Seth Goldman, co-founder and ‘TEA-EO’ of entrepreneurial success story Honest Tea, tells BeverageDaily.com that Coke’s ownership has helped the brand take Fair Trade and Organic credentials into the US mainstream.
Speaking to this publication, Goldman said: “We’ll do more than $100m in sales this year – last year we were in the $80ms, and when Coke invested [in 2008, taking a 40% stake] we were closer to $20m. We’ve grown fivefold in about five years."
He said that Bethesda-based Honest Tea's success “speaks to the growth of organic products”, with the brand (best-known for its RTD bottled tea products) now in conversation with some national restaurant chains across the US about them serving Fair Trade organic tea.
“So just talking about who we’re reaching through this partnership – I can assure you we would not be having those conversations were we a standalone company,” the entrepreneur added.
Coke bought balance of Honest Tea's shares in March 2011, Goldman explained, noting that although the first Fair Trade tea launch occurred in 2003, the company didn’t go fully Fair Trade (across its tea portfolio) until April 2011. “That was done with Coke’s support," he said.
“We talk about ‘democratizing organics’, so it’s interesting to ask how many people had access to our products before Coke’s investment. We were in about 15000 stores, today we’re in about 100,000 stores,” Goldman added.
“What it means is, whether you’re talking K-stores, restaurant chains, even the White House, where our products are in the cooler there. To be able to able to see our organic and Fair Trade drinks available, because they weren’t before, that’s a very exciting element.”
Such strong growth and widespread distribution also helped suppliers, Goldman said, noting that back in 2008 when Coke first invested, Honest Tea was buying around 800,000lbs of organic ingredients, but this year will buy over six million.
“That’s a dramatic move for our sourcing communities, and the demand for organic articles. Again, we’d be the first to say ‘we’re not the only ones doing this’, but when you’re working with a major company it can really makes a difference.”
Some consumer disenchantment
Nevertheless, Goldman admits that there was some push back from consumers when Coke got involved with Honest Tea.
“Some consumers said 'you’re product Coca-Cola', so we’re signing off. And some natural food stores said ‘we’ll watch what you do – if you in any way back away from your commitment to organics or to Fair Trade, then we’ll buy from someone else’.”
“What’s been really gratifying is that some of those stores, which had delisted us, took our products back in. We’ve continued to innovate and strived to be transparent.”
We asked Goldman whether it was important, in the event of a takeover by a large corporation, that the likes of Coke left entrepreneurial brands to run their own businesses, and whether some separation in the consumers’ mind from ‘big beverage’ was also crucial?
“It’s not just important in the consumer’s mind. It also is in terms of how you run your business. When you’re part of a larger business your decision-making becomes slower, you get more often drawn into branding by committee,” Goldman said.
Innocent Drinks comparison
“I think one of the reasons Innocent Drinks [the UK smoothie brand now also wholly owned by Coke] has done so well is that they have their own culture, offices, team, and we’ve done the same."
He added: “Our distribution is largely through the Coca-Cola system, so we have to be partners to them, but keeping an entrepreneurial culture is vital, especially in beverages where branding is so relevant.”
In this respect, Goldman is enthusiastic when discussing products such as a brewed drink using tulsi (holy basil) and carbonated, zero-calorie sodas brand Honest Fizz, both of which were launched this year, the latter in February.
“Honest Fizz is out of supply, which is frustrating because we under-forecast that, which is very exciting,” Goldman said.
“The biggest innovation we’ve made in recent years has been Honest Kids, a drink pouch line for kids, which is now more than a third of our business – that's a low sugar, organic drinks line," he added.