Saturday, February 9, 2008

I'll still drink to that

I love honesty and I love Honest Tea. But my favorite independent beverage maker is going corporate. The Coca-Cola Co. has bought a 40-percent stake in Honest Tea for $43 million, and after three years, it has an option to buy the rest of the company.

When I read about it, I felt kind of sad. I've been a huge fan of Honest Tea and its line of lightly sweetened drinks almost since the company's inception 10 years ago, and I don't want this deal to change things. Moroccan Mint is my favorite, but I've tried and loved many of the other flavors, including First Nation Peppermint and the sadly discontinued Gold Rush Cinnamon. I like the fact that they're low calorie, not loaded with sugar or artificial sweeteners, and they actually taste like tea.

Cofounder Seth Goldman writes on the company's Web site that he was always searching for the perfect thirst quencher after a run or a game of basketball. But most drinks he tried were either too sweet or too tasteless. During a Coke vs. Pepsi case study in business school, he found out that he shared a passion for the idea of a less sweet yet still flavorful beverage with one of his professors, Barry Nalebuff. Together, they started Honest Tea in Bethesda, Md., in February 1998, to fill the niche between overly sweetened drinks and bottled water.

On his blog, Goldman explains his rationale for partnering with Coca-Cola. The company has reached a point where it needs Coke's nationwide distribution network if it's going to continue to grow. "Despite our 66% annual compound growth rate (70% in 2007), we still aren’t reaching all the people we want to reach."

Goldman pledges that the company will remain true to its efforts to support sustainable agriculture, use suppliers that respect individual workers and their families, and promote better-tasting, healthier beverages. The partnership with Coke, he argues will help further those goals.

"When we buy 2.5 million pounds of organic ingredients, as we did in 2007, we help create demand for a more sustainable system of agriculture, one that doesn’t rely on chemical pesticides and fertilizers.

"But when we buy ten times that amount, we help create a market that multiplies far beyond our own purchases. When we sell 32 million bottles and drink pouches with less than half the calories of mainstream alternatives, as we did in 2007, we help displace 2,400,000,000 empty calories. That’s important, but when we sell ten times that number, we help lead a national shift toward healthier diets."

There's a pretty interesting discussion about the deal at Seth's blog. I'm a little surprised by some of the reactions. While most of the comments are supportive, some customers have mixed feelings. They fear that a small company will lose its soul when it's swallowed up by a behemoth. Some people are angry, and a few have even said they won't be drinking Honest Tea anymore.

Since Seth and Barry are still going to be running the company, I trust that Honest Tea will be the same great-tasting beverage it's always been and remain true to its corporate values. I don't have a knee-jerk reaction that big corporations are intrinsically bad. I'm hoping Coke's distribution network will help make my favorite beverage more widely available. And who knows, maybe some of Seth and Barry's philosophy will rub off.

I agree with this comment from Ian: "The POINT of being a company like Honest Tea isn’t to only reach the people that already think like you - it’s to change the minds and behavior of those people that DON’T think like you."

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