At Honest Tea headquarters in Bethesda, Maryland, there’s more going on than just brewing up some of the country’s most popular bottled tea. Scroll down to learn about what TeaEO and co-founder Seth Goldman has been up to since Coca-Cola bought his company in March 2011. And what tips he has for other entrepreneurs who want to hit the big time.
Be Inkandescent: In addition to being named one of The Better World Shopping Guide’s “10 Best Companies on the Planet,” you are listed in PlanetGreen’s “Top 7 Green Corporations of 2010.” The Huffington Post also ranked Honest Tea one of the leading “8 Revolutionary Socially Responsible Companies.” Obviously people are picking up on your message. Is that how you got Coca-Cola to invest?
Seth Goldman: Yes, sort of. We were very focused in surviving in the natural foods world for the first five years we were in business. The first 10 years were awfully tenuous. We were just trying to keep the lights on. Then, we started to get some expansion into some of the grocery stores around the country and some restaurants and other chains. At the time, Coke had developed a new division called Venturing and Emerging Brands. What they wanted to do was invest in companies that would be the big brands of the future, so they reached out to us and asked if we were open to a discussion about how we might work together.
Be Inkandescent: At the time, Honest Tea was raising money?
Seth Goldman: We were. My partner Barry and I decided to raise some money to grow, and we figured that if Coca-Cola would be a minority investor, we’d welcome that. They did invest and we continued to grow. We had a good working relationship and after they bought the company, that continued.
Be Inkandescent: What’s the biggest benefit of having Coca-Cola buy Honest Tea?
Seth Goldman: Today, Honest Tea is selling in more than 100,000 stores, including a few international companies. Coca-Cola helped us reach a different level of penetration to the American population. That really is the goal when we started the brand 15 years ago. It was to create something meaningful and that could really create an impact. There is a balance to strike: Do you want to be a model for change or a driver for change? I certainly want this to be a driver for change.
Be Inkandescent: You and Barry also have a commitment to investing in the local community.
Seth Goldman: That’s right. We decided that if we are going to be able to be viable, and support communities around the world, we needed to support the local community where we live and work, which for us is in suburban DC, in Bethesda, MD. The execs at Coke were willing to invest to see where we’d go. I think they liked that we have a commitment to supporting sustainability around the globe.
Be Inkandescent: Do you think this is a trend with large multinational corporations?
Seth Goldman: I think that large corporations are understanding that the whole landscape is shifting. Consumers are thinking differently about what they are looking for in terms of products and companies. I also think that a lot of large companies think that they are unlikely to be the ones to bring those innovations to the marketplace. While Coca-Cola wouldn’t have created a brand like Honest Tea, because we started in a very small niche, they like what we’ve built. When we started to gain traction, they realized that this was a great opportunity for them to be a part of something new.
Be Inkandescent: What do you think the future of Coca-Cola will be?
Seth Goldman: Twenty years from now, Coca-Cola will be very different than it was 20 years ago. Remember, Diet Coke was only introduced in 1985. Going forward, the company will probably be more diversified with different brands and products, certainly a different portfolio, and likely a different approach. In my view, this is one of the ways change happens. It’s when a larger corporation can take on not just the products, but the values of some of the other companies that it acquires. You’ve seen that in other companies as well. I think that is an exciting way to think about how large corporations will be changing.
Be Inkandescent: Honest Tea is certainly on the cutting edge when it comes to community outreach. Tell us about your first bike promotion.
Seth Goldman: We believe in being healthy, and biking to work helps with that. It also helps cut down on carbon emissions. So, we bought about 500 bikes, and in addition to giving most of them away in grocery promotions, we gave one to every employee at Honest Tea. Then we asked other companies if they wanted to do the same thing. A bunch of other companies joined us, and it was fun and made sense.
Be Inkandescent: I understand that Coca-Cola also invested in this project?
Seth Goldman: That’s right. And so we kept going. Next, I wanted to create a model of local sustainability, so we invested in recycling bins, and Coca-Cola wrote a check to help buy bins to put throughout downtown Bethesda. We brought in 35 recycling bins, and that led to street-side recycling in downtown Bethesda.
Be Inkandescent: And now you are looking to add bike racks to the streets of Bethesda that are made of recycled drink pouches. Tell us about that initiative.
Seth Goldman: We are so excited about this. But here’s a great lesson for other entrepreneurs. Like many initiatives, it has been a learning process. There was a big ribbon-cutting—and then we realized that the bike racks didn’t comply with the local code, so we ended up with all these great racks that we couldn’t place. I was like, “Well, we missed a step here.” We finally placed them in private areas—at schools, restaurants, and cinemas. But we have yet to get them on the streets as we had hoped. It has been a case where our desire to do it the right way was not balanced by the reality of what’s happening on the ground. And that is a lesson we take seriously. We hope it’ll happen eventually. Bethesda is a very bike-friendly place, with a lot of car traffic, so let’s get more bikes here!
Be Inkandescent: That sound like the plight of the social entrepreneur, similar to what we learned from Bill Drayton, founder of Ashoka, who was our November 2012 Entrepreneur of the Month.
Seth Goldman: Our first step is to work on a bottle made of plant-based materials. Right now our plastic bottle is made of petroleum-based material, which is obviously not a renewable resource. We are working to increase the recycled content, but we are also working with Coca-Cola’s partners, who have a plant-based option that they have developed. Our goal is to get into that and then obviously to increase the recycling rate and that will be a significant improvement.
That’s not all! To read more of our interview with Seth Goldman, check out our podcast this December on the Inkandescent Radio Show.
For more of Seth’s insights into being a successful entrepreneur, scroll down!
SETH GOLDMAN’S 8 TIPS FOR GOING BIG
1. Expect the unexpected.
What we have seen as we have gone out to the tea gardens in the countries where we buy tea is that even more gardens are converting to organic, and engaging in Fair Trade. It’s very gratifying to know that the fact that we are growing is helping to fuel change in other gardens around the world that we haven’t even seen. That’s not all. Some of the schools in the tea gardens that I visited are developing into really good schools. In fact, these are schools where people outside the village are trying to get their kids into them. The quality of the education is that good. And this happens, in part, because of the Fair Trade support they receive.
2. Say yes.
When then Baltimore Mayor and now Maryland Gov. Martin O’Malley appointed me to the Maryland Economic Development Commission, I knew I had to step up. He asked me to think about what we can do to make Maryland more friendly and hospitable to entrepreneurs. I put together a series of recommendations for the commission that included how to showcase entrepreneurs more. In November, I was able to have the governor give introductory remarks at Net Impact, which had its 20th annual conference in Baltimore. It was great to have Gov. O’Malley there to see how the organization inspires those 3,000 MBA and college students who were interested in socially responsible businesses. Indeed, Maryland welcomes their ideas and talents. Obviously they have the potential to launch a business here.
3. Be different.
When creating a product, the key is to offer something different from what is on the market. If I had launched “Seth’s Tea,” and it was just like all of the other teas on the market, it wouldn’t have worked. Honest Tea is different. It’s organic, lower-calorie than other options on the market, and the public likes this alternative. That was the first, and most critical step.
4. Be excited about your product or service.
For me, Honest Tea was never about just selling a drink; it was about changing the diet of Americans, thinking about agriculture, and thinking about economic opportunity. That is something I still get excited about every day. After all, business is so challenging that if you only get excited about the financial side, there will be enough setbacks that it won’t be enough to keep you going.
5. Stay close to your employees.
I want to know what is going on in the marketplace, and the people who know that best are my employees, who work there every day. They know what our consumers are saying about our product. So keep talking to them. Never get stuck behind your desk or a spreadsheet. Stay in touch with what’s happening in the field. It keeps you on top of trends and changes. And that’s critical for the growth of any small business.
6. Think ahead.
Our biggest challenge in the beginning was distribution. Our original business plan is posted on our website, and while it is a nicely written plan with some nice thoughts around the marketing around the brand, it doesn’t address how we were going to get the tea to the people. To be fair, we were starting out and we had no experience in the beverage business, so I don’t blame us for not anticipating that. But on the other hand, it is kind of laughable. We were a beverage company with a business plan, but no real understanding that it was going to take distribution to get there. My experiences have helped me appreciate the value of distribution, and obviously why the Coca-Cola relationship is so valuable for us.
7. Keep dreaming.
Some people say, “Oh, I see your product everywhere.” We have grown our distribution a lot, but I see all the places it’s not. To me, Honest Tea still has a long way to go. We are talking to some national restaurant chains because we want to increase our presence, and our sales. We want to become much more of an everyday item for people. So we keep dreaming big.
8. Stay honest.
The best thing I think any entrepreneur can do is to stay close to the consumer, and close to the ingredients, because that keeps you honest. Remind yourself why you are doing what you are doing and why it is meaningful to people. I still see all of the emails we get from our consumers. While I don’t answer all of them anymore, I do see them all. And, I still try to travel to the communities we source from on a regular basis so I can feel like I understand what our impact is in these communities.
For more information about Seth Goldman and Honest Tea, visit www.HonestTea.com.