Making Healthy, Environmentally Friendly Drinks with Honest Tea’s Seth Goldman

June 13, 2011

It’s been a busy year for Honest Tea’s “TeaEO” Seth Goldman since he last joined “Green is Good.” Coca-Cola has exercised its option to buy the full rights to the company, the line has completed a lengthy switch to fair-trade tea varieties and it is introducing a few new products, including a cocoa-infused beverage and a zero-calorie organically sweetened lemonade. Honest Tea has grown by leaps and bounds in its 13 years, yes, but its original commitments as a company remain very much in place: working to make healthy, environmentally friendly drinks that skip the sugar and focus on all-natural ingredients. Still, even with its growth, Honest Tea’s focus remains to “tread as lightly on the earth as it can.” “We have the potential, over time, to be wherever Coca-Cola products are sold,” Goldman explains. “That’s an opportunity to take our mission to a much deeper level.”

Transcription

JOHN SHEGERIAN: Welcome back to Green is Good, and today we are so honored to have back on our show Seth Goldman, the President and “TeaEO” of Honest Tea. Welcome back to Green is Good, Seth Goldman. SETH GOLDMAN: Thank you. Good to be with you guys. JOHN SHEGERIAN: Hey, Seth, we got so many good responses from all around the world after our last show, we decided we had to have you back on just to do a continuation of the progression and evolving of Honest Tea. We’re just so thrilled that you’re back with us today. What’s going on today? Where have we come? Where have you taken Honest Tea since we’ve spoken with you last? SETH GOLDMAN: There have been quite a few developments since we last spoke. Certainly, one of the most significant ones is that the Coca-Cola company exercised its option to buy the rest of the company, so we now are owned by Coke, but we continue to operate as an independent unit. I’m still the TeaEO, as I call myself, and we’re still based in Maryland with the same senior management team and employees that we started with. We’ve been expanding. We converted our line over to fair trade. That was in process when we spoke last time, but now all our bottled teas are fair trade certified, which is exciting. We just launched, this month, two really exciting new product lines. One is an entirely new innovation called Honest CocoaNova, which is a line of infused cocoa drinks. We’ve taken cocoa and made it into a drink. It’s quite different than anything you’ve really tasted before. And then the other one is something we’re launching also this month. It’s a zero-calorie lemonade that is sweetened organically with stevia, so there’s no calories. It’s just got a really nice taste with zero calories. It’s been a busy time, for sure. JOHN SHEGERIAN: You basically just laid out the whole show for us because there’s so much to talk about. Let’s just start from the beginning, though. For those who weren’t lucky enough to hear your first show, share a little bit about the Seth Goldman story, your journey, how you founded Honest Tea, and what your company’s mission is. SETH GOLDMAN: I started Honest Tea 13 years ago. My co-founder was my professor from business school. We identified that the need and the opportunity for a drinks line of beverages without so much sugar in them. That was really the starting premise. We grew over time, and we converted a line towards all organic ingredients. Our position as a brand and as a company has been a commitment to health and to environmental sustainability. 13 years is a long time when you’re an independent beverage company for us, on a steady track, expanding the natural foods world and then beyond natural foods to some grocery and health-oriented stores. Really what’s happening this year, and a process we started a few years ago, expanding our brand into a much wider, mainstream audience. That’s the trajectory we’re on now. JOHN SHEGERIAN: When you started, if you can simplify the mission, what was your simple mission when you started Honest Tea? Straight from the heart from the TeaEO of Honest Tea. SETH GOLDMAN: We take that word honesty seriously, so it’s a commitment to doing things in a straightforward way. We say that nature got it right. Our job is just to put it in the bottle, nothing fancy around. The ingredients are all natural ingredients. There is certainly nothing artificial. That’s the way we’ll proceed to conduct the business too, so we tread as lightly on the Earth as we can and try to respect both the Earth and our consumers and make sure they’re taking in healthy products. To the extent we can respect our partners, and these fair trade partnerships are a great way to do that. JOHN SHEGERIAN: For our listeners out there that have their desktop, their iPad, like I’m sitting in front of my iPad now, Mike’s got his laptop in front of him, open up and look right now at Seth’s amazing website, www.honesttea.com. It’s beautiful. It’s just a gorgeous website, and it well represents your wonderful brands. There’s so much on this website. Seth, you’re one of the good guys. You’re one of the real inspirations for all eco-preneurs out there, that good guys do finish first. Talk a little bit about this whole Coca-Cola thing. Last time you were on the show, they had invested some money, but they still had the option to purchase the rest of the company. You now say they’ve exercised that option. SETH GOLDMAN: Right. So, they were a minority investor, and we welcomed that investment for a few reasons. Number one, we had investors who started with us 13 years ago. Any time you take money from an investor, usually the expectation is really, in my perspective, the commitment is that you’re going to give them their money back, and ideally with a return on it. 13 years is a long time to hold onto anyone’s money, and so we felt an obligation to make sure our investors got their money back with a return. But even more so, we’ve been expanding and continually expanding, and yet as we’ve grown, we’ve seen that there are certain channels and, really, certain parts of the country we just haven’t been able to reach because the distribution map is too challenging. The partnership with Coke enables us to connect our brand and get distribution all across the country. Today, and this is really the first time it’s been the case, you can now find Honest Tea in every state, and for that matter, in every Coca-Cola warehouse. We have the potential, and it’s something that happens over time, to be wherever Coca-Cola products are sold. That’s really, for us, the opportunity to take our mission to a much deeper level. JOHN SHEGERIAN: That’s the ultimate conclusion to the great beginnings that you’ve built from scratch to where you took it. You’re seeing it to where it could have gone all the way to the end. SETH GOLDMAN: Right. That’s another interesting aspect of the deal. Usually, when an entrepreneur sells to a large come, the entrepreneur usually is often the first one to go because the entrepreneur sort of has a maverick attitude; you need one to succeed. What’s different about this deal is that I’m still very much here. I’m still running the company, and in fact, personally, I didn’t cash out. Most of my equity is still in the company, so I’m still committed to building this. JOHN SHEGERIAN: That is just great. Talk a little bit because so many entrepreneurs, from not only the United States, we track where all the downloads go. After the show airs, it goes on iTunes, and we see that we get tons of downloads from South Korea, Shanghai, London, South America. There are tons of young entrepreneurs that are always e-mailing Mike and I after shows, and they love when we have entrepreneurs like you on. The morning after they exercised the option, obviously, you just shared the great part about it. Truly, your wonderful brand is truly going to then get full sell through all the networks in the markets that some people never get to see. When you wake up the next morning, is there a little sadness? What’s going on in your head? SETH GOLDMAN: Yeah, you know, it’s a very fair question. We’re now eight weeks since the deal was closed, and I can tell you that it really doesn’t feel any different. Maybe there’s something wrong with that. Maybe I should be easing up on the gas a little bit or taking a little time to smell the flowers, but what we do is so addictive and so fun and so fulfilling that I still feel the urgency and I see both the need and the opportunity now, both in terms of where the American diet is. I was just on this panel on obesity in Cleveland last week, and there really is a crisis going on there. We’ve got some real needs that need to be addressed, and then obviously the environmental issues, I don’t need to preach to you all about how serious the situation is and how important it is to start implementing solutions. I’m still driven by that as what gets me up every morning. I certainly don’t feel any less in control of the business than I did before the deal. I will say this is by design. I’ve talked to enough other entrepreneurs. In fact, a green entrepreneur was told by his Board, “Look, we’re going to sell the company, and then you can go do what you want to do,” and he said, “But I am doing what I want to do.” I felt the same way, and so I was careful not to sort of find myself out of what I like doing. JOHN SHEGERIAN: You structured the deal so it would really be a great partnership and it would be a win-win for both sides, so that’s kudos to you, Seth, for making it work. Seriously, not many people can really pull off the art and science of structuring that kind of deal with a wonderful and legendary brand like Coca-Cola, and you’ve done it. We’re really proud of you, and that’s what makes you great at what you do. Let’s go back to the fair trade certified. Again, when you came on last time, you were in the process; now it’s done. What does that mean? Break it down to laymen’s terms so our listeners can get as excited as you are about it. SETH GOLDMAN: The first thing it means is that we now have third-party monitoring to make sure that all the working conditions and all the tea gardens that we source have been inspected. Don’t just take our world for it; there’s a trusted entity that’s out there looking at the working conditions to make sure those are what we expect them to be. That helps me sleep at night. But then, on top of that, whenever we buy tea, we’re directing a portion of the sales back to these communities for them to invest as they see appropriate. Sometimes it goes to help them create their own microenterprise loan fund. That could be everything from someone buying cows to help supply milk, or be part of the garden. One of the loans went to help one of the people in the village start an orchid business. It’s just all kinds of different ways that we’re helping these communities obtain their own measure of economic self-sufficiency. The biggest impact we have on these communities is buying tea; that’s really the single biggest driver of economic opportunity. To the extent that we can do it in a way that really helps them enhance their own economic condition, it’s something that’s certainly consistent with our mission. JOHN SHEGERIAN: That’s great. That makes a lot of sense, and I see why you’re so excited about it, and that even makes the honest part of your process, it even just validates it more, even though you’ve been doing it the right way from day one, it’s great to get that fair trade certification. Talk a little bit about the National Forest Foundation. I’ve read myself in the papers that you now have teamed up with them to plant trees across the United States. Why is the National Forest Foundation partnering with Honest Tea? Explain the relationship and the nexus there. SETH GOLDMAN: There’s a fun backstory to this, which actually goes back to our roots. When we started the company back in 1998, Barry and I were just finalizing the labels. Literally, kind of at the eleventh hour, I said, “Hey, I want to just put a little logo on the back of the label.” It’s a circle with a tree on it, and you’ll still see it on the back of our bottles. It says, “Plant a tree,” and it’s got a little picture of a tree. Barry said, “What does that mean?” I said, “You know, I don’t know exactly what it means, but it’s a commitment that we’re going to be doing more than just moving around boxes of liquid.” So, what we’ve seen over the years is, obviously, the first step was making our product organic, and that was sort of a commitment to building something. What’s been really exciting this year is we are literally planting trees. We have a promotion that we’re doing with retailers. When a consumer buys a certain amount of product, they can do a few things. Number one, they can get a reusable shopping bag, which is a more sustainable step, but they also have the ability to go onto our Facebook page and plant trees without having to get their hands dirty. It’s a way for us to help. The trees are specifically planted in state parks, places where either through fire or through other environmental problems, there’s a real need to restore the greenery. Obviously, we all know the benefits of trees; not only the shade and the beauty, but the role they plan in helping convert CO2 back into oxygen. There’s a fundamental part of our own sustainability connected to trees, so this is really exciting partnership for us. JOHN SHEGERIAN: How many trees? What’s your goal? SETH GOLDMAN: We’re targeting 50,000 trees. Last year, we planted 10,000, and this year we’re hoping to both plant 50,000 trees and to give out over 100,000 reusable shopping bags. We’re growing every year, and the impact grows as well. MIKE BRADY: Growing five-fold as far as planting the trees, Seth, I think we can all breathe a lot easier thanks to your efforts. SETH GOLDMAN: I hope so. JOHN SHEGERIAN: For those, again, who just joined our show, please, we’re so honored today to have Seth Goldman, the TeaEO and President and founder of Honest Tea, on with us today. If you’ve got your iPad or laptop in front of you, tune into his website. It is just amazing. www.honesttea.com. Going about what we were just talking about, on the website there’s a beautiful banner that talks about the plant a tree program and how it works with regards to the forest and what’s in use with the bags that you give out, but also, Seth here, there’s something that says, “Rethink what you drink. Drinkorganic.com Watch the rap battle.” Wait a second now. What is this? SETH GOLDMAN: This one is a lot of fun. This was really fun to do, especially on the heels of the Coke deal because I think the first instinct people think is, “You sign a deal with Coke and you start acting corporate and you start thinking conservatively.” I won’t say we did it just because of that, but my longtime friend and board member, Gary Hirshberg from Stonyfield Farm, recently did a rap called Just Eat Organic, and it’s a lot of fun and very, very informative. He put it on his website. In the tradition where rappers sort of start feuds or take up response raps to each other, I wanted to point out that yes, it’s important to eat organic, but you also have to rethink what you drink. So, we got a lot of our employees and my son to join in putting together a two-minute rap video. It was a lot of fun. My favorite line in there was, “Middle-aged guys rapping, what could be sadder? I’ll tell you, homes, what you put in your bladder.” It talks about organic and why it’s important. My oldest son is off to college next year, and it was one chance to make sure he got embarrassed before he heads off to school. JOHN SHEGERIAN: That is awesome. Rapping aside, when you scroll down on your page, again, on your landing page, there are beautiful photos of your drinks. I want to talk a little bit about them because some of them you didn’t have before when I started drinking your drink. For instance, I see Honest Kids. When did you launch Honest Kids, and how is that doing? SETH GOLDMAN: That’s been on fire. In 2007, we had started selling our Honest Ade line, which is a line of drinks with juice in them. At the same time that that line started to grow, my middle son came to me one day and said, “Hey, dad, how come you sell all these healthy drinks to adults, but you put really sugary drinks in my lunchbox?” He totally caught me. Without thinking, like a lot of people, I was just buying what was in the store. I knew he needed a drink at lunch. I looked at the calorie profile, and it has 100 calories per pouch. That’s more sugar in that drink per ounce than a can of soda. That was really one of the founding motivations for launching a line of pouched Honest Kids, which are pouch drinks for kids. It’s not only for kids, by the way, but the packaging of the pouch is perfect for a lunchbox. That line, last year, was almost 30% of our sales. It’s really exploded in an exciting way, and obviously, it’s something that’s great for kids and also more sustainable because it is organic. JOHN SHEGERIAN: Then I see next to that, you have Honest Kombucha. Kombucha tea seems to have taken off. Talk a little bit about the launch of that and how it’s going. SETH GOLDMAN: For us, it took off and it faded away. That was a really fun line. We brought it out last year. It got a great response, but there were some challenges with kombucha where it’s a fermented product, so it has some alcohol content. What we’d found was number one, that the federal regulations around alcohol have been evolving. One of the things we saw where it was headed was that if the product had the potential for its alcohol content to increase, it would be regulated in a different way. That’s the challenge. If someone didn’t store it the right way or it was left on a loading deck and not kept cold, it can keep fermenting. So, we reluctantly have discontinued that line, and we remember it fondly. As much as we live with risk as entrepreneurs, that was one that was a little beyond what we were comfortable with. JOHN SHEGERIAN: I’ve tried it, and it was delicious. I’ve got to just tell you. I just want you to know, you have a fan here. SETH GOLDMAN: We miss it. We do miss it. JOHN SHEGERIAN: At the top of the show, you talked about some of the new brands you just have out. Share that with our listeners. SETH GOLDMAN: This was a really exciting concept. It’s something we’ve learned about five years ago, believe it or not, and it just took a long time to get to market. Cocoa is a really wonderful ingredient. It has natural antioxidants in it, it’s got theobromine and a whole array of health properties to it. Often, people don’t associate cocoa with a health product because they get it in the form of chocolate, which has additional calories and fat. We said, “What if you can take the health properties of cocoa and make them into a drink?” So, we worked together with the Hersey company to develop this technology that enables us to do that. The line is called Honest CocoaNova, and it comes in three varieties. There’s a mint, a cherry, and a mocha. It’s just hitting the market this month. It’s primarily in the natural foods stores. You’ll see it in Whole Foods and natural foods retailers, but I expect it will expand beyond that too because it’s getting a phenomenal response. You sort of get your chocolate fix, if that’s what you’re looking for, but with only 50 calories per bottle. JOHN SHEGERIAN: Right. Great. Wonderful. Talk a little bit about, also, what’s the next step? Where’s the evolution, besides your next drink line? Where do you want to go? Now you’ve done it. You’ve grown this thing, and it’s a wonderful company. It’s growing up to be the tree that you wanted it to be, and you’re going to get the distribution you always dreamed about. What’s next? What do you see on the horizon? SETH GOLDMAN: It’s really still at a very early stage. As much as we feel like we have made a lot of progress, I don’t want to in any way minimize, because I know it’s been a lot of work. Now we’re just getting started with the chance to make a national beverage and a mainstream beverage, and one that people think about. I’d say we have the platform. After all these years of work, now we have the platform to make this a national brand. The challenge now is we need to reach people, and we need to be relevant to people who aren’t maybe our natural or our first audience, people who don’t necessarily understand what organic means. For a lot of people, we’re going to be the first organic product they taste. We’re launching this month in 1,400 Walmart stores across the country, and that’s a totally new channel. People there aren’t necessarily as familiar with what organic is, but Walmart is the largest retailer overall of organic foods. I guess they’re the largest retailer of just about everything. Once again, it’s a chance to reach new people. Our challenge will be how do we make sure we can, number one, gain access to those people? How do those people find out about our product? How do they be attracted to it? How do they start talking about it? How do they start making it a part of their daily habit? JOHN SHEGERIAN: Right. We’ve had the great people from Walmart on the show, and we’re so excited they’re going to be carrying your line of products because what we’ve learned about Walmart is when they really do something and they make a decision to carry your brand, they really get to move the needle. SETH GOLDMAN: Yeah. They have this commitment to making healthier products more accessible, so we fit very much in line with that. JOHN SHEGERIAN: That is just great news. Seth, unfortunately, we’re down to the last two minutes or so. Some pearls of wisdom for our budding entrepreneurs out there and also some things to do to be more green because we know that you really not only talk an amazing talk, but you walk a great walk. Share just some last thoughts with our listeners out there. SETH GOLDMAN: I think one important thing is to make sure you really stand for something and stick to it. As I look back now 13 years, there were, and there still are, occasions where someone says, “Hey, you know what? If you made this product a little bit sweeter, you could sell a lot more of it.” Well, it’s true that that’s what people’s appetites were, but if we had done that, we would have diluted what the brand stood for. Make sure you know what your brand is about, what your enterprise is about, and really stick to that. It doesn’t mean you don’t evolve. Obviously, we have evolved as a company and as a brand, but you’ve really got to make sure you have a singular, differentiated reason for being. Make sure that shines through. And then the only other thing I’d say is make sure you can communicate that point of difference, not just to yourself, but to your team and that they understand what it’s about. If you do that work well and you hire people who share that vision, everybody else will get it and eventually will come onboard. JOHN SHEGERIAN: Seth, well said. We’re so honored to have you back. We’re going to invite you back again because you’re always one of our great shows. For our listeners out there, please go to Seth’s beautiful website, www.honesttea.com. Also, drink Honest Tea and plant the trees. Seth Goldman, you’re an amazing eco-preneur and TeoEO and truly living proof that green is good.