Coca Cola to Purchase Remainder of Honest Tea

Coca Cola to Purchase Remainder of Honest Tea

Honest Tea's success comes partly from Co-Founder Seth Goldman's ability to work well with Coke while maintaining the organic tea company's integrity.

The Coca Cola Company has opted to purchase 100 percent of Honest Tea, though the deal has yet to be cemented, according to Seth Goldman, president and self-proclaimed TeaEO of the Bethesda, Maryland-based RTD tea company. Since Coke's $43 million purchase of a 40% stake in Honest Tea in 2008, the tea purveyor has ramped up its scale and revenues to an impressive degree. Honest Tea recorded sales of $71 million in 2010, triple its 2007 sales, and shipped over 100 million bottles.

NBJ Bottom Line: Goldman and Coke work well together

Some of that success can be attributed to the business intelligence of the company's co-founder, Seth Goldman, who has managed to maintain the integrity of his brand throughout Coke's involvement in his company. Goldman is expected to be the only existing employee to retain personal equity in the acquired company. Goldman's partner, Barry Nalebuff, current chairman of Honest Tea and a professor at the Yale School of Management, will ostensibly stay on as an adviser. Goldman and Nalebuff's names will remain on Honest Tea bottles, offering the company some semblance of continuing brand equity, and offering Goldman some outside support in his quest to play nice with Coke.

Adapting to a new relationship with a CPG backer can be extremely difficult, especially with cycling brand managers and potentially conflicting missions, and Coke has some history of mismanaging small acquisitions—Vitamin Water and Odwalla come to mind. But Goldman and Coke seem to have struck an accord. The 40 percent "practice" acquisition of 2008 has flowered into what appears to be a mutually beneficial deal.

There is substantial growth slated for lower-calorie drinks in 2011 and beyond. NBJ estimates that U.S. sales of lesser-evil beverages could reach $30 billion by 2017. Nevertheless, when a conventional goliath like Coke swallows up the righteous little guys of the natural products industry, it can be a challenge keeping the brand vital to the core consumer.

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