Boulder: At 40, Celestial Seasonings still going for growth
Associated Press Writer
BOULDER, Colo. – Mo Siegel was a 19-year-old worker at a natural food store in 1969 when he and some friends started picking wild herbs from the Rocky Mountains and blending them into tea.
They formed a company, Boulder-based Celestial Seasonings, which today boasts about $93 million in annual sales and has a 45 percent share of the U.S. herbal tea market. Celestial Seasonings now offers more than 100 blends in trademark boxes decorated with original paintings and inspirational quotes.
Celestial Seasonings’ early, explosive growth has slowed in recent years in the face of competition from iced tea and higher-priced specialty teas. But it’s banking on what it does best: Offering soothing herbal teas for well under $5 per box at a time when consumers are looking for healthier, more affordable products.
“When times are tough, they go back to brands they know and trust and feel good about. We feel we fit in that category,” said general manager Peter Burns.
Celestial Seasonings and the natural food movement got started around the same time.
Siegel started picking herbs to make into tea and later asked friends to come along. Those who liked the tea encouraged him to start selling it. A friend put in $700 to turn the herb-picking endeavor into a “real” business, and the company – named for an attractive female friend whom the guys thought must have been seasoned in heaven – took off.
Charlie Baden joined the company 34 years ago as an herb cleaner. He plucked rocks from bales of ingredients – sometimes even munitions, if the herbs came from eastern Europe.
“It was totally laid back. I don’t think I had an interview,” recalled Baden, now a senior blendmaster who estimates he has tasted more than 300,000 cups of tea for quality.
In those days the company provided employees a vegetarian lunch. On some Friday afternoons, the plant would shut down and the staff would play volleyball, Baden said.
“Back then, we didn’t have a market. We didn’t have competition. Word of mouth sold tea to the point where you couldn’t make it fast enough,” he said.
In 1984, Kraft Inc. bought the company for around $30 million, and Siegel eventually stepped down as chief executive officer.
“If I could roll everything back, I probably wouldn’t have sold to Kraft,” Siegel said. But at the time, Kraft was offering Siegel and other shareholders money, and Siegel was feeling tired from 15 years of nearly nonstop work.
Five years later, Siegel was part of a group that bought the company back for $60 million after a proposed sale to Thomas J. Lipton Inc. raised antitrust concerns. That launched Siegel’s second tour as Celestial Seasonings’ CEO.
In 2000, Celestial Seasonings merged with The Hain Food Group to become The Hain Celestial Group Inc. Siegel jokes that he was too independent to want to stay for long. He resigned but remains a shareholder.
Despite the merger, Celestial Seasonings runs largely independently.
Today the tea maker uses more than 100 botanicals from more than 35 countries. It looks for multiple sources for every ingredient to guard against crop differences, transportation glitches and climate or political changes, said Kay Marie Wright, a 33-year Celestial Seasonings veteran who is ingredient purchasing director. Visitors to its Boulder factory sample and give instant feedback on new flavors.
Celestial Seasonings has a 13 percent market share for green tea and 14 percent share for wellness tea – both down slightly from a year earlier, according to company figures. But it has revamped flavors on both lines in time for the hot tea season, which starts in October.
Hain Celestial reported Celestial Seasonings sales of $93.1 million in the fiscal year ending June 30, 2008. It didn’t release a sales figure for the 2009 fiscal year but said revenues of herbal, green and wellness tea were lower, partly due to weaker foreign currencies that dampened international revenues and coupons that lowered sales prices.
But from October 2008 to March, the key season for hot tea, Celestial Seasonings saw consumption growth of 3 percent and was the only major specialty tea company to grow in that period, Burns said. He said the key for the future will be to innovate and expand product lines, such as Sleepytime offerings and wellness teas. The company also has cut products with lower sales volumes or profit margins.
In September, Siegel and Irwin Simon, chief executive officer of The Hain Celestial Group, mingled on the company’s back lawn with employees past and present at a 40th anniversary party. A life-size stuffed bear dressed like the one gracing the best-selling Sleepytime blend sat on a stage. Guests sipped a special anniversary tea blend. A potpourri of smells wafted from the factory, nestled in a residential neighborhood.
“What consumers are realizing is hot tea is a soothing product. They’re drinking it more for health reasons, they’re drinking it more for comfort reasons,” Simon said, adding Celestial Seasonings could even benefit from a bad flu season and cold weather.
“We’re in an exciting time for tea,” he said.