Honest Tea

How Honest Tea has kept its corporate soul

September 17, 2012: 5:00 AM ET

One year after Coke bought organic tea company Honest Tea, its CEO reflects on its foray into Big Beverage. No regrets, he says, but plenty of tough conversations.

FORTUNE -- About 10 years ago, you could only find Honest Tea in small grocery stores and co-ops – the kind of joints that also hawk kale chips and bulk-bin nutritional yeast.

Since then, the company has come far, having partnered with a beverage industry heavy-hitter. In 2008, Fortune 100 company Coca-Cola (KO) first paired up with Honest Tea by purchasing a 40% stake for about $43 million. Three years later, Coke exercised its right to purchase the remaining 60% of the company for an undisclosed amount, although Honest Tea CEO Seth Goldman reportedly bought back a significant amount of his personal equity.

Unsurprisingly, some of the former Honest Tea patrons didn't take kindly to Honest Tea's entry into Big Beverage. But it has been a beneficial, if not always easy, process, says Goldman, who co-founded the company and still runs it out of its Bethesda, Maryland headquarters. He spoke toFortune about how a small green business can keep its soul even after being bought by the largest beverage company in the world.

Since being acquired, Honest Tea has gained access to Coke's giant reach. About 15,000 stores stocked Honest Tea in 2008, Goldman says, and now you can find the product in over 100,000 places.

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Coke also knows its way around an ad campaign, and it helped Honest Tea scale from guerilla marketing tactics -- like giving away free samples at stores or trading cases of tea for a magazine spot -- to sporting big billboards and television ads. Its first TV commercial, released this summer, features animated tealeaves and a lemon trying to get into a bottle of Honest Tea. They fail though, presumably because they aren't organic.

Everything Honest Tea sells is organic, Goldman says, and the company tries to be transparent, rather unlike its parent. "We have videos and footage and pictures of tea gardens in India that I visited," Goldman says. "By contrast, and not to put down Coca-Cola, but they have a secret formula. Most people don't know where the ingredients come from, and that's by design." More

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