The Honest Truth About Honest Tea:
Co-Founder Seth Goldman Reflects on Brand's Mission-Driven Journey

One of Honest Tea co-founder Seth Goldman’s favorite drinks is Heavenly Lemon Tulsi Herbal Tea, which he describes with the same entrepreneurial passion that has fueled the company’s dramatic growth. The drink is earthy, he says, but in a smooth way and with a hint of spice.

Yet it’s the story behind the lemon tulsi drink that connects even more deeply with Goldman. In 2012, the year after he sold Honest Tea to Coca-Cola, Goldman traveled to a small farm in southern India and planted tulsi with his own hands in ankle-deep water and mud. For him, tulsi, also known as holy basil and used in Hindu rituals, served as the latest reminder of the importance of Fair Trade practices to a family farm that only gets power three hours a day as it struggles to nurture and grow its only source of income.

The story of Heavenly Lemon Tulsi Herbal Tea is in many ways the story of Honest Tea. Modest beginnings mixed with big hopes. Social and environmental consciousness brewed with business acumen. And an important relationship with a larger, more sophisticated company that could take tulsi, or a whole line of tea drinks, and propel it onto an international stage.

The origins of Honest Tea date back to the mid-1990s, when Goldman’s thirst – and quest – for a drink that was only slightly sweetened went from concept to reality. Recently, he reflected on the birth, first steps and coming of age of Honest Tea, as well as the game-changing relationship with Coca-Cola that began in 2008 with a 40 percent investment and blossomed into full ownership three years later.


Beginnings and Brewing Tea in the Kitchen

While in grad school at the Yale School of Management, Goldman and one of his professors, Barry Nalebuff, discussed a Coke vs. Pepsi case study, and the class identified an opening in the beverage market for a drink that was flavorful but not as sweet as most drinks already on the shelf. A few years later, while working at Calvert Mutual Funds, Goldman went for a run one day in New York City and afterward mixed some juice drinks with a friend – something they did often.

That’s when the idea struck him: to quench his thirst once and for all, he’d have to create a drink himself. He reconnected with Professor Nalebuff, who in a touch of serendipity had recently returned from researching tea in India and had even concocted a name for a bottled tea made with realtea leaves. The name was Honest Tea... and a brand was born.

The two joined forces and soon after, Goldman quit his job at Calvert and started brewing tea in the kitchen of his Maryland home. They produced the original five flavors: Gold Rush Cinnamon Tea, Kashmiri Chai Tea, Black Forest Berry Herbal Tea, Moroccan Mint Green Tea and Assam Black Tea.

The first big order came from the local Fresh Fields (now Whole Foods Market) store in 1998; the company propelled forward in 2001 when it was included on Oprah’s "O" List and became the best-selling bottled tea brand in the natural foods industry in 2002. Honest Tea launched its first Fair Trade Certified™ bottled tea in 2003 and also made Inc. magazine’s fast-growing companies list that same year. Another important milestone followed in 2004 when the company gained USDA organic certification for every product it made.


The Arrival of Quenchers, Big Companies and Coca-Cola

In the early days of Honest Tea, Goldman wasn’t certain how big the company could become. He desired to build a national brand, but growth was slow, albeit steady, at first. The company remained small – it didn’t surpass 20 employees and $10 million in revenue until 2006. New tea flavors and new drinks were added along the way, including the world’s first organic bottled tea, First Nation Peppermint, in 2003 and Honest Kids, a line of less-sweet juice drinks for kids, which debuted in 2007 and would end up making a big impact on the entire category of beverage options for kids.

But it wasn’t until nearly a decade in business that Goldman saw the first indications that Honest Tea would fulfill his hopes. In 2007, big companies started knocking on the door. The first big investment offer came from a large beverage company and served as validation to Goldman “that we were tapping into something big.” Those talks ended, though, because the company wanted to buy all of Honest Tea, which did not appeal to Goldman and Nalebuff because they wanted to remain part of the business.

Shortly after, a new conversation began with Coca-Cola, which was interested in a minority stake. Their subsequent deal, reached in 2008, instantly provided Honest Tea with the ability to scale rapidly and access to Coca-Cola’s global distribution channels. Honest Tea was in 15,000 stores at the time of the agreement; today, it’s in more than 130,000 stores. Coca-Cola also offered its production and purchasing prowess to Honest Tea, allowing the company, for example, to buy lighter-weight, less-expensive bottles and invest the savings in converting to only Fair Trade ingredients.

“When Coke invested in 2008, only about 40 percent of our teas were Fair Trade Certified™, and now all of them are,” Goldman notes. The relationship also allowed the Honest Kids line, which had transitioned to a recipe that used only fruit juice as a sweetener, to leverage existing Coca-Cola partnerships and land in national food service customers such as Wendy’s, Subway and Chick-fil-A.

Coca-Cola also help expose the rest of the world to Honest Tea. The brand has launched in the United Kingdom with a line of three herbal teas unique to the UK market.

“We had big ambitions but no way to get there” before Coca-Cola, says Goldman.

A Mission and an Activist Mindset

Early on, Goldman and Nalebuff knew they wanted Honest Tea to be a mission-driven company. The last sentence of their original mission statement speaks volumes: “We strive for relationships with our customers, employees, suppliers and stakeholders which are as healthy and honest as the tea we brew.”

This philosophy would drive Honest Tea’s efforts to work with Fair Trade suppliers and use only organic ingredients whenever possible. It also set the company apart from many competitors, and reinforced Goldman’s personal commitment to social and environmental responsibility, something that had drawn him years earlier to Calvert, a leader in responsible investing.

“I’m more of an activist than a business person,” says Goldman. “My mindset when I wake up in the morning isn’t how do I make more money, but how do I make more change in the world.”

In developing nations where farmers barely subsist from their crops, that support can be dramatic. Fair Trade premiums paid on top of the price of the tea and sugar used in Honest beverages are put back into the supplier communities to be used for infrastructure projects such as schools and roads, and equipment like ambulances, gas stoves and modern farm equipment. Honest Tea recently crossed a major milestone of contributing more than $1 million in Fair Trade premiums, which have had a direct impact on the lives of the people in the communities where Honest sources its tea and sugar.

New Products and Markets Fuel an Entrepreneurial Heart

Goldman says some people were surprised that he continued to be involved with Honest Tea – his title is TeaEO Emeritus – after the Coca-Colabuyout since it doesn’t often work that way in corporate America. Goldman wanted to remain involved and still describes himself, 19 years after the company’s founding, as “an entrepreneur at heart.”

He remains passionate about the brand and is excited about the recent launch of the Honest Sport line of organic sports drinks made with sea salt, as well as the continued international and food service industry expansion. He worries, too, about things like how to reach every customer now that Honest Tea is in 130,000 stores and counting. Goldman knows using paid media – something Honest Tea has done little of – is necessary to reach new consumers, but he still wants his field marketers to be out there handing cups of Honest Tea to customers because “it’s hard to advertise a taste.”

Mostly, Goldman is steeped in the gratification of knowing that after six years with Coca-Cola, annual revenues have grown 10-fold to $218 million and Honest Tea’s mission has deepened through Fair Trade expansion, by having an entirely organic portfolio of beverage options and launching more zero-calorie products.

“It’s great when you can be an engine of change in the public arena,” he says, “and an engine of financial return to your investors.”