Honest Tea Aims to Live By Its Name

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It’s a reality small consumer brands face as they grow larger: Do you fight for market share as an independent, or do you take on a partner who can provide not just deep pockets, but a distribution channel as well?

Honest Tea, a brand we recently profiled, chose the latter, casting its lot with the biggest beverage player in the world, Coca-Cola, which bought a 40% stake in the company in early 2008.

Now, it’s faced with a dilemma, one highlighted in its summer 2010 test of Americans’ “honest tea” practices above. How much can it stick to its core values of honesty and transparency (a theme today on brandchannel) without compromising its part-owner?[more]

Honest Tea co-founder Seth Goldman explains his dilemma to the New York Times: “You can build a great brand, but you can’t ship this through the mail. Beverages have a high turnover, and you’re out of the game unless your product is being restocked and on the shelf.”

Indeed, Honest Tea got exactly what it was looking for from its mammoth part-owner. Its products, which were sold primarily in smaller supermarket chains and health food stores, “soon got much wider distribution, through Coke, on grocery shelves and college campuses across the country.”

But that isn’t all Honest Tea got. Its Honest Kids line for children carried a parent-pitching copy line that became a source of angst for Coca-Cola: “No high-fructose corn syrup.” Says the New York Times, “Executives at Coke construed the phrase as an implicit rebuke of its products, some of which contained the controversial factory-produced syrup.”

Coca-Cola asked Honest Tea to change the wording. Goldman was uncomfortable doing so, since he felt “drawing attention to the absence of corn syrup was crucial to being true to the Honest Tea brand.” In Goldman’s view, it was one of the reasons parents were attracted to Honest Kids.

With Honest Kids being responsible for about a third of Honest Tea’s sales, dropping the product was unacceptable. Coke made a number of suggestions, one of which was eliminating the words altogether, but to date, Goldman has stood his ground.

Since Coke holds a minority interest, Goldman has leverage, and Coke respects the fact that he is making decisions based on Honest Tea’s “understanding of their customers.” So at the moment, the wording remains unchanged.

But next year, if Coca-Cola purchases the remainder of Honest Tea which, according to Goldman, is “very probable,” how much will things change for the once-independent brand?

Gary Hirshberg, a member of Honest Tea’s board and the CEO of Stonyfield Farm yogurt, which was sold to Group Danone, advises Goldman, “Keep the honest in Honest Tea. If you don’t you’ll regret it. And so will Coke.”

It remains to be seen just how honest Honest Tea can ultimately remain. Watch Goldman describe his brand’s virtues below.

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