Honest Tea Joins Coca-Cola Family
Published in CSP Daily News
Will operate as standalone business to retain entrepreneurial culture
ATLANTA -- The Coca-Cola Co. has exercised its option to acquire the remaining portion of Honest Tea. The move completes a transaction which began three years ago when Coca-Cola, led by the Venturing & Emerging Brands (VEB) unit of Coca-Cola North America, purchased a minority stake in the company. Financial terms of the transaction were not disclosed.
Honest Tea, a leading organic bottled tea company, will continue to be based out of Bethesda, Md. In order to retain its entrepreneurial culture, it will operate as a standalone business under co-founder and current president [image-nocss] and CEO Seth Goldman, his management team, and current Honest Tea employees.
Goldman and VEB have developed a unique operating model that allows Honest Tea autonomy to continue to run its day-to-day operations while accessing the scale benefits of the Coca-Cola system in various areas, including manufacturing and distribution. As part of the VEB team, Honest Tea will also begin to sell current VEB brands to the natural channel.
Under an innovative arrangement with Coca-Cola, Goldman has chosen to reinvest most of his proceeds from the sale back into Honest Tea. Goldman's co-founder, Barry Nalebuff and Gary Hirshberg, CEO of Stonyfield Farm, will continue to provide informal guidance to Honest Tea as part of the Advisory Council.
"We started Honest Tea 13 years ago with an ambitious mission to create a delicious, healthy beverage alternative produced with the health of our planet and our consumers in mind," said Goldman. "Over the past three years, it has been exciting to see the reach and impact of our mission expand as a result of our partnership with The Coca-Cola Co."
Since receiving an investment from Coca-Cola, Honest Tea has made exciting progress in a variety of areas, including the expansion of Honest Tea distribution from approximately 15,000 outlets in 2008 to more than 75,000 today, the introduction of the Honest Tea plastic bottle that uses 22% less material, and doubling the number of offerings as well as the sales of organic, zero-calorie drinks. Additionally, Honest Tea has committed to transitioning its entire tea line of Honest Teas to Fair Trade Certified by the end of March 2011.
The growth of Honest Tea and its leadership in the natural foods channel were among the elements that attracted Coca-Cola. "When we made the investment in Honest Tea, we did so because we saw that it had great potential to be a significant brand of the future. Three years after, the brand truly reflects where consumer demand is today and we are excited about being on the verge of still more growth," said Deryck van Rensburg, president and general manager of VEB for Coca-Cola North America.
He added, "Beyond growth, having the unique vantage point of a minority investee and watching Honest Tea has helped our company in many other ways, from encouraging Coca-Cola to obtain organic certification at three of our facilities, to establishing a state of the art tea brewing and filtration system at a bottling plant. It enabled us to participate with Honest in a number of sustainability initiatives on recycling. All of these efforts reflect why VEB has chosen to invest in entrepreneurs like the team at Honest--they provide a source of innovative ideas and energy that enhance our own efforts."
Honest Tea was started in 1998 when Goldman and his co-founder, Barry Nalebuff, brewed samples of tea in Goldman's Bethesda home and brought them to Fresh Fields (now Whole Foods Market). Since then, the brand has become the top-ranked tea brand in the natural foods channel and has expanded into mainstream grocery and convenience stores.
"This is our chance to bring organic beverages to the mainstream," said Goldman.
Honest Tea's product lines include Honest Tea ready-to-drink bottled teas in glass and PET No. 1 bottles, Honest Ade organic thirst quenchers and Honest Kids drink pouches. All varieties are USDA-certified organic.