A new beverage labeling initiative that is starting this fall provides an interesting example of how businesses can change without government mandates or laws. Launched by the American Beverage Association (ABA), Clear on Calories provides a standard disclosure system for the calorie content on the front label of any single-serve beverage item. Participation is not federally enforced but all the big beverage companies, including Coke, Pepsi, Dr Pepper-Snapple Group, and Nestle Waters of North America have signed on, as has Honest Tea.

In 1998 when we were designing the first Honest Tea labels we struggled with how to advertise the low calorie content of our drinks. Of course we mentioned the number of calories per serving on the nutritional panel on the back of the bottle but we wanted to find a way to communicate that our drinks had a lot less sugar than most bottled teas.

Back then, there was a lot of confusion among consumers in terms of what constituted a healthy drink. Some of the fastest-growing brands were selling teas and juices with 120 calories per serving in 20 ounce bottles and marketing it as “healthy refreshment”—that’s 20 teaspoons of sugar in just one bottle!

Our initial product line had just 17 calories per serving, or about two teaspoons per bottle. We didn’t want to label our drinks as “diet” because we thought consumers would associate that term with artificial ingredients, which of course weren’t organic.

We tried other ways to communicate the less-sweet properties of our drinks. Our first phrase was “Freshly Brewed & Barely Sweetened.” That phrase sounded good but people kept reading it as “Barley Sweetened”. In fact, our distributor in Colorado even put that phrase on his truck!

We later settled on “Just a Tad Sweet” for our 30-48 calorie drinks, but even that phrase is a little nebulous for someone new to Honest Tea—just a tad sweet compared to what?? We also heard from consumers who thought we were being dishonest by only disclosing the number of calories per eight ounce serving rather than for the whole bottle. Even though our labels were following FDA standards, a few years ago we voluntarily took the step of disclosing the amount of calories in an entire 16 ounce bottle.

Clear on Calories encourages beverage manufacturers to feature a standard label on the front of every bottle that states how many calories there are in the entire bottle for single serve bottles (20 ounces or less) or per serving for larger bottles. It is helping Honest Tea communicate something we should have done twelve years ago.

The whole initiative is an interesting model for change—if the government had tried to mandate this kind of label on industry, there would have probably been a great deal of protest that the government was over-reaching and imposing a nanny state. Some may argue that the ABA is taking this step to pre-empt government interference, but even if that’s the case, the outcome is that consumers will have an extra tool to help them be more informed, and that’s clearly a good outcome. I also expect the new Clear on Calories label to discourage companies from introducing sweeter drinks—who wants to be promoting a product out there with 300 calories in it?

It’s worth wondering what other industries might be able to emulate this model—there has recently been discussion about grading fuel efficiency for cars. Could there be a label for hourly energy consumed by an appliance? How about antibiotics or hormones used in non-organic milk?

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.

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.

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.

“Plan-o-gram” may sound like the newest board game to hit the toy stores this past holiday season, but it is no game at all in the beverage industry. A plan-o-gram is the organizational chart for a chain store’s beverage shelf. And though I had no idea such a thing existed when we started 12 years ago, I’ve learned how important those official “sets” are for determining which brands and varieties occupy which shelves and coolers for the year.

It may seem counterintuitive that salespeople from iced tea and soda companies are all running around the country scrambling for shelf space in December and January. You’d think we’d be busiest in April and May as the weather heats up, but by then it’s too late. Decisions about what plan-o-grams are going to look like are made months ahead of when the shelves will actually be set.

So our fates are cast over a four- to eight-week span that starts in December when representatives from Honest Tea spread out in as many directions as possible, making calls on all the major national and regional supermarket, drug, mass, and club store chains. We are still a relatively small beverage company and aren’t physically able to get in front of all the beverage buyers around the country. Occasionally, we do get lucky and have a buyer call us unsolicited, seeking information about our brand. In fact, a buyer from one of the largest retailers in the world called into our 800 line last month.

Our presentations focus on beverage trends, facts about organic cultivation, and why we think our beverages belong in their stores. Unlike the first eight years of our business, it hasn’t been hard to convince buyers that consumers are gravitating toward healthier/lower-calorie, more environmentally sustainable options. It’s also our chance to present new varieties (we’re launching a very tasty half tea and half lemonade for 2010). These sales calls are also a great opportunity to solicit input from the buyers about new products or packages we are developing. If a buyer helps steer us in a particular direction with a label design or even the taste profile of a new drink, he or she often feels a greater sense of ownership of the brand and more committed to making it succeed in the store.

As we expand, we’re finding ourselves confronting an issue we’ve avoided until now —- slotting fees, a cash payment to help the store “set up” our product in their system. Though we haven’t traditionally paid slotting fees, we always provide some kind of support, whether it is sampling (our most frequent type of marketing), customized displays (we have created a new rack made of recycled and sustainably harvested wood), or participation in store promotions and advertisements.

This year’s plan-o-gram season has been especially busy and productive, as we seek to expand our national distribution with Coca-Cola, and as the health and eco-conscious living trends accelerate. Honest Tea was out in front of the organic curve for a long, long time, but now it’s clear our time has come. In just the past five weeks we’ve gained approvals for Honest Tea and Honest Ade to expand into more than 25,000 new outlets around the country in 2010.

So though we’ve been spending a lot of time up in the air, and endured a few unscheduled sojourns at various airports, the welcome result is that American beverage shelves will be more organic, healthier and Honest as the Spring approaches.

Earlier this month, we opened Maryland’s first green business incubator. It is housed in the offices of Bethesda Green, the local sustainability non-profit which I co-chair with County Council member George Leventhal. I would have said it was a ribbon cutting, but instead of wasting synthetic material, we gathered local leaders around a pair of hedge clippers and cut a green vine of an invasive species that had been draped across the entryway. (Click to see the photo.) Here is an excerpt of my comments from the opening:

We hear a lot of talk about our nation’s environmental challenges, but where will the solutions come from? We hear a lot about the need to create green jobs during these challenging economic times, but where will those opportunities come from? There’s a Chinese proverb that appears underneath our bottle caps that says, “If we don’t change the direction we are headed, we will end up where we are going.”

Well, it doesn’t take Rachel Carson to realize that the companies who built their success in the old extractive, one-way economy are not going to be the innovators in the decades ahead. And the entrepreneurs at Bethesda Green’s incubator are stepping up to the challenge — whether it’s developing a technology to assess the environmental impact of consumer products, Savenia LLC, or a rain barrel company, Aquabarrel, that helps us capture a precious natural resource, these incubator companies will help identify the solutions that improve our community, our nation, and even the world. And if anyone doubts that these start-up companies can play an important role in our economy, just ask the 100 employees of Honest Tea, many of whom live and work in Montgomery County.

I know that for me personally, this new center helps address several challenges I encountered back in 1998 when I started Honest Tea. Of course, there were the usual challenges of not having enough money, not knowing anything about the beverage business, let alone trying to sell barely sweetened tea at a time when everyone else was drinking liquid candy. When you start a business out of your house, it can be difficult to make people believe it is a real business — like the time I interviewed a Maryland MBA student for an internship in the guest bedroom of my house. On top of that, my third son Isaac, who is 12 now, had just been born, so it didn’t seem too professional to have a 10 month old as my coworker.

I also had trouble getting vendors to work with us. I tried to convince our bottle supplier that Honest Tea was a real business, but the only address I could supply was a post office box, and that doesn’t build confidence, because when you’re trying to collect a payment, the folks who work at the post office aren’t going to be much help. So that’s where an incubator can help — a real office, without babies, bedrooms, and with a real mailing address, not to mention wireless, copying machines, and a conference room. But even more important, the chance to network and interact with a community of entrepreneurs and experts who can share insights and inspiration

What’s especially nice about this moment for me is that it helps bring closure to a conversation I had with a fancy-pants investor who flew in from Boston to tell me how to run Honest Tea back in 1998. In addition to giving me lots of bad ideas about how we should be creating an energy drink, he said you’re a natural foods company, you shouldn’t be based in Bethesda, you should set up a P.O. Box in Vermont or New Hampshire.

Well, aside from the fact that wouldn’t be honest, I said to myself, “Why can’t Bethesda be a place known for its commitment to sustainability?” We have more Ph.D.s than any community in the country. We have natural assets like the Metro and Capital Crescent Trail. We have some of the nation’s most prominent leaders in the world of environmentally responsible business, including Calvert Group and Earthshare. And now we have our own green business incubator — the first in Maryland. So I’ve already alerted my friends at the post office that they may soon be hearing from entrepreneurs around the country who will want to set up a P.O. Box in Bethesda.

We learned an interesting lesson this month about the danger of hiding your light under a bushel. Over the past few years, we had been working hard with bottle suppliers to find ways to decrease the weight of our plastic (Polyethylene terephthalate or PET) bottle. There are obvious environmental benefits for such a package — such a move could eliminate up to 1 million pounds of PET resin on an annual basis. Another advantage of a lighter bottle is that it takes less fuel to ship (before and after filling). And, of course, we’d save money as well because the price of the bottles is directly tied to the amount of resin in the bottle.

It’s been impressive to watch what’s happened in the bottled water industry over the past few years. In 2000, the average 500 milliliter water bottle weighed 24 grams empty. Today, the average water bottle is 12 grams, and manufacturers continue their race to out-lighten each other. Bottled water marketers have a big advantage over bottled tea suppliers because they are able to fill their bottles cold. To pasteurize tea, we have to fill our bottles at 190 degrees. When hot liquid goes into a plastic bottle, the bottle expands – that’s why when you peel off the label of a Gatorade bottle you see expansion panels underneath. We designed our bottle to expand on the bottom when the hot tea is poured in – once it cools, the bottom pops up and the bottle maintains its round shape. You may see some bottled teas in lighter-weight bottles, but they are using preservatives (in lieu of pasteurization) to keep their drink safe. Honest Tea is committed to organics, so those super-thin bottles are not an option for us.

We worked over several years with our supplier, Graham Packaging, to design a lighter weight package that looks similar to our previous bottle (click here to see our old and new bottle — the original was 38 grams and the new one is 30 grams). We managed to design a bottle that is 22 percent lighter, though we had to add a deeper cavity underneath the bottle because the thinner bottle needed more support in order to maintain its structure. As the new bottle starts hitting store shelves, we have been hearing from consumers who think that the new bottle is our way of trying to sell them more air. Who hasn’t been disappointed to open up a bag of chips and find out there seems to be more air than chips? Here is a typical e-mail that we received from a customer named John:

I just bought a bottle of Orange Mango, and was amazed that the bottle is so deceptively designed.

The bottom of the bottle has been designed with a hollow to displace fluid,
making it appear that the customer is buying more than is the case.

Yes its 16.9 ounces, but I’m sure your marketing dept has determined that
purchases are based on visual impressions.

I have bought your product regularly, but will stop

With a name like Honest Tea, I would expect more than these types of cheap tricks!

My partner Barry responded with this note:

Dear John,

Many thanks for writing, for your honest critique, and your longstanding support. We recently switched to a thinner bottle, one which is 22 percent lighter. This saves us money and saves the world resources. The only problem is that the thinner bottle had the risk of getting dented. In fact, this was a real problem that forced us to redesign the bottle. To help keep its shape, the inside must be under pressure. When the bottle is filled with hot tea, the liquid expands and the plug on the bottom pops out. (If you squeeze real hard, you can make this happen.) Then as the tea cools, the plug pops back in and creates the pressure on the inside that prevents the bottles from being damaged. The thinner plastic means we needed more pressure and hence the bigger plug. There really is 16.9 ounces inside and we aren’t trying to pull a fast one. But I can see how you could get confused or could think that we are trying to be deceptive. We need to do a better job explaining why the bottle has this design. In the next label run we plan to say something to explain this to our customers. I hope that makes you feel that you can still trust us and will stick with us.

Honestly yours,
Barry

Once we explained the physics of the bottle, John’s response was quite different:

Thanks for that explanation. I feel I may have jumped to conclusions, but I’m glad I wrote and didn’t just abandon you guys!

The physics behind the design solution are actually very interesting.

Thank you for taking the time to answer my concerns. I’m glad to hear what it was all about.

I will continue to support Honest Tea!

Of course, the challenge for us is that most consumers won’t take the time to write us, and we will end up losing customers because we took a major step forward for sustainability. So the lesson here is that while environmental efficiencies can help a business, make sure to communicate what you are doing and why it’s important. Sometimes a positive step for the environment could be a step backward for business if you don’t explain it to consumers.

Occasionally I worry that all our talk about organics, healthier products, Fair Trade, and sustainable packaging might come off as bragging, but I am starting to be more comfortable heeding Golda Meir’s advice. She once said, “Don’t be so humble, you are not that great.”

Earlier this week, I posted some of the most common questions I get from entrepreneurs and aspiring entrepreneurs — a list that was inspired by a lengthy correspondence I had recently with a group of California MBA students. Here is the second half of that list, focused on the dynamics of social entrepreneurship.

Why social entrepreneurship?
I have always had a personal interest in social causes, and incorporating that passion into my business came naturally — tea is a beverage that we recognized had a “natural” link to everything we wanted to accomplish — a healthy product with a strong connection to the environment. The other interesting thing about tea is that it is consumed by some of the world’s wealthiest cultures but consumed by its poorest, so there were clear and immediate opportunities for creating community wealth.

How can a company have a social impact?
Honest Tea was created to be an agent of environmental and social change, but what I’ve learned is that different people answer this question different ways. Our consumers will say that they’ve benefitted from a healthier product for themselves and their kids. Workers in the tea gardens we source our tea leaves from will say that they have benefitted from our Fair Trade and organic purchasing, and the eco-systems of our supplier communities (if they could talk) would appreciate the reduction in synthetic chemicals in the environment. But the impact I see everyday is the connection we are making with millions of American consumers who appreciate the product AND the way we operate as a company.

How does Honest Tea do all of this?
Most of the sustainability initiatives we have implemented make great business sense, so within the company, there’s not much controversy about how we operate. For example, our office is designed in a more sustainable way, but it’s also an attractive space that helps make people happy working there. It might be harder to argue that giving away bikes to employees is a great business decision, but I decided this was an important reward for their hard work, and a nice way to communicate our values to our employees. Outside the office, Honest Tea focuses on sustainability through green energy, recycling programs for Honest Kids, Plant a Tree and Bethesda Green. But the greatest impact may be through our product itself — we are making important strides with respect to reducing the environmental footprint of our packaging. Our bottles are the area where there is the greatest room for improvement.

Be “Honest” about Coke.
The key element of the Coke relationship is that while we haven’t changed any aspect of our product, we’ve dramatically changed the universe of people who will be exposed to our product. For example, I just found out that our drinks will be served at Fenway Park — a place near and dear to my heart. We would never get that kind of exposure without Coke’s help. Coke is supporting the rapid expansion of the brand, and we are running the business.

But why — was it profits or competition?
We weren’t as worried about profitability as we were about sales growth. The only way Honest Tea can have a widely significant environmental and social impact is buying selling lots of product, and Coke can help us do that. While we continued to grow in keeping with our annual compound growth rate of 66 percent, I had concerns about our ability to maintain that pace a few years from now. We’ve never let the competition drive our own strategy — our mission drives our strategy.

Big can be beautiful, too?
We’ve seen our friends at Stonyfield Farm Yogurt grow to more than $300 million in sales, and they certainly seem to have maintained their commitment to mission. I think one of the biggest challenges accompanying growth is maintaining the culture of the brand. One of the ways we’ve helped to insure continuity is by hiring and promoting from within. We have a robust intern program, and count nine former interns among our 95 employees, nearly 10 percent.

How does a social entrepreneur get started?
The advice I’d give to an aspiring social entrepreneur is no different than that I’d give anyone starting out — it’s important to get some experience selling something. It’s not for everyone, and if you don’t feel comfortable being a salesperson, if you can’t handle rejection or don’t like the feel of it, find something else to do, because even if you don’t end up selling your product, you need to sell investors, employees, vendors and the public on your enterprise.

Is there an advantage to being a social entrepreneur?
Social entrepreneurs have the edge over traditional entrepreneurs because they bring a passion to their work that is fueled by a belief in what they are doing. I appreciate the benefits of money, but if building Honest Tea were only about making a payday, I would have switched to something easier long ago. The only risk with social entrepreneurs is that they occasionally let their passion cloud their judgment.

Every week, I talk with lots of entrepreneurs, aspiring entrepreneurs, or students of entrepreneurship. I recently had a lengthy correspondence with a group of California MBA students, which inspired me to pull together some of the more common questions and answers in this two part series. This first set of questions is focused on getting started in the social entrepreneurship world.

How did you start?
Step one to starting Honest Tea was a series of e-mails with my cofounder, Barry Nalebuff, about six months before we launched. He was a former professor of mine at the Yale School of Management, and we’d had some lively exchanges about the beverage industry when I was his student. Through e-mails and telephone conversations, we evolved the concept for Honest Tea. I also began talking to everyone I knew who had any connection to natural foods, food service, or the beverage industry. I gave them samples of the drinks we were brewing in my kitchen, and brainstormed ideas with anyone who would listen.

How did you raise capital?
We first raised $500,000 to get off the ground. That wasn’t too difficult because we raised it from people who couldn’t say no — ourselves, our parents, relatives, and roommates. The hardest money to raise was the $1.2 million in 1999, when we took in money from people we didn’t know.

How hard was it to sell the product?
We were very lucky because the buyer at Fresh Fields (later Whole Foods) got it. We clearly showed what we were selling was different from anything else he was selling, so he was willing to give us a try.

What can go wrong?
For us, production was a huge challenge. I hired a consultant who was a friend of a friend. He helped us figure out how and where to make our product. Once the product was made, the biggest challenge was distribution. At first, we did our own distribution, which was brutal, but helped me understand how it worked. Then we started to work with all kinds of distributors: cheese distributors, corned beef distributors, even charcoal distributors, until at last we developed relationships with natural food and beverage distributors. We struggled and learned through trial and error.

What makes a successful business model?
It helped Honest Tea that we had a strongly differentiated product and a very clear brand concept. So, we had a good start; after that it is all hard work.

Any do-overs?
We probably waited too long to hire professional operations staff. We could have saved ourselves lots of money and sleepless nights if we had gotten some knowledgeable folks in earlier. But, even the mistakes were part of the journey and we learned from them.

The dream?
We seek to have Honest Beverages be available wherever beverages are sold. We want to be the leading organic beverage brand.

Despite all the grim unemployment data, we’ve been on a hiring spree for the past two years — from 23 full-time employees in 2007, to 52 last year, and 95 today.

As our headcount has quadrupled, one strategy we have increasingly relied on is promoting from within — starting with the interns we hire in the summer. I wish I could say this was an intentional HR strategy, but we aren’t that smart. It wasn’t until I noticed that approximately 10 percent of our employees are former interns that I came to fully appreciate the benefits of this approach.

First, we hire people who are proven to work with our company. By the time our interns join us as employees, they are already pretty far along the Honest Tea learning curve. And perhaps most important, they have already demonstrated that they know how to work with our team and our culture, which is critical to our brand.

There’s no better proof this strategy works than looking at the roles former interns play within our company today. A few of our success stories include:

- Blaine, West Division Sales Manager — In charge of managing all sales activity with West Coast distributors, including our new Coca-Cola distributors

- Mike, Product Development Manager — Takes the lead on managing the formulation and sourcing on all our products

- Patrick, National Field Marketing Manager — Oversees a team of 14 marketing managers plus their “road warriors” (summer interns)

- Kassidy, Business Development Manager — Also our National Foodservice Manager

Of course, these folks didn’t rise directly from intern to manager. They proved themselves whenever they were tested, and even though we always interviewed outside candidates for the positions, our proven internal candidates turned out to have an Honest edge.

Another benefit of this strategy is that everyone who works in our organization, including our interns, understands there are opportunities for advancement, and so they are highly motivated to perform. We’re still hiring our interns for 2009, so if you know someone ready to move some cases, check out our website.