2015 Executive of the Year: Seth Goldman of Honest Tea
Co-founder uses mission-driven culture to inspire employees, new products
When Seth Goldman co-founded Honest Tea in 1998, he set out to not just develop not-too-sweet, organic beverages, but also a company that exemplifies honesty and integrity throughout its supply chain, product development, packaging and much more. Eighteen years later, the Bethesda, Md.-based TeaEO is using those same principles to ensure that Honest Tea remains a mission-driven company.
Goldman notes that from the start, he has tried to help people understand the bigger impact Honest Tea is trying to make as a company. “When we talk about being a mission-driven business, we really want people to understand that we’re trying to address health issues, we’re trying to address environmental issues, we’re trying to address issues of labor in the developing world, so the first thing is to set that vision and get everybody aligned around it,” he explains. “Then once you get that, then the style is basically to get out of the way.”
Goldman explains that if you hire good people, you don’t need to be as involved in the day-to-day operations but operate more as a guide to help understand the big picture ideals. Goldman employs this style where he can step in and support his staff —having previously done every job in the early goings, he has an understanding of the challenges each entails — but empowers them to take ownership of the brand and how their duties can help it flourish.
“I do as much as I can to both understand their work and support them whenever they need it,” he notes.
This leadership has worked for the entrepreneur. Goldman notes that since the initial 2008 investment from Atlanta-based The Coca-Cola Co., which took full ownership in 2011, Honest Tea’s growth and distribution has grown sevenfold. When The Coca-Cola Co. first invested, Honest Tea had a presence in 15,000 stores. Today, it can be found in more than 100,000 stores as well as more than 6,000 Wendy’s locations.
The same can be said for its dollar sales. Goldman notes that company’s estimated growth for 2015 will be comparable to its full-year sales in 2008, and that this year its full-year sales will exceed $160 million.
“We’re seeing growth well over … 25 percent so far this year, which is a very exciting growth rate,” he says. “It’s one thing when we were starting out and when you start from nothing it’s not hard to double your sales. But now that we’re a much larger company, seeing that growth accelerate, which is really exciting.
“And with accelerating growth, we’ve seen new opportunities, more retailers take on expanded parts of the product line,” he continues. “Then of course there are opportunities like Wendy’s. That is just so much brand visibility, more eyeballs, people who see the brand, people who don’t think of themselves as ‘organic’ consumers going to a store and seeing this brand either whether they’re buying a tea or a drink for their kids and realizing this is a product that they can purchase in stores, so [there are] a lot of big strides around visibility for the brand as well.”
For these reasons and more, Beverage Industry named Goldman its 2015 Executive of the Year.
Although Honest Tea operates as an independent unit within The Coca-Cola Co., Goldman is pleased with how the partnership has evolved and how the brand is able to help The Coca-Cola Co. expand its reach and consumer base.
“The single best way we can contribute to the success of the company is to grow this brand because this is a diversification of their business and their future, their customer base, [and] their consumer base,” he explains.
An example of this is Honest Tea’s partnership with Wendy’s fast-casual foodservice outlets. Honest Tea has been able to give The Coca-Cola Co. incremental growth because the corporation previously was not the brewed tea provider for the restaurant chain. The companies will even take this partnership a step further as the brand’s Honest Kids line also will join the Wendy’s menu options nationally.
“That’s another example where that was not a part of the business that Coca-Cola had, so by having our product line in their portfolio they’re able to gain incremental sales opportunities that they previously didn’t have,” Goldman states.
Honest Tea sales staff also has shown to be an asset with natural channel retailers, distributors and brokers. In fact the staff has taken on an expanded portfolio where it’s not just selling Honest Tea, but other natural products owned by The Coca-Cola Co.
However, Goldman also is quick to credit The Coca-Cola Co. for the opportunities it has provided Honest Tea. For instance, the strides the brand has made in the convenience channel compared with 10 years ago when that channel provided its share of challenges to the ready-to-drink beverage company.
“We are in several convenience chains where we are blowing away the expectations of the buyers, and that’s been really great to see because that not only speaks to our brand’s ability to be relevant with consumers, but also how consumers are evolving,” he explains. “You wouldn’t normally think of buying an organic beverage in a gas station, and now you can. That would just not have happened without our partnership with Coca-Cola.”
Evolving consumer … and market
When discussing Honest Tea’s growth, Goldman also credits the evolution of the U.S. consumer. As consumers’ tastes evolve and they are becoming more engaged and educated on ingredient panels, brands that embrace organics and low calorie can fulfill those changing need states.
Just as consumers’ preferences have changed, so have companies. “We’ve certainly gotten more adept at formulating drinks that have taste appeal and label appeal, name appeal, and package appeal, yet have a satisfying taste,” he notes.
For example, Honest Tea came out with an herbal, lightly sweetened cinnamon tea in 1998 called Gold Rush. Goldman notes that it did OK, but eventually was pulled from the portfolio. Fast forward to spring 2015 and the brand released Cinnamon Sunrise Herbal Tea, a blend of organic Vietnamese cinnamon and Fair Trade certified red rooibos from South Africa, brewed together for an unsweetened zero-calorie drink.
“We’re better at identifying ingredients, better at identifying formulations, and I say we, but really the collective industry, has gotten better at being able to meet the consumers’ evolved needs and desires,” Goldman explains. “We were probably a little too far in front of the consumer in 1998 trying to sell them that drink. I’m so glad we had the natural food stores that were willing to give us a try, but we really didn’t get much traction elsewhere. Today our brand is getting traction in very mainstream retailers and that’s because consumers have evolved.”
The influence to release Cinnamon Sunrise Herbal Tea came from the success of the brand’s Just Green Tea and Just Black Tea, as well as some insight from Goldman’s wife. “She doesn’t drink caffeine and she says ‘well Just Green is doing well, but what can I drink?’ And it wasn’t only about her, but sort of helped me realize that we should find a way to create zero-calorie herbal teas,” he explains. “The challenge was that as we tried formulating them, they all just had a thin taste to them, and then when we added these spices they just really came alive, so I’m especially excited with these new herbal teas.”
At the same time as the launch of Cinnamon Sunrise, the company released Ginger Oasis Herbal, another unsweetened herabl tea. However, this was not Honest Tea’s only embracement of the herbal tea market.
At the end of 2014 into early 2015, the company decided to transition its Honest Ade line to a sweetened herbal tea line. Goldman explains that Honest Ade was challenged at finding a home on shelf, but opting to transition it allowed the company to have a consistent tea line for its PET portfolio and helped amplify its shelf presence. And the retooling has proven to be a success.“The first way we compare [the lines] is how are they doing against the Honest Ade line because that’s what they replaced,” he notes. “And they have absolutely outperformed the Honest Ade line, so I feel good about that move.”
More than just tea
Although the conversion to herbal teas allowed for a more robust tea portfolio, Goldman explains that they learned early on that they are more than a tea company.
“For the first six years, we just thought we were a tea company,” he says. “It’s funny, the word Honest was a descriptor and then we realized Honest is really the noun. Tea is more of the modifier. Once we made that leap, we realized there were a lot more products that could fit under the Honest brand.”
One of the company’s most recent additions is its Summer Refreshers line, which launched in 2014. The limited-edition line, which launched as an exclusive to Whole Foods Market stores, originally was comprised of Original Lemonade, Berry Hibiscus Lemonade, Mango Lemonade, Mint Limeade and Half & Half Lemonade & Tea. This year Watermelon Lemonade was added, replacing Berry Hibiscus Lemonade.
“I’ve always loved watermelon and it’s a popular fruit, so how do we create a formulation that gives you an authentic taste around watermelon and do that with the line?,” Goldman explains. “Our team did some really neat, great work with watermelon juice and the lemon juice, but also with some fun work around the flavoring, too, to give it that authentic flavor.
“We say you can taste the rind,” he continues. “There’s a little bit of rind in there to make it feel like a real watermelon, so it very quickly became an office favorite and a very strong seller with Whole Foods as well.”
Honest Tea included Whole Foods in the formulation process of the new variety because, Goldman notes, they wanted the retailer to embrace Watermelon Lemonade as much as the company did. “You want them to own it,” he says. “That goes back to the big picture about the leadership style; you always want people to own the work they do, so that’s something that’s a consistent theme.”
In fact, Whole Foods was involved early on in the development of Summer Refreshers when the retailer challenged the brand to use Fair Trade certified sugar, making it Honest Tea’s first products to use the sweetener.
“I went to Paraguay. I met with other sugar suppliers as well as with the Fair Trade cooperative that is now our provider to understand what Fair Trade meant,” Goldman explains. “When we first brought out that line it was the first product that we brought out that had Fair Trade sugar, and then a few months later we converted all of our glass bottles to Fair Trade sugar, and then earlier this year we converted all of our fresh brewed tea into Fair Trade sugar, and right now we’re in the process of transitioning all of the sugar in our PET line, the largest part of our business, to Fair Trade sugar.
“I think that’s a great example of every time we innovate we’re going to challenge ourselves to stretch a little further around our mission and our impact,” he explains.
Although Goldman is pleased with the Summer Refreshers line, one of the brand extensions he gets the most excited about is Honest Kids.
“The impact of Honest Kids in the kids market has been very satisfying and gratifying to see,” he says. “We came into that market in 2007 and really almost all of the kids’ juice pouches or drink boxes had roughly 100 calories per container. That was really the standard profile. We came out at 40 calories and over the next few years, took a lot of the share and you just see this shift in the whole market, and I don’t know that there are any kids drinks out there now at 100 calories.
“To me, I think we helped create a mission structure that at the very least helped other brands realize there was opportunity out there and maybe even pressured them to move to these lighter formulations, because it was clearly something that parents were seeking out for their kids,” he continues.
Given Honest Tea’s mission-driven culture, the company takes this beyond its in-house operations. Two of its most recognizable activations from its field marketing division are The Great Recycle and the National Honesty Index.
At the end of August, Honest Tea released the results of its latest National Honesty Index, in which it found that 94 percent of Americans were honest. The activation features unmanned racks of Honest Tea products where people can take a beverage and leave a $1 in exchange. This is the sixth year the company has run this program, which Goldman jokes has now become a “property” of the company.
“With the National Honesty Index, it’s fun [and] interactive,” he says. “It’s lighthearted, we’re not giving a lecture on ‘be honest; teach your kids honesty.’”
Goldman adds that you will see parents that walk by with their kids and explain the concept. “It’s a very teachable moment, and for us to be able to be part of that education is really fun,” he notes.
The activation also allows Honest Tea to work with its partner FoodCorps, a national nonprofit that connects kids to real food and better nutrition. The money collected from the experiment is donated to FoodCorps, but as the visibility of the National Honesty Index grows so can this partnership. Goldman uses his conversations about the National Honesty Index to share the story about FoodCorps and what its mission is.
Another popular activation for Honest Tea is The Great Recycle, a national event in which the company erects one 30-foot tall and six 12-foot tall recycle bins to generate excitement and enthusiasm for recycling.
“We trying to sell this idea of people being involved in a more sustainable product lifestyle and make sure they all understand whether you like it or not, when you buy something you are part of a lifecycle,” Goldman explains. “You have the conscious choice to end that lifecycle with a trash can or keep it going by using a recycling bin. We want to make sure No. 1 we communicate to consumers that we know that this is a responsibility of ours, but
No. 2 if they can become conscious of it of it, or incentivize to do it, it can give them that chance to connect with our brand in a deeper way.”
Both of these programs allow consumers to interact with the Honest Tea brand on their terms, which can foster that deeper connection, Goldman says.
As excited as Goldman gets about these programs, he’s also quick to credit the company’s field marketing teams for their successes.
“The challenge we put to them is how do you find other ways to interact with people, how do you reach them where they live, work and play in a way that is engaging, but you still get to tell the story or let them taste the product,” Goldman says.
He adds that these team members are out there every day talking to consumers about the company’s culture, creating relationships and foraging that deeper connection.
But whether it’s the field marketing team, its retail partners, research and development department or anyone else that is part of the Honest Tea culture, Goldman notes that having people who take ownership and passion for the brand are a key component to the company’s current success and its future.