Leaving Bethesda was never on the table.
That point, made by Honest Tea co-founder Seth Goldman as he prepared to announce the completion of the purchase of his company by Coca-Cola, is part of the larger value system he said would remain in place even as the entrepreneurial, environmentally-conscious startup joins the Atlanta, GA-based multinational soft drink giant.
“One of the main ideas here is we want to be able to keep our own identity and entrepreneurial spirit,” Goldman said. The company’s deep social and corporate roots in its Montgomery County, Md., home – County Chief Executive Isiah “Ike” Leggett was scheduled to speak at the official purchase announcement Tuesday – are a key example of that identity, the erstwhile “TeaEO” said.
So staying put reflects many of the new arrangements the erstwhile “TeaEO” has made with Coke, among them that Goldman will be operating Honest Tea as an independent entity.
Nevertheless, balancing the corporate changes at Honest Tea with the overall spirit of the brand and its stakeholders will be one of the key challenges Goldman faces. While he tries to satisfy consumers in the natural retail channel, for example, he will also watch Honest be ushered by Coke into traditional mainstream accounts like Rite-Aid and Walgreen’s, large drug chains where the brand has just received approval.
“In terms of reaction, I’m sure there’s going to be one,” he said in an interview with BevNET conducted shortly before the official announcement. “There’s always an instinctive response that natural food operators have when a multinational corporation comes into their stores. But we’ve been at this for 13 years. I would hope they would judge us by what we do – and what we’ve done in the past.”
Certainly, some of the new arrangements following the purchase could help to knit Honest Tea closer to the natural channel rather than drive it further away. Goldman said he expected positive feedback from that channel following Honest Tea’s full conversion to a Fair Trade-certified brand by the end of March. With Honest also taking responsibility for selling into the natural channel some of the brands being developed internally by Coke’s Venturing & Emerging Brands unit – the same unit that purchased Honest Tea – Goldman said he believed the company could also help its new parent company gain credibility with the Whole Foods and food co-op crowds.
“We always want to look at who’s got the ability to help the other,” Goldman said. “We know Coke can help us in a lot of ways, and this is one of the few areas where we may have more people.”
Nevertheless, the new arrangements do have their corporate boundaries. For example, Goldman could not reveal the final purchase price of Honest Tea. And when asked which VEB brands would now be sold into the natural channel by VP Melanie Knitzer, Goldman paid attention to the corporate communications process, answering, “I know which ones, I just don’t know if we’ve said which ones.”
Still, Goldman said that his brand’s ongoing relationship with the natural channel would in many ways be informed by what he perceived as missteps that were made by Coke and another high-profile acquisition, glaceau, following that company’s purchase in 2007.
In that case, glaceau, which had used natural as a key initial building block, terminated its contracts with natural foods broker UNFI, among others, choosing to sell its key vitaminwater brand from Coke trucks – exactly the kinds of arrangements that cause natural foods buyers to cringe.
“We’re actually expanding our commitment in natural foods,” Goldman said, pointing out that his company was introducing Cocoanova, a cocoa-based beverage, into the natural channel this spring.
Nevertheless, glaceau was a company with fewer natural stakeholders than Honest Tea, and also one with fewer openly stated social and environmental priorities. Goldman made it clear he believes Coke is aware that maintaining those priorities – the ones that Goldman himself has often been the public face — remains one of the largest keys to the brand’s growth.
“I’m going to continue blogging and speaking,” he said, adding that he will remain the voice of Honest Tea, even within Coke’s traditionally corporate communications-driven structure.
Other corporate overlays are in place at Honest Tea, however, chief among them the dissolution of a board of directors that was represented by some of the most powerful voices in the “conscious capitalism” community, including co-founder Barry Nalebuff – whose stake in Honest Tea was bought out in the final purchase –and Stonyfield Farm founder Gary Hirshberg, along with Timberland CEO Jeffrey Swartz. While Nalebuff and Hirshberg will remain part of the company’s newly-formed “Advisory Council,” along with VEB chief Deryck van Rensburg and other Coke representatives, it will have no official power.
Nevertheless, Goldman is gambling that the advice he gets will keep him on a trajectory that will let him build Honest Tea while sticking to his own priorities, even within the Coke system. He has tied much of his own remuneration from the buyout to Honest Tea’s operating profit, rather than the purchase price, which was determined largely by its sales figures at the end of a three-year agreement.
“I’m very interested in continuing to run this business in the way we’ve built it,” he told BevNET, adding that Swartz had told him “’Run the business like you’re going to own it forever.’ The best way I see to do that is to actually do it.”