Honest Tea founder on being owned by Coke: “It’s a dual identity”

May 20, 2011

Seth Goldman, co-founder of Bethesda, Maryland-based organic beverage company Honest Tea, said his company maintains a small business culture, even though parent Coca-Cola Co increased its minority stake to full ownership in March.

With 2010 sales of $71 million, the company’s teas can now be found in national retail chains such as Kroger and CVS. Goldman, in Washington recently for an SBA National Small Business week event, spoke to Reuters about the transition.

Q: Were you able to maintain the Honest Tea culture after Coke took full ownership?

A: Absolutely. What’s really nice about us is that we still operate as a small business. We still run everything out of this one room office in Bethesda, Maryland. I’m still the Tea-EO. Our senior management team still really has stewardship of the brand and the business. We’re accountable for it. Our paychecks say Honest Tea, so in a way it’s a dual identity. We have a vending machine in our office now; it’s got Coca-Cola on the front and Honest Tea inside.

Q: What was the benefit of Coke’s investment?

A: For us, it wasn’t as much about the Coke money as the Coke resources – the distribution resources. No matter how much we or our consumers love our product, if we can’t find a way to get it into their hands, it’s really just a thought exercise. What the Coke partnership enables us to do is get the product into people’s hands wherever beverages are sold. We have the ability to do it, and that’s really critical. For the first 10 years of our business, distribution was just a bear. All of a sudden we gained access to the most powerful distribution network in the world. We are on a path to be able to launch probably early next year, a bottle made of a new type of resin – plant based. That’s something Coke is helping us with.

Q: What was distribution like before Coke?

A: We had assembled a patchwork of distributors around the country. Ultimately we knew we had to be with beverage distributors. In the beginning, there were no beverage distributors that would even give us the time of day. First we were doing it ourselves. We sent to cheese distributors. The corn beef distributors got us to the delis. We even had a charcoal distributor who was taking us to grocery stores.

Q: What was your learning curve in developing this business?

A: We have on our website our original business plan from 1998. It’s very accurate in terms of the way we anticipated what our hopes were for the brand, what we wanted to create. What it totally lacks is any understanding of the distribution, which has been a learning process for us. The difference between creating a product and creating a business with employees that has logistics and warehouses and payroll – they’re not two separate things, but they’re not the same thing. That evolution from having a product to having a business is something… a learning curve that a lot of entrepreneurs have to go through.

Q: We’ve heard your teas can be found in the White House. What’s that about?

A: It’s really for us a nice to know that our tea is enjoyed in all kinds of places. I can tell you that it’s not a paid endorsement. We had two green teas – Community Green and Green Dragon Tea – that (President Barack Obama) was drinking. I saw him a few years ago and he told me that he had switched over to drink Black Forest Berry, an herbal drink, because the caffeine was making him a little jumpy.

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