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North Bay Business Journal

Monday, November 18, 2013, 5:56 am

Food & Ag Conference 2013: Blair Kellison, Traditional Medicinals

’39-year overnight success’

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    Blair Kellison has been chief executive officer of Sebastopol-based Traditional Medicinals (707-823-8911, traditionalmedicinals.com) since mid-2008, becoming the nearly four-decade-old medicinal-tea maker’s first leader who wasn’t a founder.

    Blair Kellison

    Blair Kellison

    In that time, he’s helped guide a company that is the nation’s fifth-largest seller of bagged tea and the No. 1 seller of organic and fair-trade tea. It has 11 percent annual growth in U.S. tea sales and 33 percent market share in medicinal tea.

    Previously, Mr. Kellison was president for Natural Snacks in Berkeley for two and a half years, business development manager for Fantastic Foods for two years when it was based in Petaluma, a brand manager for Nestlé for four years and a CPA with Ernst & Young for nearly eight years.

    Mr. Kellison is set to be among the speakers on the “Building a Support Network” panel at the North Coast Food & Agriculture Industry Conference in Santa Rosa on Thursday.

    What food businesses are best-suited to the North Bay?

    BLAIR KELLISON: In general, companies choose locations for their bottom line, and employees choose location to live for quality of life. Every geographical location has a unique point on these two axes. The companies that are best-suited for the North Bay are the ones that fit on the North Bay’s location on these two axes.

    These would typically be companies whose ownership values quality of life and are looking to attract employees who also value quality of life. These are typically transparent organizations that are mission driven and are corporately responsible citizens. I live in Northern California because I value quality of life and I will only work for a company that also cares about quality of life.

    As a board member of Sonoma County BEST [Building Economic Success Together], we have identified the specialty food industry as fitting squarely on Sonoma County’s location on these two axes of cost of doing business and quality of life for employees. These companies offer a higher-quality product, employ corporate social responsibility and market their products to consumers across the U.S. who value quality, transparency and corporate social responsibility in their food purchases.

    What helped and hindered the business in getting started and growing?

    MR. KELLISON: Traditional Medicinals is a 39-year overnight success! The company pioneered herbal medicinal tea in 1974 and has spent the past 39 years educating consumers about the healing power of plants.

    Nothing has come easy for the company. From financing to regulatory constraints, it has been a long slow struggle to get to where it is today. Its success is the result of many dedicated people over many years with one constant — the leadership of its co-founder and majority owner, Drake Sadler.

    If a company has nine lives, Drake Sadler has used all nine to get Traditional Medicinals to where it is today. Each day, my executive team and I stand on his shoulders and the shoulders of all those who have come to the company before us.

    And after all these years of hard work, that view is now quite magnificent. Over the last five years, the company has experienced the greatest expansion in its 39-year history.

    TM has taken the slow-and-steady approach. And the lack of consumer knowledge around herbal medicinal tea demanded this prudent approach.

    Although now largely operated by a management team, the company remains family-owned by the Sadlers. This ownership structure enables us to think and act in the best interest of the future and not the present.

    For instance, during the 2009 great recession, we laid off no one but, instead, used our earnings to keep all our employees. This is a luxury in today’s business world. It enables the company to continue to be a pioneer in herbal formulations and in creating a new social business model.

    What lessons are there from your story in what other North Bay food companies need to thrive?

    MR. KELLISON: A good idea, combined with persistence, patience, and perseverance. 

    Starting a business and capitalizing on an idea is like a surfer riding a wave. You can’t get behind it, or you miss it. You can’t get ahead of it, or you’ll spend all your time and money before it’s able to move you forward.

    You have to stay on top of the wave at all times. Sometimes, it will move fast, and sometimes, it will move painfully slow. With persistence, patience and perseverance, good ideas will always get their opportunity to ride the wave.

    When does an artisan food producer need sales, marketing or management professionals?

    MR. KELLISON: A growing company is always on a path toward its future state. Successful companies have one foot in the present and one foot in the future. In hiring key managers, you have to hire people who have already been to where you are going.

    I follow Jimmy Buffet’s philosophy: “Don’t try to describe the ocean to someone who has never seen it.” Instead of trying to describe your future to those who have never been there, in the leadership positions hire people who have spent their careers swimming in that ocean you are heading for. They will take everyone else along with them.

    The probability of a previously successful senior manager “pulling the company up” to their experience level is substantially higher than a person without that experience “pushing the company up” to the next level.

    Previously successful managers are the type of people the typical small company says they cannot afford. But history proves this theory is incorrect. The opposite is almost always true: small companies cannot afford not to hire previously successful managers. History shows that companies typically expand in direct proportional to their expansion of talent.

    And these experienced hires not only increase your chance for success, but also everyone in the organization gets to learn from them. So everyone gets smarter in the process.

    How does a specialty producer balance artistic sensibilities, marketing distinctiveness and bottom-line realities?

    MR. KELLISON: This is a constant challenge and struggle within an organization. The easy answer is, never compromise on quality; it is why your business exists.

    But this is easier said than done. I am fortunate to have worked at Nestlé, the largest food company in the world. [It had $100.7 billion in 2012 sales.] Similar to other large food companies, they exist through producing good products — good enough — with excellence around cost control, distribution, marketing, sales, finance, logistics, etc.

    In contrast, small artisan food companies exist because they have excellent-quality products, and typically they are poor to OK at all the other qualities I mentioned. But their quality is so good it transcends their poor-to-OK operations.

    I have been the chief executive officer of four specialty-food companies that had excellent products but were poor to OK at operations. In my first employee meeting, I always hold up the company’s product and ask the employees to talk about it, to which they respond with passionate accolades. I then I tell them I am here simply to create an organization from top to bottom that operates at the same level of excellence that already exists in that product.

    When you combine an excellent product with an excellent-running organization, you will always experience success.

    How do social, product-content and quality-process certifications and standards affect your operations and access to the marketplace?

    MR. KELLISON: Corporate social responsibility is in the DNA of Traditional Medicinals. It affects most every decision we make.  For 39 years we have been on the forefront of striving to create a new social business model that is sustainable in all aspects of its business.

    We are a long way from achieving this goal. But we continue to push forward every year earning new certifications and becoming a more sustainable enterprise. 

    We invest well over $1.0 million each year in social and environmental initiatives. These investments range from a solar array on our production facility to ultraviolet treatment of our waste, turning it into grey water for irrigation, to 95 percent of our ingredients being organic to being the largest seller of fair-trade herbal tea in the U.S. to building schools in our overseas growing regions to contributions to Redwood Empire Food Bank in Santa Rosa. In some years, this investment has represented 100 percent of our annual operating profit.

    We have a dedicated supply-chain team that is constantly seeking new social and environmental certifications for our ingredients, products and company. We invest in the founding of new standards like Fair Wild, which is a social certification for wild-collected herbs. We were the first tea company to use a 100 percent recycled box and the first to use an unbleached sustainable tea bag filter paper.

    Yet we tend to only focus on our flaws and what we need to get better at, which is still many aspects of our company.

    How is the marketplace affecting company growth?

    MR. KELLISON: The bagged-tea category overall is relatively small in terms of consumer products — it is about the 75th largest category in the grocery store. In dollar sales, bagged tea is way behind pickles and olives!

    Over the last 10 years, the bagged-tea category has been flat to declining. In 1974 Traditional Medicinals created a niche within bagged tea by pioneering an herbal medicinal bagged tea subcategory. Herbal medicinal tea now accounts for 12 percent of all bagged tea sales in the U.S., and we are the market-share leader.

    As a result, Traditional Medicinals has been able to grow well in excess of the overall bagged-tea category. Over the past five years, we’ve expanded our product distribution from 25,000 stores to 50,000 stores, and this has resulted in the greatest expansion of our brand in our history. 

    Over the next 10 years, there will be tremendous growth in access to health- and natural-food products. The retailers Whole Foods Market, Sprouts, Trader Joe’s, Fresh Market and a few regional chains are projecting to triple the number of their outlets in the next 10 years. This accessibility will introduce millions of more U.S. consumers to natural, organic and specialty foods.

    Consumer trends all point to a sustained interest in plant-based wellness, and we believe this trend will fuel our growth well into the future.

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