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Management in Practice

Seth Goldman on the Not-So-Sweet End of Honest Tea

The case of Honest Tea stood out as a model for social entrepreneurs. The company produced a healthier, fair trade, organic product and reached millions of new consumers when Coca-Cola bought the company. Then Coca-Cola decided to discontinue the line. Seth Goldman ’95, one of Honest Tea’s co-founders, talked with Yale Insights about that “gut punch,” lessons he has learned as a social entrepreneur, and his plans to return to tea.

Seth Goldman

Seth Goldman

Eat the Change
  • Seth Goldman
    Founder, Eat the Change and PLNT Burger; Chair of the Board, Beyond Meat; Co-founder, Honest Tea

Q: You’ve been a social entrepreneur for decades. How would you compare your approach to launching Honest Tea in 1998 to your current work with Eat the Change?

Honest Tea initially started around just one idea—a less-sweet tea. We saw a market opportunity. We went to the buyers and said, “Here’s the calorie profile of all the teas in your cooler, and here’s Honest Tea’s.” It was a clear point of difference. That helped us secure a space on the shelf.

Once our less-sweet tea was in the market, we realized, well, organic ingredients are really important. From the time tea leaves are picked until they are brewed, they are never washed. If chemicals are sprayed on them, those chemicals end up in the drink. We were the first to make organic bottled tea in 1999.

Then as we got to know more about the supply chain, we learned that fair trade was really important too. We started to make a fair-trade bottled tea in 2003. It took eight years to get the entire line to be certified fair trade. It was a long journey. We learned along the way.

“I believe if you ingrain the mission into the product, there’s no chance to go astray.”

The change to organic and fair trade added to what made us special and different while being consistent with the brand and the market opportunity. In other words, it was good for the business and for the mission. I believe if you ingrain the mission into the product, there’s no chance to go astray.

That was even more the case with Eat the Change. We spent a year digging into the issues that we wanted to be tackling. How do we reduce the environmental footprint of our food? How do we reduce food waste? How do plant-based diets play into solutions? As part of that we stood up a grants program that supports nonprofits working to expand planet-friendly diets. That whole process created the guardrails that came to define what Eat the Change is about. Essentially, we started with the impact we wanted to have and then we had to go search for the market opportunity.

Q: The reason we’re talking now is that Coca-Cola, which bought Honest Tea in 2011, recently announced that they would discontinue the brand, with the exception of the Honest Kids line. How does the decision to sell to Coke look to you now?

I still think it was the right decision. The goal had always been to democratize organic drinks, to make them available in places where they weren’t. And we did that. We went from 15,000 stores to 150,000 stores.

As disappointing as it is to see Honest Tea discontinued, Honest Kids, which has become a larger brand, is still there doing what we hoped it would do. It’s carried nationally in McDonald’s. That on its own is a great example of democratizing organic and healthier drinks.

Q: Are there lessons you would share with other leaders of mission-driven brands when they are considering selling to a giant company?

I never design something to be sold. I want to build it like I’ll own it forever. That’s the best way to build something that you care about. But if there were ever a situation where it would come time to sell, I wouldn’t do it at the stage that Honest Tea was at. I would insist on growing the brand more before I turned it over to somebody. It would have to be much larger. I’d want the brand to be un-discontinuable.

The way you do that is to make it large. To get big, you have to have scale. In order to have scale, you have to have widespread demand. In order to have widespread demand, you have to have distribution and price affordability. Those are also the keys to democratizing.

Q: You continued to lead Honest Tea for years after the sale. Why did you make that choice?

I stayed to drive growth, drive innovation, and ensure that the brand’s values stayed intact. And Honest Tea did grow. When Coke initially invested in 2008, Honest Tea was a $23 million company—not a huge brand by Coke standards. When they acquired the rest of the company in 2011, it had sales of $72 million.

I left at the end of 2019 to work on Beyond Meat and other projects. Who knows what would have happened had I stayed. But even at the time, I said, look, if you’re not going to invest in the brand, you don’t need me around. I’m not going to be a steward of a declining brand.

Folks at Coke said that they had supply-chain challenges, which they did, but I reject the idea that the brand didn’t have prospects for growth. I think they chose not to invest in it in the same way that they invested in other brands. It’s disappointing that Honest Tea will not continue. But it was their choice to make.

One consolation is that Coke never compromised the brand. They could have said, we have supply-chain challenges, so we’ll move away from organic. Or, we’re not seeing as much demand, so we’re going to make the drink sweeter. None of that happened. I’m grateful for that.

Q: How did you learn about the decision?

I had a call with senior managers at Coca-Cola who I had known from my time there. That was May 23. It was unexpected and obviously disheartening. I wrote a LinkedIn post that day where I described it as a gut punch, which it was. That post got over a million views, thousands of responses, and hundreds of comments. So many people around the world were upset and disappointed and supportive.

“With Honest Tea, I did what I aspired to do. We created an impact-driven business that embodied the values I care about. As disappointing as this whole thing was, it was a little bit like being able to be at your own funeral without having to die.”

With Honest Tea, I did what I aspired to do. We created an impact-driven business that embodied the values I care about. As disappointing as this whole thing was, it was a little bit like being able to be at your own funeral without having to die. I got to see what the brand meant to people. In their comments on LinkedIn, some just said that Honest Tea was a great drink. Some said Honest Tea had inspired them to start mission-driven companies. Tea growers wrote to say how important it was to showing there is a space for organic and fair trade. Seeing the ripples from the business, touching people and leading them to follow this path, for me, it was powerful and meaningful. Hearing from them was profound. They inspired me.

Q: How so?

I’ve always said, there’s no downside to acting on your values, doing what you care about, because even if it doesn’t succeed, you’ll know that you acted and took up a cause you believed in.

With this, I got to really see if that was true. And I do feel that my experience has validated the idea. Obviously, things with Honest Tea didn’t work out as I had hoped. But I don’t regret anything we did, and now we get the chance to do it again.

As all these responses were coming in, we were also getting approached by beverages companies interested in taking Honest Tea’s spot. They wondered if Barry Nalebuff, my co-founder from Honest Tea, and I would be the face of the brand. We thought, wait, if anyone’s going to do this, it should be our team.

We talked it through at Eat the Change. Spike Mendelsohn, my co-founder, and Barry, who is on the board, and the entire team—there was no hesitation. The whole point of Eat the Change is to encourage and support planet-friendly diets. An organic, fair-trade, less-sweet tea clearly fits within that.

We started talking to suppliers. They were all in. To a person. And it’s becoming a second-generation undertaking. I was talking with the sons of the tea growers I worked with in the beginning. Same with the bottle supplier. They were like, “Oh my gosh, I get to continue the legacy of work my father did.” That was really amazing.

My experiences with Honest Tea and Beyond Meat taught me the keys to democratizing a different kind of product. It takes great branding, great formulation, great sales, marketing, and execution. We have a team that’s capable of doing all those things with Eat the Change.

Two weeks after Coke let me know they were discontinuing Honest Tea, I was able to post that we’ll be launching a line of just-sweet-enough organic bottled teas. It’s going to be called Just Ice Tea. You could read it as “justice tea.”

Q: What’s your hope for what Just Ice Tea will mean for Eat the Change?

Eat the Change has been growing nicely, but this will turbocharge the business.