How an ‘Honest’ Beverage Startup Got Coke’s Attention

The founder of a popular 11-year-old beverage brand got the business idea while doing a case study on Coke (KO) versus Pepsi at the Yale School of Management. And, he said, it wasn’t something he found, but instead something that was missing.

Since its inception, Honest Tea has grown 66% and the company has distribution deals with retail giants like CVS and Coca-Cola. And the future continues to look bright, according to CEO and President Seth Goldman.

“We see a lot of growth ahead with all the trends in greener living,” said Goldman. “There’s a lot of converging towards what we’ve been building.”

 Q: Where do you see your business headed next year?

Goldman: Next year will be a huge year for us. We have a partial investment from the Coca-Cola company. We will be expand the brand nationally, whether is it in grocery stores or colleges. We also got a distribution deal with CVS. We know that a lot of health-orientated consumers are going to the drug store and CVS is one of the largest in the country. We (also) see our numbers doing well in high school cafeterias and in hospitals.

Q: How did you get Coke interested in your company?

Goldman: The key thing is to make sure what you are offering is different and unique. As we were growing, the American diet was for sweeter tastes. [Some] were saying that people wanted more sugar in the products, but [instead we continued to offer] a healthier drink with fewer calories. If you just follow the crowd, you can’t build anything that will really stand. We saw that the long-term trend was to help people get to a healthier diet. It became very valuable to Coca Cola. Our partnership just started about [six months].

Q: In which stores/brands did you first notice consumers drifting toward more healthy options?

Goldman: In stores like Whole Foods, but [now see it] in much more mainstream places. We just started to be in some restaurant chains. Next year, we’ll have a national presence in Qdoba.

Q: What are some tips for other small business owners?

Goldman: There is nothing wrong with starting small. The advantage of being small is that when you make mistakes, the smaller your mistakes are. We’ve been fortunate that we made mistakes as we were learning our way around the market. I didn’t have any experiences in the beverage brand. When you get bigger and you can’t afford [to make mistakes], it can really hurt you. We were able to afford our mistakes.

Q: What new products are on the horizon?

Goldman: We launched a line called Honest Kids, and it is a healthier line of drink pouches with a fruit punch and an apple drink. It is [also a] more sustainable refreshment. We are bringing out a half and half—a half lemonade, half ice tea drink. We have a line of Honest Kombucha, which is a fermented drink, so that is unusual. We are selling that in more of the health food stores.

Q: What’s your biggest message for other small business owners?

Goldman: Our model of a mission driven business is important and we made a commitment to stand for something. We’ve stuck to it, and that is ultimately why we have done well. We could have run more quickly had we jumped on a bandwagon with more sugar or a low-carb drink, but we stuck to it. I think that is important for other small business owners to think about.