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An Honest Dialogue with a Disappointed Consumer

Earlier this month we announced that Coca-Cola was making a 40% investment in Honest Tea. Though most of the feedback from consumers has been positive (”finally I won’t have to drive 2 hours to get your drinks!”), we have received heartfelt notes from loyal customers who are disappointed with our new investor. We take these concerns seriously. I am pasting below a recent exchange with a customer, Julie, who agreed to let me share her comments. As you will see, we end up agreeing to disagree, but at least we both understand where the other is coming from.

Hi Julie,
Thanks for your honest opinion, even if it’s not what I was hoping to hear. As someone who comes from an activist background, I certainly understand the nature of your concern. I don’t expect that I’ll convince you otherwise, but I do want to share a few thoughts on why this investment from Coke does make sense to me — I’ve tried to insert comments in green italics below. Please let me know what you think, honestly yours, seth

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From: Julie
Sent: Tuesday, February 19, 2008 4:12 PM
To: Seth Goldman
Subject: Honest Tea, Health, Environment, and Social Justice: Where Does Coca-Cola Fit In?
Dear Mr. Goldman,

I am writing to express my surprise and disappointment upon hearing the recent news that Coca-Cola will acquire a 40% stake in Honest Tea, making it the company’s largest stakeholder, and that it will have the option to purchase a majority stake after three years. As a business that has built its reputation over the past decade on a commitment to healthy organic products, environmental quality, and social justice for its producers, Honest Tea’s decision to partner with Coca-Cola–a multinational corporation that has consistently violated all three of these principles in their global business practices–confounds me.

I won’t try to defend Coca-Cola here – that’s not what this deal is about. However, based on your remarks I think it’s fair to say that you believe the world would be better if Coke sold products more like ours. So then the question is whether we believe that Honest Tea will be “corrupted” by Coke. I’m confident that Honest Tea will continue to sell the products it’s been selling – we painstakingly built our business over ten years in a very deliberate manner. We were constantly presented with the option of making the products cheaper (e.g. using high fructose corn syrup instead of organic cane sugar or honey or without Fair Trade certification) or with more calories but we consistently chose to keep the brand “Honest”. Coke found value in what we’ve created – if they wanted to change our company into one like theirs, they wouldn’t have invested in ours.

Coca-Cola’s extensive business network and far-reaching marketing capabilities have been built upon a foundation of worker and farmer exploitation and environmental degradation, particularly in developing countries. The idea that a partnership with Coca-Cola will help Honest Tea to expand its so-called health, environmental, and social mission seems naively optimistic, if not grossly misguided. For a company that was founded on a vision of long-term sustainability, I find your new business affiliation with Coca-Cola to be surprisingly short-sighted.

I believe that every time we sell a bottle of Honest Tea we are doing a positive thing for the people picking /processing the leaves, the ecosystem and the consumer. If you accept this first assumption, as I do, then I believe it is my responsibility to make Honest Tea as powerful as I can. The more we sell – provided it is the same product we have been selling for the past ten years – the more good we do. And the more we convince the larger beverage companies that there is a market for a product like ours.

By partnering with Coca-Cola, you may gain a net increase of customers at mainstream retail outlets, but you will alienate those who previously valued your commitment to social and environmental responsibility. Even if the end result for Honest Tea is increased consumption of a healthy, organic, Fair Trade certified beverage, loyal and “conscious” customers will find themselves confronted with the dilemma of supporting a multinational corporation that has a history of violating global social and environmental rights, and that already owns more than a fair share of the beverage market.

Here I think it is important to avoid creating a sense of economic exclusivity. Organics need to be democratized. I love Whole Foods and independent natural food stores – we wouldn’t be in business without them. But if we’re really serious about making an impact on the environment and on the American diet, we have to expand the reach of organics and healthier products to regions and populations where they are not widely available. I would understand if our core consumers were alienated because we changed our product but if they become alienated just because more people can buy our product, then that’s a trade-off I’m willing to make.

Optimists within your company have asserted that Honest Tea is not selling out. Rather, they say, Coca-Cola is “buying in.” Only time will reveal whether this is the case, or if this “buy in” is simply the corporation’s latest foray in corporate green-washing and beverage market monopolization.

I agree with you here, and I encourage you to keep a close eye on what we sell and how we sell it – if we change our fidelity to the “Honest” brand, please let me know and I’ll respect your right to take your business elsewhere. If we stay “Honest”, I believe we deserve your business.

After all, they’re the ones who now have two of five seats on the board of Honest Tea…not the other way around.

But we still maintain governance control – and last week when the President of Coke North America was receiving an award from the National Recycling Coalition, he said, “We want Coca-Cola to be more like Honest Tea than the other way round.”

Even if Honest Tea maintains its commitments, and even if Coca-Cola continues to honor the traditions of Honest Tea after three years, how can one overlook its simultaneous ventures in worker endangerment and exploitation, environmental degradation, water depletion, and high fructose corn syrup…ventures that blatantly contradict Honest Tea’s founding commitments?

I believe that by working with Coke to sell Honest Beverages, we are helping to make change happen.

I have no doubt that you have already asked yourself some of these very difficult questions. Unfortunately, it appears that we have come to different conclusions because Honest Tea has chosen to continue its growth with the monies and connections of a corporation that has done much to harm human health and the environment, at home and abroad. Like you, I want to see an increase in healthy, environmentally sound, and socially just products in the market. But in the end, even after considering the positive health, environmental, and social outcomes of mass-market distribution of your healthy, organic, Fair Trade certified product, I still can not condone your partnership with Coca-Cola as a means to this end. As a consequence, I will no longer consume or purchase Honest Tea products. I will also be informing my family and friends, who I originally introduced to your product, of this decision.

For the past ten years, we have built the Honest brand with passion, effort, and a great deal of sleepless nights. Whether it’s not knowing how we’ll pay bills or personally guaranteeing bank loans far in excess of my net worth, I have built this company with its mission ingrained in its product. If I am still running the business (which I am) and Honest Tea is still selling the same kind of products (which we are), I believe we have earned the opportunity to prove ourselves. We have the chance to make change happen in a powerful way – of course there’s the risk that we won’t succeed, but I’ve lived with risk for ten years and can live with the odds.

I hope that time will prove me wrong. For now, however, I feel personally obligated to part ways with Honest Tea.

Respectfully Yours,
Julie

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From: Julie
Sent: Thursday, February 21, 2008 10:26 AM
To: Seth Goldman
Subject: RE: Honest Tea, Health, Environment, and Social Justice: Where Does Coca-Cola Fit In?
Hi Seth,

I very much appreciate your articulate and personal response, and I have a lot of respect for the opinions and information that you’ve shared. The arguments that you make are thoughtful, compelling, and obviously genuine.

But in the end, I still feel that supporting Honest Tea now forces me to indirectly support Coca-Cola, which is something that I’ve made a conscious decision and effort not to do. That decision may change in time, but that will depend more on Coca-Cola than it does on Honest Tea.

I do not worry that Coca-Cola will adulterate your product, or that Honest Tea will change its practices–you’ve made it clear that Honest Tea is still in charge of Honest Tea. But at this point, I do not share the belief that by working with Honest Tea, Coca-Cola is changing its harmful business practices, particularly abroad. (When working in rural China, I was disturbed to find children drinking very old Coca-Cola out of very old cans that no longer meet U.S. safety standards due to choking hazard). Expanding their product line-up to include something healthy, organic, and socially just does not do anything to change the rest of their products, or to change the practices involved in making those products. Until I see those changes, I choose not to support Coca-Cola or any of their subsidiaries and associates.

I thought a lot about your argument that organic products need to be democratized, and that they should be available in regions of the country where organics are not widely available. I do share this vision, and while I agree that it’s important to avoid being “elitist” in how products are distributed, I also think that it’s my responsibility as a global citizen and consumer to be critical of the means that are used to accomplish that end. What I wonder is whether partnering Coca-Cola was the only means to achieve wider distribution of Honest Tea products?

As I said before, I know you’ve asked yourself these questions, and I have a lot of respect for the values and integrity you’ve demonstrated in building your company, advancing the availability of organic options in the market, and even taking the time to personally respond to disgruntled and demanding consumers. Therefore, I can respect your path, as I’m sure you respect mine. As their new business partner, I sincerely hope that your values and integrity will inspire some tangible changes in Coca-Cola’s practices.

Thank you again for your honest response,
Julie

Thanks Julie. I talked with my wife last night about your note and she said “The world needs more people like her — people who hold their convictions firmly and act on them.” And I think that’s true but we still hate to lose you as a customer!

10 Responses to “An Honest Dialogue with a Disappointed Consumer”
  1. Sally Says:

    Hi Seth
    Must have hit the wrong key on this very sensitive laptop with that last send. Anyway, as a label reader and one who surfs the net for truth, pass it along to Coke that many of your customers do as I do. Don’t forget what happened to Odwalla a few years back = not the same product that it was. As an educator, I’ve always tried to get my students to read labels and do some research regarding the ingredients of those things they put into and onto their bodies. With so many of them guzzling liquid candy (love that label) thanks to Coke’s (and the other liquid candy makers) marketing, our babies have been duped into thinking that if it tastes good, it must be good. The Coke that I grew up with is not the Coke of today. What makes you think that when they get the option and the larger share of the Honest Tea company, they won’t make similar in your product? Have you signed an agreement that prohibits you from making your original product once Coke messes with it? Hoping for the best.
    Sally

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  3. Martin Lindeskog Says:

    I want to purchased your products now when you are involved with a great company as Coca-Cola. Could I get your products in Sweden? I want to visit the Land of Opportunity soon again… Could I get your stuff in New Hampshire (I studied at Southern New Hampshire University, Manchester) and Ohio (I worked in Troy)?

    Best Premises,

    Martin Lindeskog - American in Spirit.
    Gothenburg, Sweden.
    http://Martin.Lindeskog.name

  4. Matt Simpson Says:

    Seth -
    I (of anyone) understand your passion to grow the infrastructure of organic & sustainability (social, eco, envn). If Coca Cola has taken the “we will learn from HT” you have already begun the shift of corporate responsibility Julie speaks of. It is amazing to watch the transformation of these large (once not socially focused) global companies chartering their senior leadership with sustainable performance measures.
    Your model can work (as we know). Also - it is always refreshing your point of contact with consumers. This speaks volumes of your ‘Honest-(tea)’.
    All my best Seth -
    Matt

  5. Sam Says:

    OK, I am hoping for the best with the Coke investment, but I have to say that it disturbs me how quickly new labeling that looks much like everything else on the market was rolled out. Your labels used to be unique with very individual artwork for the “T’s.” Now I see that you have replaced that artwork with generic pictures of lemons or peaches, etc….

    -Sam

  6. Chris Says:

    Seth,

    I hope that Honest Tea is able to maintain 100% of its “Honest” approach to business. I’m glad that you will be able to open up more channels and improve your distribution, as well. In the end, I hope that Honest Tea will have a positive effect on Coke’s practices!

    Chris

  7. Renee Says:

    I found the arguments on both sides of this debate to be both interesting and valid. However, I have to underscore Julie’s question that I don’t believe was directly addressed - that being, is partnering with Coca-Cola the only way to accomplish a wider distribution and increased availablility of Honest Tea’s wonderful products? I think both sides agree, this is the goal, but are there other options that may be more in line with the “honest” vision and less of a seemingly “quick fix”. The gains in distribution are obvious and great, but what about strategic alignment of company vision? I did an intership at Coke awhile back and I know its corporate vision is to “refresh the world,” which some might consider a shared vision with Honest Tea, but at what cost to world health? Honest Tea’s vision, in my opinion, goes far beyond refreshment.

    It’s surprising because Honest Tea has in so many instances in the past not chosen the easy, most profitable route with it’s creative solutions to issues surrounding ingredients and packaging. This decision to partner with Coca-Cola seems on the surface to be an all-too obvious solution to the “problem” of not reaching enough customers and for this reason, it raises questions of whether or not Honest Tea is simply selling out. Personally, I don’t believe that to be the case, but I would love to hear some supporting details of why the partnership with Coke was the best option to acheive the goal of wider distribution - not just the easiest, quickest and certainly, most obvious.

    Seth Says:
    You raise a very legitimate question. When we started the company we assumed that if we created a great product the world would beat a path to our door, but as we discovered, when the product is mostly liquid and heavy and inefficient to ship, having a great product isn’t enough — we needed to find an efficient way (logistically and environmentally) to get our drinks to the shelves. We’ve been pushing hard on the distribution front for the past ten years — it has easily been the biggest barrier to our growth. In the beginning we couldn’t find any distributors willing to carry Honest Tea, so we did it all ourselves — it was painful, costly and not that much fun either (dented U-Hauls, broken glass bottles, and lots of parking tickets!). Then, we got our first opportunity with a cheese distributor, then a corned beef distributor, and then a charcoal distributor… whoever was going to a store, we’d welcome the chance to work with them. Finally, we started working with early-stage beverage distributors (some of whom refused to pay us) and finally top-quality independent distributors. But even in our tenth year, we are only able to reach about 15-20% of the US population through our indepdendent beverage distributors. Yes, if we had another ten years, we could increase this perecentage, perhaps to 60%, but as we think about the best use of our efforts over the next ten years, we believe they are much better spent building the brand and mission than continuing to bang our heads against the distribution walls we’ve encountered. Our partnership with Coke will open up distribution doors that we didn’t even dare to dream about when we were hauling cases around in our rented vans. And in many markets, the Coke distributors will provide more reliable and consistent service than our current system — most of the emails we receive are from customers who are frustrated that they can’t find our product.

  8. Heather M. Says:

    It’s very refreshing to see how you have publicly addressed the concerns of your consumers. I have similar beliefs as Julie but unlike her I think it’s important to continue to support companies like Honest Tea as you “branch out”, even if it means supporting companies such as Coca Cola. I am a firm believer that it’s easier to make big changes from within than trying to fight “corporate America” from the outside. Congratulations and I sincerely hope that you achieve success in your endeavors. I, for one, will continue to buy honest kids for my children and promote Honest Teas to my family and friends as a company to support. Of course, we will be watching closely that you stick to your “honest” ways:)

    Take care, Heather

  9. eric m. Says:

    hey there, found this linked from mark hurst’s newsletter… terrific exchange between you and julie. thanks not only for taking the time to address her concerns but (obviously) for publishing it here for us to see. best, Eric

  10. Tracy Needham Says:

    Hey Seth,

    We never met but are fellow Calvert alums! I’ve been enjoying your products and admiring your company for years. I’m sorry to see you lose your independence but as I said on my blog, I think it’s a good move and that most of Honest Tea’s fans will be able to see the bigger picture. (http://compellingmarketingblog.com/2008/02/28/sustainabili-tea/)

    Tracy