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 November 5, 1999

Celestial tea sales on a roll; herbal capsules market flat

BOULDER — As fiscal year 1999 came to a close on Sept. 29 for stalwart Boulder tea and herbal supplement manufacturer Celestial Seasonings, the company has been in the thick of a major ideological transition.

An entrepreneurial spirit has always propelled the company, founded in 1968 by current Chairman Mo Siegel, but now its management is embracing a model of more professionally guided growth.

Celestial Seasonings President Steve Hughes noted that the year was the first in which the company’s tea sales topped $100 million.

“The tea business has just hit a whole new growth,” he noted.

Hughes attributed a 25 percent gain over 1998 in the company’s tea shipments to the growing consumer demand for green teas and other teas with “herbal relatedness.”

Conversely, the company’s secondary product segment – herbal supplement capsules – has seen less lucrative returns.

“The capsules – it’s been a tough year,” Hughes said, noting that the market has been flat for the herbal supplements category since Celestial Seasonings became the first such national brand in the spring of 1998.

“In the last two years, most of the major pharmaceutical suppliers entered the herbal supplement category as well,” explained Blake Waltrip, the company’s vice president of marketing and general manager of beverages and supplements. While competition increased, demand did not expand, a fact Waltrip attributed to a lack of research findings supporting the products’ efficacy. Nonetheless, the company is encouraged by the fact that it is the second or third leading manufacturer in the market, Waltrip added.

The demand for green tea, however, was boosted by the results of clinical studies by Rutgers University, the Mayo Clinic and the USDA. Such studies found that antioxidants, which are found in green teas, have “cancer prevention potential,´ said Waltrip. Thus, the green tea segment has seen 100 percent growth in each of the past two years, a period that also has seen the Celestial Seasonings green-tea market share make a phenomenal jump from 10 percent to more than 30 percent.

Such expansion has helped shape the company’s vision for the future, a major component of which is to extend the Celestial Seasonings brand. To this end, the company opened a retail store in Denver’s Cherry Creek Mall in mid-September. Walt Freese, general manager of Celestial Seasonings Direct, noted that the store’s opening was motivated by the success of the existing retail store at the company’s Boulder headquarters as well as the catalog business.

“We saw a demand,” Freese said.

The demand, he noted, is often for products outside the realm of traditional tea and supplement categories, such as teapots, teacups, framed prints and honey.

“You can think of (the Cherry Creek store) in terms of Nike and Niketown,” Freese explained, adding that the operation provides an opportunity for extension of the Celestial Seasonings brand and an “equity lab” to test new branded and unbranded natural living products. “Everything in the store,” he said, “plays back to Celestial or natural living in some way, shape or form.”

Waltrip noted that the extension of the brand is part of the company’s current growth strategy. “The challenge will be to extend that brand without damaging it” in the eyes of consumers, he noted. Waltrip stated that the $100 million tea sales milestone signals the dawn of an era where shrewd brand management can be the key to continued growth.

Continued growth also requires additional space, and the leasing of a 60,000 square-foot warehouse and distribution center in Gunbarrel in the spring of this year filled that need, said President Hughes. He nixed rumors that the company is considering relocation out of space-starved Boulder.

“We’re a Boulder company, and we want to remain a Boulder company,” he said.

BOULDER — As fiscal year 1999 came to a close on Sept. 29 for stalwart Boulder tea and herbal supplement manufacturer Celestial Seasonings, the company has been in the thick of a major ideological transition.

An entrepreneurial spirit has always propelled the company, founded in 1968 by current Chairman Mo Siegel, but now its management is embracing a model of more professionally guided growth.

Celestial Seasonings President Steve Hughes noted that the year was the first in which the company’s tea sales topped $100 million.

“The tea business has just hit a whole new growth,” he noted.

Hughes attributed a 25 percent…

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