It wasn't the banker's cup of tea, but Celestial Seasonings went to town
When Morris (Mo) Siegel approached his banker to ask for a loan to start up an herb tea business 10 years ago, the banker thought the idea was "totally weird." Nevertheless, Mo got his $5,000 -- with a guarantee signed by his mother -- and launched what has become the most successful herb tea business in the United States: Celestial Seasonings.
To be fair, one has to have a lot of sympathy for that bank manager. In 1970 , the boom in "natural" foods had not yet begun in full force, with its campaign for caffeine-free beverages, and Mo Siegel had not yet turned 21.
But he knew his herbs and for some time before expanding on the $5,000 loan, he and three friends had been gathering the herbs indigenous to the mountains around Boulder, Colo., and selling them in little hand-sewn muslin bags.
Their first product was a blend of peppermint, spearmint, comfrey, alfalfa, and hibiscus flowers that they called "Mo's 24." Next came Red Zinger, made from rosehips, hibiscus flowers, lemon grass, peppermint, orange peel, wild cherry bark, and wintergreen. And from these two the range has grown to 52 teas, with ingredients imported from 17 countries around the world.
The company's sales have risen from $60,000 in 1972 to $15 million for the fiscal year ending last June, which represents a respectable share of the $120 million retail herb tea business in the US.
This is the kind of growth Mr. Siegel targeted -- 25 percent a year. Now he has become slightly dissatisfied and is looking toward 27 percent annual growth over the next 10 years and sales of $100 million by 1990. The company does not disclose any more financial information, but annual earnings are report-edly "substantial." Certainly they are healthy enough to attract potential bidders from the ranks of the food conglomerates who are keen to get a slice of the whole-food action.
Celestial Seasonings has been a sitting duck for takeover for several years. Last summer General Mills came "very close" to buying the company when some of the Celestial principals decided they wanted to sell their stock. In the end Mr. Siegel obtained a bank loan and bought the stock -- bringing his stake to about 30 percent -- and General Mills went home empty-handed.
The key to the company's success has been Mr. Siegel's instinct for creating new blends of teas, coupled with a sense of the importance of the clever and the beautiful in marketing.
"Mandarin Orange Spice," for instance, one of the newer flavors, is packaged in a handsome orange and black box sporting an illustration of an Oriental girl framed in white orange blossoms, bluebirds, and branches heavy with fruit. On the bottom -- just above the note that the box is made of recycled paper -- is a quotation from Confucius: "The man who in the view of gain thinks of righteousness; who in the view of danger is prepared to give up his life; and who does not forget an old agreement however far back it extends -- such a man may be reckoned a complete man."
That's pretty heady stuff for even the most compulsive package-reader's breakfast table. But judging by the letters Mr. Siegel receives from customers (packages often carry a footnote saying: "Please write, we like to respond"), part of the pleasure of drinking his tea is buying his boxes.
As the company has expanded, Mr. Siegel has had to concentrate more and more on management and the financial side of the business. More responsibility for developing tea blends has been delegated to the PhD in food technology who works in the research lab, and, for packaging, to the marketing department, which is headed by a man from Pepsi-Cola. But new products still have to pass his strict taste test, and he reserves the right of veto over the artwork, which he likes to be in the "realistic fantasy" style.
Mo's plans for Celestial over the next 10 years or so include a major expansion into a range of products wider than just herb tea. The company has been marketing cold drinks and a range of "Salad Snacks," which double as snacks and a kind of savory crouton. Other new food products and body-care items will probably be marketed within the next six months or so.
The objective is to diversify out of food and thereby become a major health-care company. Executives have apparently been hired from Coca-Cola, and "substantial amounts" of money have been pumped into product development. It's part of Mr. Siegel's lo ng-range plan to make Celestial big andm beautiful.