Businessweek Archives

Putting The Red Zinger Back Into Celestial


People

PUTTING THE RED ZINGER BACK INTO CELESTIAL

At Celestial Seasonings Inc., tampering with Almond Sunset is almost like resetting the crown jewels. This, after all, is the brew Nancy Reagan used to soothe a ruffled Raisa Gorbachev at the 1985 Geneva summit; Celestial employees have called it "summit tea" ever since. But that doesn't bother Morris J. "Mo" Siegel, Celestial's iconoclastic 41-year-old founder. Drawing a sip through his teeth and noisily slurping it in, he pronounces his verdict: "It's a little boring." Maybe blending in another flavor will help. "Did you look in a cookbook?" he asks his half-dozen assistants. "What does Betty Crocker put with almond?" They barely have time to answer before Siegel butts in. "Let's get radical," he says with a grin. "Vanilla, coconut, chocolate . . . Who says we can't use chocolate?"

Nobody says he can't--at least, not anymore. Siegel, the man who built a multimillion-dollar market for herbal teas with such concoctions as Red Zinger and Grandma's Tummy Mint, has just returned to Celestial Seasonings after a five-year hiatus. His plan had been typically lofty: Working with a variety of nonprofit organizations, he wanted to save the world. But he learned a lot about himself along the way. "I put a lot of my life into this company," says Siegel, who sold Celestial to Kraft Inc. for about $40 million in 1984. "I missed the corporate world."

At Celestial's Boulder (Colo.) headquarters, the sense of excitement is as pungent as the scent of lemon grass wafting through the building. Siegel, chairman and CEO, brings with him not only taste buds but a quirky blend of philosophy and business. He says he'll concentrate on marketing and product development--both, naturally, using such environmentally correct prescriptions as the omission of strings and tags from most tea bags.

The hope is that his presence will translate to greater sales, now around $51 million a year. After rising rapidly under Kraft, revenue growth has slackened since management bought out the company in 1988 for about $60 million. Siegel may be just what it needs. "It was Siegel's vision, his enforcement of the cult that defined Celestial," says Tom Pirko, president of beverage consultant Bevmark Inc. "Celestial needed the spirit Mo imbued."

As he reacquaints himself with Celestial's operations, Siegel wants in on almost every detail. So, on this sunny morning, he's off at a trot to the aroma lab--actually a windowless conference room dubbed "the dungeon"--where he sniffs the contents of little glass jars. Today's fragrance is for a laundry product under development by Earth Wise Inc., a company Siegel founded to produce garbage bags from recycled plastic, kitchen cleaner from vegetable oil, and other products. Celestial agreed to buy Earth Wise when Siegel returned.

CORPORATE NARCS. "You've got to be kidding," he says, wrinkling his nose over one jar of scent. Another he pronounces "awesome," a third he compares to clothes on a line: "It's sad, but clothes drying in the sun don't smell that good." Siegel says he won't disclose what this product is, for competitive reasons. In fact, he may not even pursue it: Procter & Gamble Co. has a similar product with "the right environmental solution." He wishes the consumer-goods giant well. P&G "could affect more people in a positive way than we," he says.

Such rhetoric may be difficult for outsiders to swallow, but there's no denying that Celestial has always embraced environmental concerns. The corporate-beliefs statement pledges Celestial's actions to be "building blocks in making this world a better place now and for future generations." And despite difficult years under Kraft, which once riled employees by hiring an undercover agent to investigate suspected drug use at Celestial, Siegel is doing his best to keep it a hang loose kind of company. There's a shower for employees who bike to work and a track for noontime runners and roller bladers. The corporate uniform is jeans and a T-shirt.

Curiously, Siegel has begun sporting a tie since returning to Celestial. But on warm days, the tie accompanies shorts, moccasins, and ankle socks. And you won't find these ties in the Brooks Brothers catalog. Selected to project the image of a wild and creative guy, each is stranger than the next. The most outrageous is one Siegel calls "road kill," with a design resembling crushed feathers.

HIPPIE DAYS. Like many of his generation, Siegel's odd style is informed by his hippie years in the late 1960s. After growing up in a little Colorado town called Palmer Lake, the son of a rancher who also ran a store in nearby Colorado Springs, Siegel attended college briefly before setting off to Aspen to set up a health-food shop. The tea business came into being around 1969, when Siegel, his first wife, and another couple began picking herbs for tea. The women hand-sewed muslin bags to package the teas; the men sold them to health-food stores around Colorado. The reception was overwhelming, and by

1972, Siegel and a half-dozen investors had incorporated. The health craze of the '70s swept Celestial along, winning it space on supermarket shelves and ballooning revenues, to $27 million, by the time Kraft arrived.

The buyout netted Siegel more than $10 million and gave him the chance to go off and better the world. He helped found Omega Technologies Inc., which grows algae containing Omega 3, a chemical that helps prevent heart disease. He also started the Jesusonian Foundation to further the teachings of Jesus. His father uas Jewish, but Siegel says he developed that interest while attending Catholic high school. He himself is not a member of any church. And he also worked with John Denver on his Windstar Foundation, an environmental group. And he started Earth Wise.

Meanwhile, Kraft was busy building up Celestial. The corporate parent provided marketing research, advertising, and cash to pay for rapid growth of the brand. Celestial's revenues increased more than 50% under Kraft, to $45 million. But Kraft apparently failed to understand Celestial's niche in the health-food market. It developed a Celestial blend of seasonings to flavor beef, of all things, and ordered the company to cut its well-known sponsorships of professional bicycling. Friction followed, and by 1987, Kraft tried to sell the company to Unilever's Thomas J. Lipton Co. After tea maker R. C. Bigelow Inc. challenged the purchase on antitrust grounds, Kraft sold Celestial back to management, backed by Vestar Capital Corp.

A LITTLE HAZY. At the same time, Siegel was growing frustrated with his life in public service. He missed the competitiveness that's "so much fun" in the corporate world. He began to ponder the advice of Mother Teresa, whom he had met on a trip to India in 1985. She had poked him in the chest and said: "Grow where you're planted." This summer, Celestial President Barnet Feinblum and Vestar managing partner James P. Kelley offered Siegel a chance to acquire 25% equity to come back.

Siegel says he has returned to handle all aspects of the company, although he's a little hazy on the numbers. His goal, he says, "is revenues of $96 million by '96 . . . or maybe it's $76 million by '96." (The real number is closer to 96, he says later.)

Now, Siegel's main task is to keep Celestial growing while protecting the things that make it special. When a visit to the packaging department reminds him that some Celestial tea bags are now encased in foil--not the ultimate in environmental friendliness--Siegel balks. Customers "might expect it from Bigelow, but they don't want it from Celestial Seasonings," he tells a manager. Changes are discussed.

Ever the radical, Siegel says he may even overthrow Celestial's sacred slogan. Over a lunch of barbecued chicken and Iced Delight tea in the company cafeteria, Feinblum asks "Don't you like 'Soothing Teas for a Nervous World'?" Siegel squints into the bright autumn sun and says he dislikes the word nervous. Besides, the tagline would be fine "if we just want to sell herb tea for the rest of our lives." But he's got bigger plans. Mother Teresa poking you in the chest will do that to you.

MO SIEGEL: FROM CELESTIAL TO SAVING THE WORLD--AND BACK AGAIN

1969 Celestial Seasonings founded by Mo Siegel

1984 Kraft buys Celestial for $40 million. Revenues: $27 million

1986 He leaves to pursue various causes, creating Jesusonian Foundation and Earth Wise, among other things

1987 Unilever's Thomas J. Lipton says it will buy Celestial, but deal is foiled by antitrust challenge. Revenues: $35 million

1988 Management buys Celestial back. Revenues: $45 million

1991 Siegel returns as chairman and CEO. Revenues: $51 million

DATA: BW, BW ESTIMATESSandra D. Atchison in Boulder, Colo.


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus