Honest Tea founder on what its shutdown means for purpose-based brands

Seth Goldman wants you know he can take a gut punch. The food entrepreneur's Honest Tea brand helped beverage giant Coca-Cola Co. tap into booming consumer demand for organic foods and brands that serve a purpose. After the company announced this week it would cease production, Goldman took to Twitter to call the decision a “gut punch” to the brand’s backers and suppliers. But in an interview with Ad Age, Goldman said he does not regret the decision to have sold the brand in the first place, noting that its sub-brand Honest Kids—which Coke will continue to make and market—succeeded in its goal of making healthier choices more accessible and affordable. And Goldman, who is also a board member of the plant-based meat brand Beyond Meat, and is launching a new Earth-friendly snack brand called Eat The Change, still believes purpose-based brands have a future. The following transcript has been lightly edited for style and space. What does the shutdown of Honest Tea say about the state of purpose-based brands? Marketers have a lot riding on this. It's definitely a setback. I had the same conversation with Coca-Cola on Monday when they informed me of their decision—not that they had to because I don’t have any economic or governance stake, but I appreciated that they did. I said, ‘Gosh, are you guys are you really moving out?’ They’re keeping organic in the sense they still have Honest Kids, but it is losing the tea brand, and its Fair Trade component, and that’s really a shame. But in the world, things don’t always move in a straight line. I have no doubt that this direction is where the future is, and where the opportunity is, and where consumers are headed—but it doesn’t move in a straight line. The pandemic played a pretty significant role, too ... supply constraints made the product harder to source and provide, and made margins tougher. That forced Coke to narrow down their portfolio. Those were contributing factors. But to me, it doesn’t change the long-term direction of where consumers are headed, and ultimately, where corporate America will go, and where entrepreneurs will continue to focus, and should continue to focus. It's easy to find people who will tell you that Whole Foods Market is not the same as it was once Amazon bought it. We wrote recently about an upcycled food brand backed by Anheuser-Busch that was shut down shortly after we published. What’s going on? Is Whole Foods not the same, or has the rest of the market come to it? I would argue [it] is the latter. Whole Foods may not stand apart as much as they used to, but that’s because the mainstream—Kroger, Safeway, Costco, and even Walmart—are much closer to Whole Foods than they were before Amazon bought it. I was just in a Beyond Meat board meeting yesterday where we were talking about all the mainstream retailers embracing plant-based protein in an aggressive way. We would not have been having that conversation five years ago. Coke mentioned in its press release that Gold Peak—one of the two bottled teas to survive the portfolio rationalization—had adopted a “real-brewed” formula in 2018. What did that mean? This is another example of the impact that Honest Tea had. We brought to Coca-Cola the capability to brew tea with tea leaves. Before Honest Tea came to Coca-Cola, the Coca-Cola portfolio of bottled teas was made with powders or syrups. We had developed the equipment, and we installed that on both coasts, and then Gold Peak moved to that. I think it creates a much more authentic taste. That's one way we've contributed to the tea portfolio. How do you see inflation and fears of a recession, affecting better-for-you, plant-based and organic brands? Should it be any more of a concern to them than to mainstream counterparts? The macro [effect] is about scaling these brands. The margins on Honest Tea were not as good as those on Gold Peak, because we had not yet developed scale. That carries over to other brands whether it's Beyond Meat, or my new brand, Eat the Change. Startups and brands that are innovators are always going to be in a challenged position because of the cost of goods. What’s unique about Beyond Meat is that you are starting to see the benefits of scale now—we are seeing our price points become more competitive. Eat the Change is still on the early side of that curve. We’re just launching a new carrot snack, and it is a little more expensive than some fruit snacks that parents feed their kids, but it's a dramatically different product. It's going to take time and scale. The innovators’ challenge is to try to get to scale and get to a competitive cost point—but you don't start that way. Brands on the rise—a new Ad Age series How Celsius energy drink is challenging Monster and Red Bull—and winning Behind Vuori's marketing efforts in the activewear space Inside the rise of hair color brand Madison Reed What’s the story behind Eat the Change? One reason I didn’t want to wallow in my juice over the Coca-Cola decision was because I’m onto building what I think is the next great brand. Eat The Change is a snack brand with the slogan, ‘Snack to the Future’ and it’s all planet-friendly foods. Mushrooms and carrots are two of the most water-efficient crops there are, and we made two different snacks with those ingredients that use the full product, so there’s no food waste--which is another big environmental challenge. We have five varieties of a mushroom jerky that is in about 3,000 stores now including Publix. Our newest line we’re launching now is a carrot snack. According to the Centers for Disease Control, only 7% of American children are eating their recommended daily allowance of vegetables and only 10% of adults are, and so we have to find a way to get nutrient-dense foods, and vegetables in particular, more accessible, more available, and more fun. The Carrot Chews are intended to go to the same shelf as the fruit chew. And the fruit chew is one of the worst and most-inaptly named product categories out there—there’s no fruit in there. It’s water, puree and some juice, maybe—it’s basically a gummy bear. In our food, the first ingredient is carrot. How will we see you marketing this brand? A ‘Top Chef’ celebrity [Spike Mendelsohn] is already involved as a co-founder. Spike is great. And we have very aggressive sampling program. We just placed some accounts in stores like [the upscale natural foods chain] Erewhon Market, and influencers, particularly dieticians, have really gotten behind it. They get it. They say, ‘This is what we should be feeding out kids.’ For us, marketing will be very grassroots, influencer-based. We're not going to pay people to say its healthier or better. But we’re going to send it to them and let them say. We have a lot of Instagram love. Given how it all turned out for Honest Tea, do you regret having sold to Coca-Cola in the first place? It’s a really good question. As recently as last night I was talking about it with my wife. But I don’t. People and personnel change, and I’m confident that had the people I did the deal with still been there, this wouldn’t have happened. But people change, conditions change, and there’s no guarantees in life—I used to tell my employees that. The business won’t be around if it doesn’t justify itself. The goal was to democratize organic, and certainly, with Honest Kids now in McDonald's, Subway, Chick-Fil-A, Wendy’s and Arby’s, we have brought organic drinks and made them available, accessible and quite successful too—in a way that I had dreamed of and hoped for. So I certainly don’t regret that. The goal was also obviously not to have the Honest Tea brand disappear. I’ve already been approached by friends in the industry who asked ‘Couldn’t we just recreate it without the name?’ We could. I personally don’t have the bandwidth, but I have the playbook and the suppliers, who I desperately want to find solutions for. I said this in my Twitter feed: ‘Don’t cry because it’s over, smile because it happened.’ Because it was a wonderful moment. My son sent me a nice email that said it wasn’t about a bottle of tea—it was about a movement and people who tried to take the things they cared about and manifest them. That will always be there. Sign up for Ad Age newsletters Get the latest news and analysis delivered to your inbox Click here

Honest Tea founder on what its shutdown means for purpose-based brands

Featured Stories