Honest Acquisition in Works?

The most recent post on Seth Goldman’s blog at Inc.com was headed with the question “Are We Willing to Give Up Growth for Mission?”  

That title could be eerily prescient.

That’s because some publications – notably Beverage Digest — are reporting that Goldman’s fast growing do-gooder organic tea company, Honest Tea, may be selling a stake to the Coca-Cola Co.

Goldman, traveling in Israel, could not be reached for comment. Coke spokeswoman Lori Billingsley declined to comment, as well.

At first glance, the move would seem to make sense, satisfying the needs of both businesses.

font-family: Arial”>Coke has been under pressure, both internally and from competitors, to improve its performance in the RTD category. The company has run a weak fourth to PepsiCo (Lipton), AriZona, and Cadbury Schweppes-owned Snapple for the past several years and an attempt to bulk up its offerings via high-end product Gold Peak never caught fire.

Meanwhile, Honest, the largest maker of organic tea in the U.S., has grown steadily but slowly, and may be at the point where it needs a new capital infusion. Although the company recently received a $12 million investment from international private equity firm Inventages Venture Capital and from Honest Tea board member Gary Hirshberg’s Stonyfield Farm Inc., the process of taking mainstream supermarket shelves is an expensive one.

But Honest has made a name for itself by trying to present itself as a crunchy alternative to Big Soda’s smooth corporate veneer. Advocates of both fair trade and environmental responsibility, “Tea-E-O” Goldman’s blog is even called “The Mission Driven Business.”

So for the deal to go through, it’s likely there will have to be some reconciliation of mission and money.

Coke has been on a growth binge recently, with a blockbuster $4 billion-plus deal to acquire Glaceau and its hot brand Vitaminwater. Coke has recently added Fuze, another company that uses teas, to its portfolio, but Fuze products tend to be blends of teas and other new age elements.

But Coke has made strategic investments as well as acquisitions. It recently purchased a minority stake in beverage innovation shop Brain Twist.