Beverage Industry

Leading In a Healthy Direction

December 1, 2004

Leading In a Healthy Direction

By JAMIE POPP
The Hain Celestial Group Inc., with headquarters in Melville, N.Y., is a force to reckon with in the beverage industry. With leading brands such as Celestial Seasonings, Soy Dream, Rice Dream and WestSoy, the natural and organic foods company, under the direction of Chief Executive Officer Irwin D. Simon, is not afraid to experiment with ingredients. It continues to discover ways to innovate teas, soy milk, rice milk and juices. From using plant sterols in its rice milk to introducing juices with lutein and debuting a multitude of Celestial Seasonings tea varieties in between, Hain Celestial is connecting with consumers both here and abroad.
Celestial Seasonings has been producing teas since the 1970s when founder Mo Siegel began making tea with wild herbs in the foothills of the Rockies in Boulder, Colo., where today the company continues to process tea. Working with friends, Siegel produced 500 pounds of the first tea blend, which was sold to a local health food store. Starting the company in an old barn, the team expanded its marketing and ultimately introduced herbal teas to a nationwide market. It is this foundation from which Celestial Seasonings gets its entrepreneurial spirit, venturing to create products that routinely engage loyal and new consumers alike.
The days of processing tea in a barn have long passed, and since 2000 Celestial Seasonings has been part of The Hain Celestial Group’s beverage offerings. With a much larger marketing and sales effort behind it than it had in the 1970s, Celestial Seasonings spent this year capitalizing on the tea buzz due to heightened awareness of chai, white, red, green, black and exotic-flavored teas. Celestial Seasonings cited ongoing case sales growth during 2004 as proof that it is doing something right.
Surpassing its traditional roots in the health food category, the company has expanded its reach into channels such as supermarkets, mass merchandise and drug, which contributed a 20 percent increase in sales this year.
The 80 tea flavors produced today are developed in the company’s onsite research and development laboratory. During 2004, Celestial Seasonings was busy introducing tea flavors such as True Blueberry, Perfectly Pear White, Madagascar Vanilla Red, Peach Apricot Honeybush and two Women’s Wellness teas. It was also watching the sales impact of introducing non-bag tea products, including Zingerade, a blend of herb tea, lemonade and juices; TeaHouse Lattes and Chais; and Cool Brew iced tea, tea bags specially formulated to brew in cold water.
Beyond tea
But Celestial Seasonings is only part of The Hain Celestial Group’s line of beverages. Last year the company acquired Walnut Acres Certified Organic and Mountain Sun juice brands, and the Imagine Food’s soy and rice milks, and it continues to expand in the natural beverage category.
This year, the company integrated three juice brands into the mix. Walnut Acres Certified Organic was acquired in June 2003, along with Mountain Sun, a line of functional juices that includes a 100-percent cranberry juice. These brands are undergoing packaging redesigns and flavor enhancements as the company spruces up the juice side of the business. It’s also getting ready to launch a 100-percent blueberry juice under the Mountain Sun brand.
Earlier this year, Hain Celestial introduced Earth’s Best Tots toddler juices, which are fortified with calcium and vitamin C, in 4.23-ounce brick packs. The organic apple peach banana, strawberry pear and apple juices for toddlers are an addition to the infant line of Earth’s Best juices.
The non-dairy market has posed interesting challenges for Hain Celestial during the past year. In addition to completing the integration of Imagine Food’s Soy Dream and Rice Dream brands, which successfully achieved cost and SKU reductions during 2004, the company dealt with a decline in distribution for Soy Dream because of grocery strikes in Southern California, one of its top markets. Additionally, the company discontinued the WestSoy refrigerated line and limited distribution of the refrigerated Soy Dream line.
While soy milk hit a few bumps along the road, Rice Dream became a non-dairy star. Competing successfully in the refrigerated section, rice milk provides an avenue for increasing consumer awareness of non-dairy products. In addition, Rice Dream offers a variety of non-dairy beverages, including HeartWise. HeartWise products provide key heart health benefits through the use of CoroWise, a naturally sourced ingredient that may reduce the risk of heart disease when consumed as part of a diet low in saturated fats and chloresterol. The HeartWise innovation brings the heart-health benefit associated with soy to Rice Dream.
Hain Celestial’s ethnic initiative is highlighted by Rice Dream Horchata, which is being launched in January. Horchata, is a traditional Hispanic rice-based drink. This is the fastest-growing segment of the rice drink category, according to the company.
Although Hain Celestial’s soy milk brands have struggled in the dairy aisle, they remain strong in shelf-stable aseptic packaging. The company plans to grow its aseptic business by focusing on Soy Slender and unsweetened segments of the line. These segments offer no-sugar or sugar substitute soy milk for those consumers counting carbs. Combined these two segments gained 2.8 share points during the latest quarter.
WestSoy continues to be a leader in grocery and natural food store channels. Distribution in mass merchandisers such as Wal-Mart, and creative promotions that involve floor graphics in the refrigerated section that lead consumers to the natural food aisle are ways the company is drawing attention to its variety of products. The WestSoy soy milk line includes low-fat and fat-free varieties of Soy Shakes; and specialty soy-based Soy Slender. Overall, the brand continues to gain market share in grocery stores, and experienced a sales increase of almost 4 percent during the past year.
Hain Celestial also is taking on the role of European soy milk leader with its acquisition of Natumi, a German producer of non-dairy beverages and desserts.  
“Natumi will provide us opportunities to meet the increasing demand from European consumers for non-dairy beverages, as we combine our experience in this category with Natumi's excellent products and management,” said Chief Executive Irwin  Simon in a recent statement.
“Natumi's modern production facility will provide us with the capability for in-house production of its current milk-free products, as well as our other non-dairy products that we distribute into the European markets.”
Distributing the passion
Celestial Seasonings competes in many retail channels. With the number of teas, non-dairy beverages and juices Hain Celestial promotes in grocery, mass merchandise and natural food stores, competing successfully requires a hearty strategy of variety and brand awareness. It also involves staying true to the company’s core values of being inspirational, with beautifully designed packaging, and maintaining a leadership role in markets where it competes.
“Our mission statement says it best,” says Steve List, president of Celestial Seasonings. “Our goal is to profitably grow Celestial Seasonings’ market share by being the most loved and frequently purchased specialty tea in all channels of distribution.”
To create buzz about the company’s teas and sway consumers to repeat purchase “It’s not enough to start with strong brand equity,” says Cecilia Atkinson, vice president of marketing. “You must keep it strong and well-attuned to the consumer’s changing needs.”
Consumer trends revolving around convenience, health and exotic flavors are high on Atkinson’s list of factors affecting the tea category. With a large population of tea consumers abroad, a growing group of tea drinkers stateside, and shifting consumer demographics, understanding its core consumers is paramount to Celestial Seasonings.
“The heart of the tea demographic is 25 to 55 year old women, but this target continues to change as more and more consumers look for healthier beverage alternatives,” Atkinson says. “In the United States, 50 percent of the adult population drinks specialty tea. Much of this growth can be traced directly to increased awareness of the health aspects of tea.” Recent articles have touted the benefits of white, green and black teas, and studies have underscored the natural benefits of red and herb teas.
“Tea is the only beverage other than water that consumers drink all day,” she says. “Our goal is to make Celestial a part of every ‘day part.’ People who are heavy tea drinkers often begin the day with a black tea, then switch to a green tea in the afternoon, finishing with an herb tea before bedtime,” according to Atkinson.
The marketing focus on tea being a beverage American consumers reach for all day is built in to the company’s sales goals as well.
“We’ve seen a lot of growth in the drug store category due to impulse purchases,” List says. “We’re trying to break into club stores… and I see a lot of opportunity for continued growth in foodservice.”
Promoting full steam ahead
Variety in the non-dairy product line gives the company an advantage on the grocery store shelf.
“We’re taking a strong hold in the non-dairy aseptic business,” says Maureen Putman, general manager, grocery. “We have refrigerated rice and soy milks, but our expertise is in the aseptic business, and it’s really the most profitable place for us. But we feel that being in refrigerated can only bring more awareness and more people into the category.
“The non-refrigerated section offers variety,” she continues. “I don’t think you’re ever going to get the shelf space in refrigerated to offer the variety that we have in aseptic because it’s a limited section. You could take up the whole refrigerated milk section with the variety we have in aseptic soy milk, and the refrigerated section is precious real estate in grocery stores.”
To ensure trial and repeat purchase, in-store couponing has been successful for the non-dairy business, according to Putman.
“When it comes to marketing Earth’s Best infant and toddler foods, it is imperative to connect with new mothers and become a trusted resource,” she says. “We do this in a variety of ways, including participating in baby fairs around the country, monthly meetings with new mother’s groups, direct mail, e-newsletters, advertising in key parenting magazines and couponing to increase trial purchases.”
During 2004, Celestial Seasonings exposed consumers to the brand’s new products through widespread sampling, while simultaneously providing incentive to purchase through couponing. Inside boxes of Celestial teas are product samples as well as colorful brochures with information about the history and benefits of tea, plus recipes, tea tidbits and coupons. In 2004, the company boasted the broadest new product initiative in its history. Expanding on last year’s new launches, Celestial debuted 11 new teas covering a range of segments from white and green to red, black and chai. Some of the newest flavors are Blueberry Breeze Green, Decaf China Pearl White, Moroccan Pomegranate Red and Chocolate Caramel Enchantment.
It also has introduced holiday-inspired teas for children in flavors such as Santa’s Candy Apple and Rudolph’s Rockin’ Raspberry. These join the holiday line of Gingerbread Spice, Nutcracker Sweet, Sugar Plum Spice and new Candy Cane Lane teas for adults.
In addition to national retail outlets, a company store in Boulder, Colo., offers thousands of annual visitors the opportunity to peruse the company’s myriad products, which also include Terra Chips and Health Valley cookies and snacks. While Celestial Seasonings lip balm, “tea” shirts, fruit preserves and honey, as well as other paraphernalia such as teapots fill the shelves, 70 percent of the revenue in the store comes from tea sales.
Steeped in innovation
The natural and organic foods company generally introduces new products around two dominant industry trade shows: Natural Products Expo East and Natural Products Expo West. While it shares sales and creative resources among company divisions, Celestial Seasonings has its own laboratory at its facility in Colorado, while the soy business has a laboratory at its facility in California.
Putman says, “Ideas for new products come from a variety of resources: syndicated and custom research, sales, R&D and marketing groups, our medical advisory board, employees, suppliers, customers, even our own children.”
The company is introducing Horchata under the Rice Dream brand. Horchata is a traditional Mexican beverage that is a blend of cinnamon, vanilla and rice, which, will be introduced in aseptic packaging in January after its successful debut this year at the Natural Products Expo East.
For Celestial Seasonings, new beverage development stems from a number of sources such as consumer feedback, supplier tips and research reports about flavors that are hot. In a laboratory at Celestial Seasonings, a group of scientists works with numerous ingredients. The R&D team is responsible for developing the highest quality product formula, creating the optimal blend for each tea, according to Scott Graham, director of product development at Celestial Seasonings. A vast collection of herbs, spices, black, green, red and white teas are testament to the variety of ingredients that go into making some of the world’s most popular specialty teas.
“The process of creating a new tea starts in a variety of ways,” says Celestial Seasonings’ List. “It can come from anyone from me to a retailer or salesperson in the United States or internationally who sees something new in the market, or from custom or syndicated research that tells us some flavor such as pomegranate is going to be big this year.”
The company’s True Blueberry herb tea was developed in conjunction with Celestial Seasonings’ flavor manufacturer, based on research that suggested blueberries had high antioxidant properties. Other teas develop from activity on the store shelves.
“Once we have the flavor we think will work, our creative team works with artists who create the actual artwork for our packaging,” he says. “At the same time, we’re developing the formula and brainstorming on potential names. Eventually we’ll merge these elements to create the finished tea product.”
In addition to the bag tea brands, two ready-to-drink teas have been introduced that have limited availability in the United States.
“The ready-to-drink category is something we are consistently looking at improving,” List says. “We tried other products in the past as well. We currently have a test going on three refrigerated products, called Zingerade. We’re doing a very limited test to see how it goes. Because the cost of entry and velocity expectations in the refrigerated category are high, we need to test the proposition thoroughly, first. “
Packaging with care
The artwork on Celestial Seasonings tea boxes is as recognized as the tea inside. The marketing and creative departments, along with a team of commissioned artists, collaborate to develop whimsical imagery for every flavor of tea, and thoughtful sayings, educational snippets and detailed artwork to communicate with consumers. This is Celestial’s trademark. And the availability of Hispanic-targeted teas in flavors such as Cinnamon Apple, Linden Mint, Honey Lemon Diet and Apple Banana Chamomile, and international-specific packaging, shows its commitment to expand its products and messages.
Designing the content that is going to appear on each box is no small task, considering each line of teas has its own unique box architecture. To add to the complexity, some of the varieties recently switched to dual-panel boxes in order to stock more flavors on the shelf. Additionally, different box sizes and multilingual packaging contribute to more than 150 SKUs.
Taking a hint from the Celestial Seasonings experience, non-dairy products are going through a packaging transition as well. Rice Dream HeartWise is expected to receive enhanced health-benefit call-outs. In addition to flavor profile changes, the Walnut Acres Certified Organic brand is scheduled to get a new look.
“We are improving the package with clearer plastic so you can see the juice color,” Putman says. “We’re also updating the label to reflect the fact that it is 100 percent juice, a key benefit that has been missing from the label, and to better communicate the organic message.” BI