Honest Optimism on Coke Pickup; pessimism on Mate, Kombucha

As he discussed dumpster diving and shady hotel rooms as part of a presentation on staying independent as a growth strategy for beverage companies, Honest Tea “Tea-EO” Seth Goldman also talked about addition and subtraction: namely, his company’s addition to the Coke portfolio and its subtraction of SKUs from a pair of categories, kombucha and yerba mate.

Kicking off Day Two of BevNET Live event in Santa Monica on Tuesday, Goldman highlighted how the indie brand is maintaining its identity despite a highly likely Coca-Cola buyout in 2011. Goldman also officially announced the company will be nixing its kombucha line and selection of mate teas.

Goldman was optimistic about Honest Tea’s future and explained that the Coca-Cola Company would most likely purchase the brand in February 2011. With annual sales trending toward $70 million for the company overall, he said he expected that they will go ahead with the deal. He mentioned that Honest Tea has presented a three-year business plan to Coke officials and that they “appreciate Coke recognizing the brand’s value” and the purchase would be “a great opportunity to continue to build the brand and expand the team.”

As for questions about the legitimacy of an organic, Fair Trade brand’s authenticity within the Coke system, Goldman said the purchase would continue to help Honest Tea to become relevant  to a wider group of consumers and to bring it to places in which consumers currently don’t interact with the product – stores like Target, for example.

In terms of product development, Goldman explained that Honest would be taking kombucha off the market, saying that maintaining legal alcohol levels in the beverage would have been too complicated due to the FDA’s decision to look more closely at beverages with the potential to contain alcohol. Honest Tea simply “didn’t have any interest in finding loopholes around these regulations,” Goldman said, and ceasing production made more sense, especially after learning that when left at room temperature, the beverage became more alcoholic. Kombucha was “not a direction in which we wanted to go,” he said.

Also getting the axe are Honest Tea’s mate beverages, but the decision was more financial than regulatory: Goldman said the products were not performing as well as expected. As part of its development and growth strategy, the company plans to remove SKUs that aren’t up to par. In other words, the decision wasn’t really a big deal. However, Honest Tea isn’t only getting rid of unsuccessful products as it approaches 2011; Goldman revealed that they are launching a new, confidential product. “It’s never been on the market before,” he said.