"Slim-Fast was a fast-growing brand but totally opposite to H?en-Dazs. Disastrous -- no structure, no strategic plans. You had no authority. You had a meeting with the top guy, and the next day you would start to do what you were told, and he'd come back and say, 'Why the hell are you doing that?' 'You agreed to it.' And he'd say, 'So why'd you listen to me?' What I learned there went against what I learned from youth. People were treated badly. Slim-Fast would hire people when things were good -- the philosophy was, When things get bad we'll just fire them. They would call people over the PA system, and everyone knew what it meant: come down and be fired. They didn't value people -- at Hain we've never had a reduction in force; what I try to do is hold back on hiring until we're absolutely stretched -- and they didn't value the brand. With my father in the store, it was Campbell's soup in that red can, that was always in our store, and Heinz ketchup -- these were products you always had to have in the store. Pillsbury, Coca-Cola, Canada Dry. They stood for something. At Slim-Fast they thought the brand could go on anything and sell: salad dressing, popcorn, cookies. Probably one of the most valuable things I learned at H?en-Dazs was brand equity, brand equity. Slim-Fast would put their brand on toilet paper if they thought it could sell $5 worth. I hated it."
Rather than growing Hain by stretching a single brand until it snaps, Simon has collected a portfolio of brands sufficiently balanced that should one ship go down it won't sink the fleet. He learned that much in 1995, when 40% of his revenues came from the rice cakes flying off the shelves in the wake of a $35-million marketing blitz by Quaker Oats Co. -- until the fad collapsed.
Simon believes in gently stretching each brand. His Earth's Best baby food now has a line called Earth's Best Kidz (infants tend to grow), but it's unlikely he'd put the brand on disposable diapers or baby bottles. Simon's brands work more like a patchwork quilt -- each piece delicately overlapping the next -- than like a jigsaw puzzle. On a recent visit to a supermarket-size Whole Foods health-food market in Manhattan it was actually a trick to walk down an aisle and not bump into Hain Celestial: here soups, here cereals, here soy milks, here cold soy beverages, here snacks, and here baby foods. To Dean De Santis, a Whole Foods manager, that was no secret. "Hain? No rival, not even close," he says. "Everything they put their name on is top-notch. And they own everything."
"In 1991 I got married. The next 10 years of my life would be crucial. I had to establish myself. If I wanted to do it, I had to do it now, in my thirties. I had a severance package. If they fired me, I would get a year. I tried everything to get pushed out. So at the same time I was at Slim-Fast, I was looking for a job just in case, I was looking for a business deal, and I was looking to get fired, which you had to do right, because it couldn't be for cause. My plan was to find a business, find products, find brands, find money -- and '92 was rough times."
In the end Simon didn't have to find another job. He got fired -- his former boss was recently surprised to learn that that had not been Slim-Fast's idea -- and found his business. Actually, several businesses: a company making soy ice cream and soy "meat" pockets, a line of soy pizza, a tiny weight-loss competitor to Slim-Fast, and a company selling frozen kosher foods. Only the last was profitable.
"I thought, 'If I can put these [businesses] together and generate $3 million to $4 million in revenues, enough cash flow to pay the bills and take these brands and grow them....' So I took my own money and put down deposits on each one, and I went out and sold my story to these people, that I was going to raise money and build this big company, that I knew what I was doing, that I was a great marketer, that I was a great visionary, and I guess it worked because people liked me and had confidence in me, but really I didn't have a clue. I'd never before had to worry about money because I had worked for companies with deep pockets. I never had to raise money. I never had to meet payroll. But I convinced all four of these people that I had the other companies, and that I had the money. Next I had to go raise the money. Knocked on the doors of banks, VC firms, everywhere -- they all absolutely thought I was just whacked out."
Ah, the satisfactions of success: Fleet Bank, which wouldn't lend Irwin Simon $100,000 after he had risked everything he owned -- gutting his $106,000 in savings and mortgaging his apartment for another $150,000 -- recently competed to hand Hain Celestial a line of credit worth $240 million. That early period in the capitalization-free zone no doubt explains two things about Simon: (a) why his company is virtually debtless, and (b) why he spends up to a third of his time taking care of shareholders and the analysts/soothsayers who now consider Hain Celestial a buy but tomorrow might shift it to hold ... or worse. When he heard that one New York analyst was in a quandary about private schooling for her child, Simon invited her to call his wife: "Daryl's been through that -- she knows it all," he told her.
Simon knows what it's like to gasp for cash: when he finally got a small underwriter to do a public offering, all that was left after the costs of acquisition, underwriting, accounting and legal fees, and repaying bridge loans was about $235,000 -- a pittance. On aggregate annual sales of $3.8 million, the new company, with its four brands, was bleeding $600,000.
"Once I went public, I got rid of all these people, all this overhead, and in the first couple of months I turned it profitable. We needed to sell more, and tighten up. Meanwhile, I knew we had to get bigger -- so where was the next risk? There was a company called Hain Pure Food Co. -- a great name, around since 1926 -- which was up for sale by Pet Inc. Hain Pure Food had $50 million in revenues. Lo and behold, I was out there in St. Louis bidding -- and I was the last bidder. I convinced Pet, a $1.5-billion company, to sell it to me, me with this little public company, and I sold them that I can do it, I can raise the money. And all I'm thinking on the plane back is, 'How the hell am I going to get $21 million?' "
