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GROWTH THROUGH ACQUISITION

How to Thrive (at a Big Company) After Acquisition

Can a mission-driven enterprise accelerate impact within a larger corporation?

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It's been almost five years since The Coca-Cola Company first invested in Honest Tea, and nearly two years since Coke purchased the remaining portion of Honest Tea. With a new year  and the publication of our third annual mission report, Keeping It Honest 2012, it's the perfect time to make some observations about what makes the relationship work.

First of all from a business perspective, the impact of the Coca-Cola partnership has been dramatic. Our sales have grown more than fourfold as Honest Tea has expanded its availability from 15,000 stores and restaurants in 2008 to more than 100,000 outlets today.

But beyond the basic business metrics, there are a few guiding principles that help ensure our mission-driven business is thriving within the larger corporation.

1. Don't change the core of the product, but feel free to improve upon it.

There was some speculation when Coca-Cola invested in Honest Tea, that we would seek shortcuts--like making our tea with a concentrate or a powder instead of brewed tea leaves. Instead Coke invested several million dollars to help us design, develop, and install elaborate tea-brewing systems on both coasts. Each brew system produces clearer, tastier tea, with higher yields (which save water and waste).

In the same vein, I'm encouraged to see new energy over at Seventh Generation, an early innovator in green cleaning products. After undergoing a CEO transition (always a shaky moment for a mission-driven enterprise) their new leader, John Replogle, has championed an innovative cardboard laundry detergent bottle that helps the brand reclaim some of its pioneering mojo.

2. Make sure there's authentic brand energy.

At Honest Tea, the lifeblood of our brand is still managed out of Bethesda, where the company started. While I can't guarantee the Maryland address will always remain on our bottle (though we recently embossed our Bethesda origins on the base), it is critical that there are people thinking about our brand who are steeped in our history, our mission, and our own way of doing things. I recall a chilling conversation I once had with one of the early employees of Nantucket Nectars who lamented the website for his acquired brand once depicted a cruise ship, even though boats that large aren't allowed in Nantucket harbor.

3. Keep innovating.

We're still not afraid to bring out new and different products--some with more success than others. Our Honest Kids line has flourished with newflavors and packaging to the point where that business now represents more than a third of our total sales. And yet despite that success, we recently reformulated the entire line by eliminating the organic cane sugar and sweetening only with fruit juice. Then there's 2011's Honest CocoaNova, which was discontinued within twelve months. But that failure hasn't dampened our taste for innovation--we've just made a big bet on tulsi--(also known as holy basil) and are committed to sharing this delicious herbal brew with our customers. Next month we will be dipping our toes into entirely new (bubbly) waters when we launch Honest Fizz, a carbonated line of zero-calorie beverages.

4. Keep the mission top of mind and hold yourself accountable to it.

Our newly published Keeping It Honest 2012 focuses the lens on our three key impact areas--health, organics/sustainability and economic opportunity.

  • Health - Across our product lines, the weighted average calories of our drinks is 5 calories per ounce. We have seen exciting growth with some of our zero calorie drinks, such as Just Green Tea. But we also have seen some offerings, such as our Zero-calorie Lemonade struggle to gain traction.
  • Organic purchases - Our annual organic purchases have grown fivefold--from 790,000 pounds of organic ingredients in 2007 to over 4 million pounds this year, which require more than 3,624 acres of dedicated organic farmland.
  • Fair Trade - Before Coca-Colas investment, we offered nine varieties of Fair Trade bottled tea but today all of our 19 teas are Fair Trade Certified.Our purchases of Fair Trade ingredients has grown from 72,000 pounds in 2007 to 325,000 in 2011. The $112,000 premiums we paid in Fair Trade funds help create economic opportunity for grower communities--providing better roads and electricity, schools, buses, vaccines, and other benefits.


But in some ways the best way to measure our impact is by bottles sold because as long as we continue to make our products lower sugar, organic, and Fair Trade certified, then the more we sell, the more impact we are having on diets, agriculture, and working conditions in the developing world.

Most importantly, any serious discussion of a company's impact shouldn't be a cheerleading document. It is important to note progress, but almost more important to acknowledge shortcomings--the mile markers behind us tell us where we've been--but the potholes help prepare us for the journey ahead.

Last updated: Jan 2, 2013

SETH GOLDMAN is the President and TeaEO of Honest Tea, the company he co-founded in 1998 with Professor Barry Nalebuff of the Yale School of Management. He's preparing the September release of a graphic novel titled Mission in a Bottle.
@HonestTea




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