Honest Tea Trying to Stay Honest

Just as we do in our personal lives, companies go through growing pains.  One organic beverage company, Honest Tea,  now faces its own growing pains.  From brewing batches of tea in his kitchen in 1998, Seth Goldman and his colleagues have now created one of the best-selling organic teas in the country. The business model was so successful that in early 2008, Coke purchased a minority stake in the company for a tea-tipping $43 million.

The dilemma rests in the fact that Honest Tea is trying to maintain its status as a truly organic, ecologically aware and low-calorie beverage company. Coca-Cola sees cost cutting measures and expansion of product portfolio as primary drivers.  To add to this drama, Coke has the option to buy the whole company, come 2011. 

Tea-Time

As a recent Wall Street Journal article Can Honest Tea Say No to Coke Its Biggest Investor explains, new financial ties to such a large company as Coke would definitely compromise the integrity of the socially responsible firm.  Currently, Honest Tea visually banners the “no high-fructose corn syrup” label.  Executives at Coke presented the option to eliminate this label.  Mr. Goldman argues that he does not want any highly processed products involved with Honest Tea adversely stating, “I met with various people [at Coca-Cola] who explained their belief that high-fructose corn syrup is comparable to sugar in its health impact.”  Keep in mind, most of Coke’s soft drinks contain corn syrup and numerous health concerns are linked to this product.

One catch phrase option that Coke recommended placing on the bottles was “No fake stuff.”  This was quickly rejected by Honest Tea due to its subjectivity and lack of definition.  A Coca-Cola spokesman states that “sugar is sugar is sugar.”  Clearly, there are differences of opinion here.

Chief executive of the organic dairy company Stonyfield Farm, Gary Hirshberg has stuck it out with his own company after being acquired by conglomerate Dannon.  He states “My advice to C.E.O. Seth Goldman: Stick to your knitting. Keep the honest in Honest Tea. If you don’t, you’ll regret it. And so will Coke. I would argue that Honest Tea is providing more value to Coke by blazing its own trail than by adapting to Coke’s.”

In terms of companies trying to maintain their true sustainable mission, it becomes difficult to actually quantify or measure brand value.  What is the value of Honest Tea’s commitment to not adding artificial ingredients to its product?  As Ed Cotton of influx insights states in his recent post, there is not one tangible scoring place or discipline to determine value.  Coca-Cola will soon be answering this question and let’s hope consumers don’t have to question the honesty in Honest Tea.

Dale Wannen

Dale Wannen is President of Sustainvest Asset Management, an investment advisory firm focused on sustainable and responsible investing (SRI). Prior to Sustainvest, Dale was a portfolio manager at Harrington Investments and specialized in ESG investment strategies, securities analysis, and shareholder advocacy. Prior to this position, Dale was a financial advisor with UBS Wealth Management Services in San Francisco. He is often a guest speaker on the topic of ESG investing and shareholder advocacy.Dale has an MBA in Sustainable Management from Presidio Graduate School in San Francisco. He earned a B.A. in Economics from Rowan University and currently is a volunteer with Mentor Me Petaluma, Rebuilding Together Petaluma, and the founder of Green Drinks Petaluma.He also currently sits as Board of Director and Treasurer of San Francisco human rights organization, Global Exchange, teaches Economics for the Oakland non-profit Game Theory Academy and is a committee member for the National Resources Defense Council (NRDC) in San Francisco. Previous volunteer work has included Treasurer and Board Member for bird conservation organization, San Francisco Bay Bird Observatory (SFBBO), committee member of the Petaluma Pedestrian and Bicycle Advisory Committee (PBAC), and President of the Social Venture Finance Club at Presidio Graduate School.Dale currently holds the Series 65 FINRA license and has previously held the Series 6, 7, 63, 66 and California Life and Health Insurance Certification. He is a member of National Association of Professional Financial Advisors (NAPFA) and the Financial Planning Association (FPA).Dale lives in Petaluma, CA with his wife Lauri and their Malamute Shadow.

3 responses

  1. I have to agree with Coke on this one. A sugar is a sugar. High fructose corn syrup and refined sugar are indistinguishable to the human body. But consumers distinguish anyway, because of the fear-mongering surrounding high fructose corn syrup. Companies know this and slapping a label on the packaging that doesn’t actually make the product any more or less healthy. It’s a great marketing tactic, but doesn’t make anyone healthier.

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