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Hain Acquires Imagine Foods:
Ramifications on European Non-Dairy Beverages
Market
Introduction
Consolidation in the organic food industry
continues with Hain Celestial acquiring Imagine Foods this month.
The acquisition of Imagine Foods by one of the largest American organic
food companies is to have a big impact on the non-dairy products
industry.
Imagine Foods has grown to become one of the largest producers of soya-based
and rice-based drinks since it started production in 1982. Its flagship
product is Rice Dream, which is marketed all over the world as a dairy
milk substitute. It is the market leader in the American and European
rice drinks market.
History of Acquisitions
Hain Celestial has bought Imagine Foods
for USD 52 million and it is the latest in a series of acquisitions by
the company. It acquired Canadian firm Yves Veggie Cuisine and Belgian
company
Lima
in 2001, and Celestial Seasonings the year before. Its most notable
acquisition has been that of the Earth’s Best brand from H.J. Heinz,
which involved the multinational taking a 19.5% stake in the company in
1999.
The ‘inorganic’ expansion strategy of Hain
Celestial has been criticised by some industry observers who state that
it pays too much for new companies that do not always integrate
smoothly. The purchase of Imagine Foods is deemed to be a smart move for
there are possible synergies between the two firms and it also gives
Hain Celestial a larger slice of the non-dairy sector.
Hain Celestial leads the American un-refrigerated non-dairy beverages
sector and the addition of Rice Dream and Soya Dream to its portfolio
increases its market share. Hain Celestial also gains an entry into the
frozen non-dairy desserts sector and the refrigerated non-dairy
beverages market.
Prospects in
Europe
The ramifications of the acquisition will
also be felt at the international level, especially in the fast-growing
European market. Sales of non-dairy beverages are projected to expand by
22.1% to EUR 228 million this year. Imagine Foods is the market leader
in the rice drinks market, which is projected to show higher growth than
the dominant soya drinks market in the coming years.
Before buying Imagine Foods, Hain Celestial had a small presence in the
European non-dairy beverages market. Its presence was via the Belgian
company
Lima, which has a portfolio of non-dairy drinks but it has relatively
low market share. Its products are mostly marketed by specialist
retailers and increased competition has prevented it from making inroads
in high growth segments.
Hain Celestial has been eyeing the
European non-dairy beverages market for a number of years. In October it
unveiled a new range of non-dairy drinks at SIAL 2002 in
Paris. These were scheduled to be launched in the European market before
year-end under the Hain Pure Food brand.
Competitive Structure
Alpro dominates the European non-dairy
beverages market. The Belgian firm leads with its Alpro and Provamel
range of non-dairy drinks and it also supplies a number of leading
companies like Distriborg. It is widely seen as a pioneer in the
European non-dairy products industry where it now has three processing
facilities. Its domination has been unchallenged partly because most of
its competitors are small-medium sized firms with low financial
resources.
The acquisition of Imagine Foods by Hain Celestial makes it a challenger
to Alpro’s domination of the European market. Hain Celestial is likely
to build on the success of Imagine Foods Rice Dream in the rice drinks
sector by launching complementary products like soya drinks and chilled
desserts. The purchase also gives Hain Celestial instant access to
established marketing and distribution infrastructure of Imagine Foods
in
Europe. Marketing expenditure is expected to increase over time as it
looks to make its presence felt in the European market.
Competition was already stepping up in the
European market prior to the market entry of Hain Celestial by acquiring
Imagine Foods. High market growth rates have attracted a significant
number of new entrants, particularly in
Italy. There are a number of rice drink producers in Italy, many of
which are developing a regional presence. One leading company has even
made a successful foray in the
Far East
with its range of rice drinks.
Impact on Competition
Two-tiers of competition are expected to
develop in the European market. The first tier is to remain highly
concentrated with companies like Alpro and Hain Celestial (Imagine
Foods) dominating. These companies will focus on producing large volumes
of non-dairy drinks that will be mostly marketed by mainstream marketing
channels.
The second tier is to become increasingly fragmented as more companies
enter. Companies in this tier will focus on niches, either in terms of
product offerings or marketing channels. Most of them will focus on
specialist retailers like health food shops, which have been the
traditional sales channels for non-dairy drinks.
There could also be some consolidation or acquisitions in the European
non-dairy sector in the coming years. Hain Celestial could become a
successful example of how acquisition can be used as market entry method
for non-European companies that are looking to take a slice of the high
growing non-dairy products pie.
Source Report:
#1001-50 The
European Market for Non-Dairy Drinks
Posted: December 23rd 2002
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