Celestial’s Siegel Says Industry’s Future Is in Providing Health Solutions

Product and marketing innovation, proven science, taste and innovation—all based on health—will create the next decade’s winners, CTEA’s chairman says.

by Vicky Uhland

BOULDER, CO—Celestial Seasonings’ (CTEA) founder and Chairman Mo Siegel recently gave the keynote speech at the Natural Business Retail Strategies summit.

Siegel, who began his remarks clad in a suit and then stripped down to shorts and a

T-shirt (“The taking off of my suit was clearly the low point,” he jokes), quickly moved into a more serious discussion of what the future holds for the natural products industry. In a postspeech interview, Siegel reviewed with Natural Business the highlights of his talk.

Siegel begins with a disclaimer: “It’s important to remember that whenever you look through crystal balls, you wind up eating glass. I’m going to talk about what I’m thinking and feeling, vs. what I really know.”

He then polishes his own crystal ball and begins to predict. “In the future,” Siegel says, “the fuel for growth will be the same as our roots—health. I started Celestial with that adage. I had asthma as a child. This is an industry started by health nuts.”

In the future, Siegel says, the natural products industry will have to appeal to the mainstream “with intelligent, attractive services centered around health.”

He outlines four ways to do so:

1. Product and marketing innovation. “New sells: new looks, new ingredients, new concepts, new flavors—really driven by R&D and marketing concerns,” Siegel says. “All the retail outlets are blending together. The stuff at Target—how different is it from Vitamin Cottage?”

2. Proven science. “Natural products manufacturers need to spend money on R&D; they need to develop products that work. This industry needs to spend money on proven

science,” Siegel says.

3. Taste. “No one wants to eat ground-up Birkenstocks,” Siegel asserts. “People want foods that taste good. There’s a merger between gourmet and natural foods at Whole Foods (WFMI) and Wild Oats (OATS).”

4. Marketing innovation. “There’s a lot of brand-building linking people to products,” Siegel says. “Stores need to be interesting and fun.”

He then launches into the challenges of marketing for different channels of distribution. “With channel marketing, everything’s kind of blurring together. People say they can occasionally see Celestial products at Sam’s Club or Costco, but it’s four products compared to 200 at a natural foods store. Manufacturers need to distinguish channel offerings, and stores need to distinguish their channel.”

But if there is one point Siegel is even more passionate about, it’s the importance to the future of the natural products industry of consumer convenience.

“Winners in the future will focus on convenience. If I really could shout about this, I would,” he says. “I’m thinking about how much money people spend at Wild Oats and Whole Foods. But they don’t spend nearly as much as they do at supermarkets, or as much at supermarkets as they do at Costco. To get more volume per shopper, stores in the future are going to have to offer some convenience.

“Why does a 30,000- or 20,000- or 10,000-sq.-ft. store need six brands of peppermint tea or 14 vitamin Es? People are asking ‘Where’s the Tylenol?’”

“Stores are over-niched without understanding the need for convenience,” Siegel says. “You can get more ring per business without losing ‘cleanliness’ as a company. Some stores are starting to do it.”

Siegel also believes management in the natural products industry increasingly will come from the halls of ivy. “Winners in the next decade will be tougher competitors. You’ll see more young folks with MBAs from Harvard in the business,” he predicts. “People are going to have to get smarter as we go global and there’s a crunch for public company money.

“You can be a nice, cozy, happy, complacent company or one that’s going to smash it in there at the end of each quarter. In the future, I think it’s going to be both highest quality and lowest price that successful companies employ.”

Siegel continues: “The winners follow the 4F principle—fast, fluid, flexible and factual.”

Siegel concludes where he began: In the final analysis, “The only survival in this industry is the focus on health. We were born to make people healthy.”