Siegel Returns to Rekindle Fire for Herbal Teas : Turnaround: The founder of Celestial Seasonings is called back to help rescue the company from smothering debt.
Morris J. (Mo) Siegel is an older, wiser version of the free spirit who gathered wild herbs near the Rocky Mountains to create Celestial Seasonings teas two decades ago.
Part philosopher, part businessman and all entrepreneur, Siegel is taking his usual hands-on approach these days to help boost Celestial Seasonings Inc.’s sales and reduce debt after an absence from the company and a management-led leveraged buyout.
The 42-year-old chief executive has his work cut out for him, but he’s used to turning things around.
He recalled those early days when his idea for a tea called Red Zinger first was greeted with amazement by bankers. “The look on their face when I went in . . . it was like, ‘This is a bad dream.’ The banker went out laughing and got somebody else and said, ‘You’ve got to hear this.’ ”
No one’s laughing these days.
Siegel proved himself to be the boy wonder of the business world in the ‘70s. He created Celestial Seasonings when no one knew much about tea, particularly herbal varieties. Today, the company sells about 50 varieties of teas and accounts for more than half of all herbal tea sales.
It all started in the summer of ‘71, when Siegel and co-founder John Hay began gathering herbs from the hillsides around Boulder. They used old screen doors built up with wooden sides to dry the teas, which then were packaged in hand-sewn muslin bags.
That summer, they sold their entire crop to a health food store. The following year, they launched Celestial Seasonings after borrowing $5,000 from a Boulder bank--a loan co-signed by Hay’s mother--and $5,000 from a friend.
“We were absolutely as poor as we could get,” Siegel recalled. “I had nothing, absolutely nothing.”
But Siegel managed to move the company into the mainstream and, by 1974, sales exceeded $1 million.
The company rode to success on the coattails of the nation’s health-and-fitness fad, using psychedelic packaging and aphorisms to sell its caffeine-free teas with whimsical names like Red Zinger and Sleepytime.
Among the best-known quotes:
* “I hold that while a man exists, it is his duty to improve not only his own condition, but to assist in ameliorating mankind.”--Abraham Lincoln.
* “We are the music-makers, and we are the dreamers of dreams, wandering by lone sea breakers, and sitting by desolate streams; world-losers and world-forsakers on whom the pale moon gleams: Yet we are the movers and shakers of the world forever, it seems.”--Arthur O’Shaughnessy.
In 1984, Siegel sold Celestial to Kraft Inc. for an estimated $36 million. Growing tired of the business, he stepped down shortly after.
“When I left, I had an objective to see every major country in the world before I was 38,” Siegel said, sitting in his office where tea boxes line the window sills. “And I got to South Africa and strangely enough I wanted to kiss the soil because it was my last country. There was kind of like this huge emptiness that also hit the same week.”
Siegel did a lot of nonprofit work, but eventually grew restless.
In 1990, he founded Earth Wise, which makes and distributes biodegradable household detergents, cleaners and recycled trash bags.
Siegel returned to the helm of Celestial last summer after a merger agreement in which Celestial bought Siegel’s Earth Wise.
He was left with a company battling the ill-effects of a $60-million leveraged buyout. Managers and an investor group took Celestial private again in 1988. The year before, Thomas J. Lipton Inc. had attempted to buy Celestial from Kraft, but that deal fell through amid concerns from competitors that the merger would create a monopoly.
Siegel’s focus these days is to put Celestial’s 225 employees on a quality-driven, customer-service track.
Although he won’t disclose specifics, he projects sales of $200 million within six years, possibly by taking the company public. Last year, sales totaled $53.5 million.
Celestial Seasonings has a number of new products in the works, including an agreement with Perrier of America Inc. for bottled tea. Siegel says the company is looking at other licensing agreements, and that he hopes to crack some new international markets too.
Thomas Pirko, who tracks the beverage industry for Bevmark Inc., says Celestial is in an ideal position right now.
“When we review who the players are, it’s pretty hard not to put them right at the top on the tea side,” Pirko said. “Celestial Seasonings is like Kleenex is for facial tissues. They are the mark against which everyone else is measured.”
Few details are too small for Siegel’s attention.
He and Steve McIntosh, president of Earth Wise, recently subjected the company’s latest line of trash bags to a strength test. Siegel collared an employee, who climbed into a 30-gallon bag hoisted off the floor to see which sample held the best.
Later, in a downstairs lab, Siegel slurped tea samples--works in progress--from half a dozen cups as he fired questions at a technician.
“I don’t like that,” he said between sips from a well-worn tablespoon. “This one isn’t so bad.
“Go for the punch,” was his advice.
