Industry Issues

March 24, 2008
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Coca-Cola buys stake in Honest Tea

The Coca-Cola Co., Atlanta, has purchased a 40 percent interest in organic tea-maker Honest Tea, Bethesda, Md. Under terms of the agreement, Coca-Cola may elect to buy the remaining shares of the company at a future date.

“Honest Tea is at 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 of Coca-Cola North America’s Venturing and Emerging Brands business unit. “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.”

Honest Tea co-founder and “TeaEO” Seth Goldman shared his thoughts on the agreement in his blog on the company’s Web site. “While Coke is now our largest shareholder, the agreement was negotiated to ensure that Honest Tea will not be managed or controlled by Coke,” he said. “We will continue to operate as an independent business with the same leadership and mission.”

The driving factor behind the partnership, he indicated, was the desire to create larger market reach for Honest Tea products, and to spend more of his own time developing the brand.

“I have the same passion and drive for building Honest Tea that I had in 1998, but I want to focus less on raising money, managing production and distribution challenges, and more on building the brand and our mission,” he said. “If we could find an investor who will help us build our business while still honoring our style of business, then that seems like an ideal scenario.”



Diageo chooses Ketel One, drops out of Absolut race

Diageo last week agreed to form a new 50/50 venture with Nolet for the exclusive global rights to sell, market and distribute Ketel One vodka. As a result, the company pulled itself out of the running for Absolut vodka, which is under auction by Vin & Sprit in Sweden.

London-based Diageo agreed to pay $900 million for its half of the new company, which will be based in the Netherlands. The Nolet family will continue to own the brand rights for Ketel One as well as the distillery where it is produced. According to the companies, Ketel One has annual sales of 1.9 million cases.

Commenting on the agreement, Paul Walsh, chief executive officer at Diageo, said: “This transaction is strategically important for Diageo, giving us an interest in an outstanding high-quality brand and fantastic potential for global growth in the super-premium vodka segment. The new company represents a unique alliance in our industry.”

Diageo says it expects the venture to produce a profit in year five. The transaction is expected to close by the end of March.

Diageo’s exit from the Absolut bidding leaves Fortune Brands, Pernod Ricard and Bacardi as frontrunners. Fortune Brands currently distributes the brand in the United States.



Heineken USA opens center in Savannah

Heineken USA, White Plains, N.Y., has opened a new “demand point” center in Savannah, Ga. The center will receive 4,000 containers of Heineken Lager, Heineken Premium Light and Amstel Light shipped from the company’s international breweries each year.

With the opening of the location, Heineken USA has six facilities to fill orders for its U.S. distributor network. The Savannah facility will distribute more than 7 million cases annually to distributors in Georgia, North Carolina, South Carolina, Tennessee, Kentucky and Alabama.

“Our beers are brewed more than 3,000 miles away at our quality breweries in Holland, requiring a logistical excellence to ensure consumers enjoy the freshest and highest quality product possible,” said Dan Sullivan, chief financial and operating officer at Heineken USA. “This demand point not only delivers on that goal, but it also lays the groundwork for further expansion in the Southeast region, which we predict will be the second-fastest growing region for Heineken USA over the next five years.”

Through the company’s recent supply chain evolution, Heineken says it has been able to reduce costs and improve speed to market. Within the past decade, it has reduced order lead time from brewery to store shelf from 10 weeks to seven days. Day-to-day operations in Savannah will be managed by Satellite Logistics Group, which also operates the Houston, Miami and Charleston demand point facilities.



Tetley merges U.S. businesses

Tetley USA has integrated the U.S. sales, marketing and finance operations of its Tetley and Good Earth tea brands. The new group will be led by Tetley USA President Jeffrey Freeman, and the business will be headquartered in Santa Cruz, Calif. Ron Stroup, Clive Rowlandson and Mike Clark will lead the new sales, marketing and finance teams, respectively.

“Tetley USA is now one company, with two locations and three major tea brands,” noted Freeman. “Our 1-2-3 approach has successfully streamlined the company’s operations in order to increase the market penetration and consumer takeaway of our Tetley, Good Earth and Wildcraft tea brands.”

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