Case:

Celestial Seasonings, Inc.

Student:
Page 1 of 9

STRATEGIC AUDIT FACTOR ANALYSIS WORKSHEET

U

STRATEGIC AUDIT
PARAMETER
I.

COMMENTS

CURRENT SITUATION

I.A. Past corporate

performance indexes

Currently growing at 7+ %
54% market share of Herbal tea Initial public offering in 1983.
market.

Acquired Earthwise in 1991.

Profit after taxes has exceeded
8%.

In 1983, scandal due to toxins

found in tea. IPO withdrawn.

In 1984, acquired by Kraft.

In 1988, employees purchased
company from Kraft.

Page 1

I.B.

Strategic Posture:
Mission

We believe in creating and selling

healthful, naturally oriented products
that nurture peoples bodies and
uplift their souls. Our products must
be

Superior in quality,
Of good value,
Beautifully artistic, and
Philosophically inspiring.

Our role is to play an active part in

making this world a better place by
unselfishly serving the public. We
believe we can have a significant
impact on making peoples lives
happier and healthier through their
use of our products.
Objectives

Ensure consistency of product

taste

Objectives not explicitly stated in the

case text.

To be profitable
Strategies

Expand and diversify vendor base

so that no one vendor can control
the supply chain for any
ingredient.

Target market: women 18-49

Penetration pricing (low cost
provider)

Expand distribution
Integrated manufacturing

Page 2

Policies

Employee empowerment
Consumer involvement
Cultivated herbs must be organic.
Promote from within.
Preserve the environment.

S.W.O.T. Analysis Begins

II. STRATEGIC MANAGERS
II.A.

Board of Directors

Founder is currently the chairman

of the board.

Vestar Capital Partners unclear

involvement with board
II.B.

Top Management

- Top management is typical

hierarchical environment.

III. EXTERNAL
ENVIRONMENT:
Opportunities and Threats
(SWOT) [Optional External
Factor Analysis Summary,
or EFAS]
III.A

Societal Environment

Economic -

Political Legal

Weather patterns
exchange rates
USA 2nd largest tea consumer
in the world
Socio-Cultural

Health emphasis
Page 3

Child labor practices in foreign

countries

Industry FDA regulated

Anti-trust laws
Monopoly
Trade regulations
Political instability in foreign
countries

Technological

Computer technology
used for consistency in
product.

Microwaves to heat up
tea.

 Environmental concern
Effect of baby boom on target
market.

2-income families
Cultural norms
III.B.

Task Environment

Competitors Lipton & Bigelow

Limited competition
Appeals to the health conscious
consumer

Barriers to entry are significant.

Substitute products exist.
Celestial Seasonings created
this market.

Overall tea market is stagnating

(other than the liquid tea
segment)

Specialty tea market in

increasing.

Company is publicly traded.

Ingredients supplied from all
over the world.

Suppliers have little power

since there are so many.

Totally non-union plant.

IV INTERNAL
ENVIRONMENT
IV.A.

Corporate Structure

Classical hierarchical structure

Page 4

IV.B.

Corporate Culture

Culture is a mixture of 70s

informality and 90s business
practices.

Free spirit
Low turnover
Casual, relaxed company
No clear line between
management and workers.

Employees rewarded for their

efforts.

Good job security due to barriers

to entry.

Family oriented company picnics, etc.

One of the Top 100 companies.

IV.C.

Corporate Resources

MC1

Marketing

40 different types of teas

Customer focus
Focused growth via health
consciousness, brand awareness,
strong consumer loyalty,
distinctive packaging.

Target market: Women 18-49

Consumer involvement
Price penetration strategy (low
price product)

Distribution: Expanded to
grocery stores.

Internet sales capable

Page 5

MC2

Finance

1993 went public and brought in

$38 million.

Very good profit after tax

percentage : 8-10%

ROI is marginal at 11-12.5%

Large investment in capital and
inventory.
MC3

Research and
Development

Ventures into nutritional

supplements

New products created in

traditional tea category.
MC4

Operations
(Manufacturing
services)

One production plant.

100 items purchased from 45
countries.

200+ suppliers.
Highly integrated manufacturing
facility and automated packaging
line.

Extensive recycling in production

and packaging processes.

24 hour operation
MC5

Human Resources

Rated in Top 100 Best Companies

to work for in 1995.

216 employees, non-union.

ESOP
Gain sharing programs
Employee empowerment
Holiday and birthday bonuses
Low turnover.
Good benefits, jobs security and
advancement opportunities.
Page 6

MC6

Information
Systems

Information from case does not

indicate use of information
systems and technology.

V. ANALYSIS OF STRATEGIC
FACTORS
(Optional: Strategic Factor
Analysis Summary, or
SFAS)
.

V.A

S.W.O.T
Key Internal and
External Strategic
Factors.

(+) Factors

(-) Factors

Strengths:

Weaknesses

Industry innovator
Motivated employees
Integrated manufacturing
Low employee turnover
Creativity
Supplier diversification

Opportunities

Liquid tea market

Global market potential
Growing target market - Baby
Boomers

Strategic alliances to diversify

$900 million cold/flu industry
Threats

Major competitors: Lipton and

Page 7

Seasonal business
Capital intensive operation
Loose organizational structure
Low inventory turnover
Herbal tea market maturity, lack
of growth potential

Bigelow

V.B.

Review of Mission and

Objectives

Foreign supplier instability

Foreign exchange rates
Trade regulations
Regulatory impact (FDA)

- Mission statement appears to be

supported by objectives and actions
of company.

S.W.O.T. Analysis Ends

VI. STRATEGIC
ALTERNATIVES &
RECOMMENDED
STRATEGY
VI.A.

Strategic Alternatives

Alt.1
Growth
Related Diversification.
Enter liquid tea market with
herbal tea.

ADVANTAGES

Already strong presence in tea

market.

Name brand recognition and

consumer loyalty.

Strong customer base.

Supplier base exists.
Alt.2

Consistent supply of herb.

Controlled supply chain
Growth
Vertical integration (backward) Consistent herb quality and
Control supply chain by
purchasing and operating own
herb farms in United States.

DISADVANTAGES

characteristics

Potential cost savings.

Different distribution channels.

First attempt unsuccessful
Requires new production process.
Difficult to market natural
herbal teas, without
preservatives, and maintain
adherence to mission statement.

Capital intensive
May not be able to provide proper
climate for all necessary herb.

Increased labor expenses.

Tight labor market.
Page 8

 Reduced transportation costs.

Reduced transportation time.
Elimination of some import tariffs.
Alt.3
Growth
Horizontal Integration
Expand distribution into global
market.

Increased sales and profits

Foreign populations not as health

(potentially)

Europeans more environmentally

conscious than U.S.

Accessibility to foreign markets

via the internet.

conscious as U.S.

Lack of distribution channels

outside country.

Unknown product acceptance.

Growth potential for specialty

teas in other countries.
VI.B.

Recommended Strategy Celestial Seasonings is a success,

based on herbal teas, and this
Expand distribution into global
strategy builds on its strong base
market.
product.

No need to develop new

production process. Need only to
add distribution channels or
partnerships.
VII.

IMPLEMENTATION

Develop strategic alliances with

foreign firms who already have a
presence in the selected markets.

Develop appropriate packaging

for foreign markets selected.

VIII.

E VALUATION AND
CONTROL
(ASSESSMENT)

Sales numbers
Foreign market share
Margins
Better ROA

Page 9

NOTES:

Page 10