ATLANTA -- The Coca-Cola Co. and Honest Tea Inc. today announced that the two companies have completed an agreement resulting in Coca-Cola holding approximately 40% interest in the fast-growing maker of certified organic beverages, including Honest Tea.
Coca-Cola may elect to buy, and the remaining Honest Tea shareholders may elect to sell to Coca-Cola, the outstanding interest not currently owned by Coca-Cola in the future. Financial terms of the investment were not disclosed.
"We started Honest Tea ten years ago with modest resources, but an ambitious vision for offering a new [image-nocss] type of beverage—a delicious healthier drink produced with a consciousness about the way the ingredients are grown. 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," said Seth Goldman, co-founder and TeaEO, Honest Tea.
The strategic opportunity was identified by Coca-Cola North America's Venturing & Emerging Brands (VEB) business unit. "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 of VEB for Coca-Cola North America.
Honest Tea was started in 1998 when Goldman and his co-founder, Barry Nalebuff, brewed samples of tea in Goldman's Bethesda, Md., home and brought them to the regional office of a natural foods chain. Since then, the brand has become the top-ranked tea brand in the natural foods channel (according to SPINScan) and has begun to expand into mainstream grocery and convenience stores.
"This is our chance to bring organic beverages to the mainstream," said Nalebuff, chairman of Honest Tea.
In 2005, the company created Honest Ade organic thirst quenchers, and in 2007, it launched Honest Kids, a line of low-calorie organic thirst quenchers sold in 6.75-oz. pouches.
"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. I look forward to helping Seth and the team continue to build the business the right way in the years ahead," said Gary Hirshberg, president and CE-Yo of Stonyfield Farm and longtime board member of Honest Tea. Hirshberg will continue as a member of Honest Tea's Board."We consider the transaction a strategic positive for Coke because it increases their exposure to a high-margin, high-growth segment via a brand that has considerable upside potential, in our view," said beverage analyst Mark Swartzberg of Stifel, Nicolaus & Co. in a research note yesterday."We consider the transaction a small positive for Coca-Cola Enterprises [CCE] too because, although Coke has yet comment officially, Honest Tea's distribution is likely to be substantially expanded through the use of CCE and other Coke bottlers."Honest Tea's product line includes Honest Tea ready-to-drink teas, Honest Ade thirst quenchers in plastic bottles and Honest Kids pouch drinks. All varieties are certified organic.
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