Annies Inc (BNNY), The Hain Celestial Group, Inc. (HAIN) – Organic Growth: 3 Healthy Stocks You Should Own

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Natural and organic foods have taken the world by storm over the past years. The market rakes in over $30 billion a year in the U.S. alone and has been growing 10% each year. People are willing to pay a premium for foods that they perceive as being higher quality and nature friendly. As an investor, there are several stocks you can own to take advantage of this growing industry.

Buying a bunny

Annies Inc (NYSE:BNNY)
Annies Inc (NYSE:BNNY) produces, markets, and distributes natural and organic foods and snacks such as pizzas, crackers, and the beloved mac & cheese. The small cap company recently wrapped up its 2013 fiscal year with net sales of $171 million, a 21% increase from 2012. With recent quarterly revenue growth of 17.70%, Annies Inc (NYSE:BNNY) is implementing key growth strategies to continue improvement.

The first key growth strategy is to expand mainstream distribution of the company’s key products. Annies Inc (NYSE:BNNY) products are currently available in 26,500 locations across different channels, the largest of which is grocery stores. The company saw good gains in distribution during 2013, but admits that it is still below long-term ACV potential. Another key driver of growth is product location. The company found that consumption of mac & cheese located on main aisles grew almost twice as fast as on the natural aisle. The company is looking to build on this information in the coming year. The next growth strategy is brand building: During 2013, aided brand awareness and trial rate increased 80% and 60% respectively. While this is impressive, the company only had brand household penetration of 6.6%. Annies Inc (NYSE:BNNY) looks to increase penetration during 2014, using targeted PR and social media tools. Finally, the company will continue the product innovation that has gotten it to where it is today. Annies Inc (NYSE:BNNY) has laid the foundation and pipeline to ensure that it can handle expansion, and expects 2014 to be a year of large growth for the company.

Annie’s gross margin of 39.4% is 50 basis points worse than the same quarter last year. This was expected by management, and Annies Inc (NYSE:BNNY) gross margin is still competitively high. With the company’s growth potential, I think Annie’s is a good long term investment.

Acquired organic growth

The Hain Celestial Group, Inc. (NASDAQ:HAIN) manufactures, markets, distributes, and sells organic goods, and is a direct competitor of Annie’s. The company recently had quarterly sales of $456.1 million, a 21.4% increase, and the largest quarterly sales in the company’s history. Hain’s recent growth has been spurred by the acquisition of Ella’s Kitchen and BluePrint.

Founded in 1996, Ella’s Kitchen is a fast-growing, hip, organic brand located in the U.K. It will be combined with Earth’s Best, another The Hain Celestial Group, Inc. (NASDAQ:HAIN) brand, to create a Global Infant Toddler & Kids business. The Hain Celestial Group, Inc. (NASDAQ:HAIN)’s executives are extremely excited about this acquisition and hope to change the way children eat. BluePrint is a juice company that offers unique flavor combinations such as pineapple apple mint, lemon cayenne agave, and lime ginger lemon agave. Since acquiring the company, The Hain Celestial Group, Inc. (NASDAQ:HAIN) has developed a BluePrint team that is working on product innovation to introduce to customers. Hain can also drive distribution expansion to increase growth and brand recognition of the juice.

These two acquisitions aren’t the only parts of The Hain Celestial Group, Inc. (NASDAQ:HAIN) that have good growth potential. Currently, the company owns eight $100 million brands that they expect to increase to $200-$300 million brands by the end of 2014. Hain also has six $40 million brands that are expect to rise to $100 million.

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