Honest Tea stays true to its roots as it grows
BETHESDA, Md. -- Seth Goldman is trying to take honesty mainstream.
"We're not just about creating a high-end frou-frou brand," says Goldman, 43, who co-founded Honest Tea in 1998, at the loftlike headquarters here. His "office" is a desk in a corner of the open room. "We want to provide our product wherever beverages are sold. Once you get beyond the natural store shelf, it's much harder for consumers to get it. We weren't getting distribution."
That began to change a year ago, with Coke's $43 million investment and option to buy it all by 2011. The deal brought more than cash to expand — it brought support and access to new markets.
"When you have a pure financial investment ... that's very distracting for management and often very bad for the brand," says Gary Hirshberg, 54, an Honest Tea board member and CEO of organic yogurt company Stonyfield Farm. "This makes happier employees, which makes a better-quality product, which makes a difference in tough times."
Yogurt giant Danone bought 85% of Hirshberg's Stonyfield in 2001. He knows that distribution is key to success.
"You can have the healthiest and best drink, but if you can't get it to store shelves, you're just another has-been," he says.
While bottled tea sales were $1.1 billion, down 1.7%, for the 52 weeks ended Jan. 25 vs. a year earlier, according to Information Resources, Honest products, including its Honest Kids juices, were up 66%, to $38.1 million — despite prices about 20% higher than rivals such as Snapple and Arizona.
The growth potential for organic tea drew the interest of Coca-Cola's Venturing and Emerging Brands (VEB) group.
"We are less than one-half of one percent of tea that's sold," says Goldman, who co-founded Honest Tea with Barry Nalebuff, a Yale University School of Management professor. "We're confident that within the next three years, organic tea will be 5% to 10% of beverage sales."
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