In the 14 years since Seth Goldman co-founded the company with Yale professor Barry Nalebuff, Honest Tea has grown from humble beginnings to become the first organic and fair trade brand to move into the mainstream beverage distribution system. During the past ten years the company has posted a double-digit (66%) annual compound growth rate, capitalizing on consumers’ shift toward healthier and more sustainable diets. Recently, MarketPoint met with Goldman, to learn how his brand played a role in the company’s success.
MarketPoint: Seth, you’ve developed a brand that’s as organic as the teas you brew. Can you share a little bit about your company’s vision and values, and how they’ve helped shape your brand?
Goldman: We always wanted to create something that would endure. And we knew, from the beginning, there would have to be an authentic connection between the brand and the product, if the brand was going to last. So we built our brand on a simple commitment to organic ingredients and a healthy product, and to this day, those same core values are reflected not only in the products themselves, but the way we market ourselves, and the way we operate the company.
MarketPoint: What role does social responsibility play in all of that?
Goldman: Well, it’s just a logical extension of what we do. When Barry [Nalebuff] first came up with the name, the links began to form. It started with a low calorie, low sugar product, and that led to organic products, which meant maintaining a natural connection with the earth. Fair trade just seemed to follow, as we looked at our sourcing partnerships and asked, “How can we develop closer connections with the communities that we source from?”
MarketPoint: Your brand promise includes a very public commitment to principles – it’s almost a “calling.” Does the public hold you to a higher set of standards because of your position? Do they “keep you honest?”
Goldman: Well, we certainly keep ourselves honest, and that means staying modest, being humble, being careful not to claim anything that can’t be backed up by a third party.
So, from a nutritional perspective, the reported sugar content must be FDA compliant, and we can’t tell you a product has only 15 calories if there are 30 in there. To say we’re “organic,” we have to show a paper trail from the garden to the bottling plant, and all the way through the warehouses. Even the term “fair trade” is third-party verified.
A few years back, we experimented with a new bottle design that was 22% lighter than our previous bottle, so from an environmental perspective, it was a very good thing. But the structural integrity of the bottle required a large cavity at the bottom, which led some consumers to think we were being deceptive – that the bottle contained less than its size implied. And I don’t blame them for the misunderstanding. Consumers have been fooled before, especially in the beverage industry, by producers who over-promise and under-deliver. That’s why we strive to be transparent in everything we do.
MarketPoint: What sort of pressures have you faced, from the outside, that have threatened to compromise your commitment to being “honest” – maybe in the market, or in your delivery chain – and how did you handle them?
Goldman: You know, we really haven’t felt those types of pressures. Of course, we could have sold more drinks in the beginning if we had added more sweeteners, and we could have sold more product if we had lowered our prices by using less expensive ingredients. But we never considered those things, because we launched Honest Tea for a reason, and it wasn’t just to be like everybody else.
In 2003, we looked into going fair-trade, but it was cost prohibitive, at the time. So we started working with our suppliers, and by 2011 we had met all of our targets and were able to call our teas “fair-trade.” Sometimes, you just have to be patient; you have to understand that it doesn’t happen overnight.
MarketPoint: With you, “honest” isn’t just a casual branding concept, it’s your first name, the most highly visible element of your brand. How does that name shape your culture?
Goldman: Oh, it certainly sets up the expectation for how we want our employees to act with our partners and with each other, and it makes it obvious. There’s no grey area with this. If you visit our offices, you’ll see we work in one big open space. That certainly helps us communicate openness and transparency.
There’s never a feeling that something’s going on behind people’s back. Even in our early negotiations with Coca-Cola – before they made the initial investment – we were transparent with our employees. They know that we trust them, and that empowers them. And so they understood that the discussions with Coca-Cola were just something they shouldn’t be talking about publically, and they respected that.
MarketPoint: Honest Tea entered the market through the natural food segment, with a strong appeal to what marketers might call the “crunchy granola type,” who are naturally inclined to accept your brand promise. As you moved from that “crunchy granola” buyer to a more mainstream American market, what challenges did you face?
Goldman: Well, of course, marketing messages need to be relevant. So our natural food consumers, who tend to be more inquisitive (reading labels and seeking out specific ingredients), think of tea very differently from our mainstream consumers. We used to have a tea called Lemon Black Tea, and we realized the distinctions between black teas and green teas may not be front-of-mind for the mainstream consumer, so we simplified the name to Lemon Tea. We also developed some regional formulations. In the Southern states, sweet tea is pretty common. So we created something called Not-Too-Sweet Tea, which has a sweet finish, but from a calorie perspective, fits the profile of our other healthy drinks. More recently, we changed our labels, to help consumers better relate to the taste and the contents, even cutting open the fruit to show the freshness of our ingredients, and that seems to help.
MarketPoint: What was it like, in the early years, to compete against much larger, more established and more well-funded brands?
Goldman: The big brands tend to hit the market with a lot of paid media. We’ve found it more effective to raise awareness with local events and guerilla marketing. One of our most successful early campaigns featured racks of Honest Tea and a Lucite box and a sign that explained our tea was $1 a bottle – on the honor system. We did it in 12 cities around the country; no cashier, no uniformed workers, just a few hidden cameras to see how people responded. Of course, it was a great way to get visibility for the brand and to get some consumer sampling, but it also earned us a lot of free media coverage, which boosted consumer awareness. Then a few weeks ago, in a guerilla campaign called The Great Recycle, we erected a 30-foot high recycling bin in New York City, to raise awareness about recycling and make our point about being better stewards of the earth. That campaign was good for us, but it also made people think about a very important environmental issue.
MarketPoint: Well, you’ve certainly gotten the attention of Coca-Cola, who bought a minority interest in your company in 2008 and now owns you outright. How have you managed to stay true to your brand and culture through that transition?
Goldman: The initial transaction was structured so that, for the first three years, Coke was only a minority shareholder. We were still the same company, based in Bethesda, Maryland. We had our own advisory council, and for the first three years, we had our own board. That helped us maintain our original decision-making structure and independence, while clearly understanding the mandate to grow. Since the acquisition, we’ve maintained the same structure, with our board becoming an advisory council, and the marketing and the branding and the innovation still based in Bethesda.
MarketPoint: So, what advice would you give to other businesses who might be navigating a similar type of transition with their own brands?
Goldman: For us, it was very important to identify the key elements that keep us independent and that drive our culture and our brand. I don’t think we could have transplanted this brand to Atlanta and not lost something in the process. This is where the roots of the brand live, and it’s where we live, and it’s where our decision-making structure lives.
If I were to offer advice to others, it would be to the acquiring companies. In business, the old model seems to have been to buy a company, cut as much as you can out of operations and overhead, and assume everything will just go on as usual. But it doesn’t work that way, because by cutting the people, you cut out important elements of the culture. You lose some of the dynamism and the energy that made the company attractive in the first place. It’s just striking how many acquired brands seem to lose their mojo in the marketplace.
MarketPoint: What, then, are the universal brand lessons? …the ones that are transferable, even to other sectors, like education or business-to-business?
Goldman: Certainly, one is that you need to stand for something and stick with it. We could have chased after the latest trends, like energy drinks, or energy shots, or low carb drinks. But we knew it was more important to be true to ourselves. That doesn’t mean we haven’t adapted our packaging or our communications plans as the marketplace evolves, but we haven’t compromised our vision or our values. At the end of the day, if you don’t stand for something, you’re not going to be valuable to consumers or to potential acquirers.
Another lesson, especially for the entrepreneurs, is that you need to stretch your resources. If you want to control your destiny, you need to make the most of the money you have, and not become dependent on someone else’s funds.
And a third would be that believing in the brand means a lot to the organization. When people are working for something they believe in, they work harder and they work better – and that is critical. When your people are willing to take that extra step, your whole organization can move from mediocre to excellent.
MarketPoint: We’ve made it to the end of the interview, and we never even mentioned Facebook. I noticed your Facebook page has over 90,000 likes. How has social media helped to shape the brand?
Goldman: We’ve dabbled with the obvious social media marketing tactics, like offering coupons. But the core of our social media success has really come from simple community-building. Our social community comprises people from all walks of life who share our beliefs. They are very conscious about what they consume, and they share our excitement about the product.
MarketPoint: Okay. So if you could leave our readers with one last word, just one piece of advice about brand, what would it be?
Goldman: Make the extra effort to tie it all together. To be an authentic brand, you have to be consistent in everything you do. You can’t have one face for the public and another for everyone else. You have to show the same face to the public and to your employees, and to your suppliers, and ultimately to yourself. It has never been smart to be inconsistent. But in this hyper-connected world, inconsistency becomes obvious. From our perspective, the easiest way to be consistent is to be honest. So that’s what we are.