Coke Invests in Honest Tea

BETHESDA, Md.—Honest Tea Inc. and the Coca-Cola Co. forged an agreement, under which Coke will buy a 40-percent stake in the organic tea maker from numerous shareholders. Coca-Cola may elect to buy any remaining shares, and any remaining Honest Tea shareholders may elect to sell to Coke any outstanding interests in Honest Tea. The financial terms of the 40-percent investment were not disclosed.

"Honest Tea is on the forefront of the rapidly growing organic beverage business, and Seth Goldman and his management team have successfully anticipated and met consumer needs in this expanding category," said Deryck van Rensburg, president and general manager, Venturing and Emerging Brands (VEB), Coca-Cola North America. "This transaction is a superb example of our mission in VEB to seek out and invest in the best beverage entrepreneurs and the highest growth-potential beverages."

For Honest Tea, this is a chance to bring its organic teas to the mainstream in a much bigger way. "We started Honest Tea ten years ago with five thermoses and an ambitious vision for offering a new type of beverage—a delicious, healthier drink produced with a consciousness about the way the ingredients are grown," said Goldman, co-founder and TeaEO, Honest Tea. "As more consumers become aware of how their decisions impact the health of the planet and themselves, we are thrilled to receive this investment from the world's largest beverage company to help take our brand and our mission to a larger scale and wider audience," He further said despite Honest Tea's 66-percent annual compound growth rate (70 percent in 2007), the company is still not reaching all the consumers it set out to reach. "We want to see Honest be an agent of change, not just through the example it sets, but through its own actions as well," he noted.

Goldman conceded the risks of this kind of transaction are obvious, but countered he has seen it work firsthand with Honest Tea’s board member Gary Hirshberg, who continues to lead Stonyfield Farms and the organic food movement with all the fire and wisdom that he had when Groupe Danone purchased 40 percent of Stonyfield in 2001.

"The knowledge and access that Coca-Cola North America and its distribution system can provide comes at a perfect time as Honest Tea is at an exciting inflection point," Hirshberg said. "I look forward to helping Seth and the team to continue to build the business the right way in the years ahead." He will continue as a member of Honest Tea's Board.

Goldman stressed Honest Tea will continue to operate as an independent business with the same leadership and commitment to its mission.