Changing the Status Quo

It's official.  Today I was elected a board member of the American Beverage Association, which means that either we've changed or the Beverage Establishment has changed—and maybe both.

When you start a beverage business out of your home, you are by definition an outsider because distribution—which is key to the business (see blog post "The Customer is Always Powerful") is almost totally controlled by Coca Cola, Pepsi, and Dr. Pepper/Snapple.  All beverage upstarts resent the Establishment because its near-stranglehold on distribution makes it difficult for us to get our drinks to customers.  We also tended to mock their so-called "innovations," which ten years ago seemed to be variations on vanilla cola, diet vanilla cola, vanilla cherry cola, diet vanilla cherry cola... you get the idea.  

So as an entrepreneur, it's very easy to develop an anti-establishment mentality. I was so conscious of being an outsider that sometimes I made things more difficult for myself early on—among other things, Honest Tea avoided hiring people from the beverage industry because they stood for all the things we thought we stood against.  

A lot has changed on many fronts. Pepsi and Coke now own juice companies like Naked and Odwalla respectively, as well as lower-calorie drinks such as Vitaminwater.  Companies like Nestlé Waters have been leading the charge toward lighter-weight bottles and Coke has launched a recyclable bottle made with renewable plant-based material.  And the trade group that used to operate as the National Soft Drink Association evolved too—it rebranded itself as the American Beverage Association.  Instead of being a group that used to fight attempts to engage in discussion about the role of drinks in our society, the ABA joined with the American Heart Association and the Clinton Foundation in 2006 to create nutritional guidelines that led to the voluntary withdrawal of sugary drinks from most schools.  The result of the initiative was an 88 percent decrease in the amount of beverage calories sold in American schools.

So who changed: Honest Tea or the Beverage Establishment?  Well, it's true we now occasionally hire people from the beverage industry, and we do work with the Coke distribution system, but Honest Tea is still making organic, Fair Trade-certified tea, and we still offer drinks with less than half the sugar of most beverages.  It's also worth noting that over the 12 years since we've been in business, the average calorie profile of bottled teas has moved from 100 calories per 8-ounce serving to 60.  The average calorie profile of kids' pouch drinks has move from 100 calories per pouch to 75.  

There's still a lot of work to be done around helping America's beverage companies become more sustainable. National recycling rates are still below 40 percent and I'm sure more can be done to promote healthier beverages.  It feels a bit surreal to think of myself as part of the Establishment, but unlike 12 years ago when it felt like it was Big Soda against everyone else, the industry has definitely evolved and embraced entrepreneurial innovation. If this is the New Establishment, I'm proud to have a seat at the table. 

What Earth Day Means to Me

In 2004, I took my family to visit the Makaibari tea garden in Darjeeling, India, the supplier of our oolong tea.  My oldest son Jonah, who was 11 at the time, was complaining that human pollution and environmental abuse was destroying the earth.  But the owner of the garden, Raja, was much more philosophical.  He corrected Jonah: "You don't have to worry about the Earth—it's not going away.  Human activity and abuse may cause temperature changes and catastrophes that kill off species including humans, but the Earth will still be here.  So don't feel sorry for Earth, feel sorry for the way we live because that is sure to change."

Raja is an unusual person. He grew up and lived in a privileged background as the son of a tea garden owner.  A few decades ago, he was nearly killed in a horse riding accident. It was then that he got serious about leading a life of meaning.  He made Makaibari one of the first biodynamic gardens in the world, creating an environment in which the whole system lives as one organism—feeding and fertilizing itself.  One day when our son Elie was taking a shower after a long hike, he screamed because he found a scorpion in the corner of the bathroom.  Raja calmed Elie down and showed Elie the scorpion that made its home in Raja's shower behind the door.  Raja told Elie, "I don't bother him and he doesn't bother me," and indeed the scorpion seemed quite at home.

Though Raja's scorpion may not seem appetizing, it can be a great metaphor for one way to think about nature. The scorpion was perfectly at home in a moist, warm environment and as long as it wasn't disturbed, Raja and the scorpion were able to live in harmony.  In the same way, the phrase "Nature Got It Right" speaks to the fact that the taste of natural ingredients are best when made as nature intended.  Nature's ingredients are healthiest without all the artificial chemicals and of course our air, water and land are better off when they are able to do what they're supposed to do.

Many of nature's short-term actions may not always please us—just ask our lawyer who is stuck in Europe due to the Eyjafjallajokull volcano in Iceland (though having a lawyer stranded in Europe isn't always a bad thing!).  But in the long term, trying to outsmart or out-technology nature doesn't work.  "Nature Got it Right" can also be understood as a warning—we may think we know better but in the long-term, nature will do what it wants and we can either respect it now or pay for the consequences of our actions later.

Whether we spend Earth Day selling organic tea, lighter-weight bottles or reusable shopping bags, every transaction we conduct at Honest Tea helps support an effort to take our economy and our ecosystem in a more sustainable direction. It's a philosophy I'm proud to live by.

The Big Brewer

When Honest Tea took on Coca-Cola as an investor in 2008, many skeptics were concerned that Coke would force us to follow the same strategy that so much of the Big Food industry employs –strip out as much cost as possible, and then put all the money into marketing.

In fact, since Coke's investment, Honest Tea has taken several steps that increased our costs – we've increased our number of Fair Trade certified tea varieties from three to more than fifteen.  We've introduced our Honest Kombucha line, which is an expensive and costly drink to produce, store and ship.  We did manage to cut some costs out with respect to our plastic bottles by developing our lighterweight bottle (see blog from October 2009), but that was an environmental win that we would have hoped to achieve even if it cost us more money.

So I was delighted to visit the newest Honest Tea production facility last month -- a Coke bottling plant where I saw a new tea filtration system that Coke installed with Honest Tea's help and expertise.  There's no more visible way to communicate the level of commitment Coke is making in our brand's future than to show a picture (see the bottom of the page) of the Big Brewer  – not only because it is a financially significant investment (more than $1 million) but because it takes up such a large piece of real estate in the middle of a production plant where space is limited and quite expensive.

We had to digitally alter some of the specifics of the photo (to prevent competitors from seeing how we do it), but the scale is accurate – three stories of tea brewing gadgetry (that's me and our VP of Operations, Ed Castro at the top)...a long, long way from the bad old days when our brewmaster George and I used to dunk big filter bags into boiling water, hoping the bags wouldn't burst and clog the filters (which they always seemed to do – and then we had to clean tea leaves off the ceiling).

The Big Brewer says several important things about Coke's long-term commitment to Honest Tea and our organic beverages – it means they are investing in brewing real tea leaves (as opposed to the cheaper tea powder which most (i.e. almost all) tea-flavored drink makers do). The payback on such an expensive system is at least three years, far beyond the investment timeframe that Honest Tea could make on its own – we're rarely in a position to make capital investments beyond the next two months.  It also means no shortcuts – Honest Tea will continue to make our teas the way tea is supposed to be made.  Yes, there's more technology and computers involved to ensure consistency but the essential notion of putting tea leaves in boiled water and then filtering the leaves out remains as authentic as the basic tea steeping basket.

And most importantly, the tea from the Big Brewer is as good, or better, than any we've made – a clear, clean taste and a beautiful look with a lot less sediment.