Coca-Cola takes Honest approach with innovation drive

By Neil Merrett

- Last updated on GMT

Related tags Coca-cola United states

Coca-Cola will acquire a 40 per cent stake in US-based organic
beverage group Honest Tea, as part of an ongoing drive to focus on
non-carbonated alternatives for its brands.

The acquisition, which was made in collaboration with Coca-Cola's Venturing and Emerging Brands (VEB) arm, is expected to further push organic beverage brands into the mainstream and extend the beverage group's functional and added value portfolio. VEB is a division of Coca-Cola's North American operations, designed to pinpoint high-potential growth brands in the country, and to meet changing consumer demand for more health-focused functional brands. Seth Goldman, Honest Tea's co-founder, believes that by working with Coca-Cola in emerging beverage segments like the organic segment, it can better meet the need of global consumers. "As more consumers become aware of how their decisions impact the health of the planet and themselves, we are thrilled to receive this investment from the world's largest beverage company to help take our brand and our mission to a larger scale and wider audience,"​ he stated.​ As a result of the sale, Coca-Cola will now help expand Honest Tea's distribution capabilities in the US. The global beverage group added that it may also consider a further purchase of Honest Tea's shares at a later date. No financial details of the purchase price were disclosed by either company. This is not Coca-Cola's first foray into new beverage markets. Back in October, Coca-Cola said on that it had completed a permanent research centre at the China Academy of Chinese Medical Sciences in Beijing. The company's chief scientific officer Rhona Applebaum said at the time that the group will attempt to identify potential nutritional benefits from traditional Chinese medicines to incorporate into new beverage brands. Adopting this focus for beverage innovation comes at a crucial time for the company and its international bottlers, which have had some difficulty in meeting consumer demands in recent years. Last year, Coca-Cola Enterprises (CCE), the group's main bottler in North America and Western Europe, said earnings per share were expected to fall between five and 10 per cent in 2007, compared to 2006. It is a prediction that follows Coca-Cola Enterprises (CCE) decision to axe more than 3,000 jobs, and re-iterates the firm's struggle to realign its business with consumer demand. CCE global revenues rose five per cent for the first fiscal quarter of the year to $4.56bn, thanks to stronger performances from juice, water and sports drinks in North America, and the expansion of Coke Zero into France and the Netherlands. But volumes declined four per cent in North America, CCE said, as consumers left full sugar, fizzy soft drinks on the shelves. CCE added that it also faced "great challenges"​ in the UK, with moves like renaming the fizzy drinks category "sparkling beverages"​, instead of the traditional "carbonated",​ not yet paying off.

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