malls.

Conclusion
Boulder enjoys industry-leading gross margins as a result of its relative market share advantage and low customer price sensitivity. Despite this, Boulder is now priced to perfection. I would advise waiting on the sidelines for a better entry price.

The article The Right Diet Can Be a Matter of Life and Death originally appeared on Fool.com and is written by Mark Lin.

Mark Lin has no position in any stocks mentioned. The Motley Fool recommends Hain Celestial. The Motley Fool owns shares of Hain Celestial. 

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