Oct 2009
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Honest Tea taps Coke executive in expansion Bethesda firm's new VP to focus on nationwide distribution
Bethesda-based Honest Tea tightened its embrace with Coca-Cola on Tuesday when it hired an executive from that corporation to expand its distribution across the country.

By: Mike Musgrove
Washington Post Staff Writer
Section A21

Honest Tea, which describes itself as on a mission to sell good-tasting and healthy drinks, sold a 40 percent interest to Coke in early 2008 for $43 million. Seth Goldman, founder, president and chief executive, has said that he took the Coca-Cola investment as a means to get onto more retail shelves across the country. On Tuesday, he described his reasons for the recent hire in much the same terms.

"It's time to put the foot on the gas," Goldman said. "We're starting to expand and it's going well, but it's clear that we need to add some expertise and experience from someone who knows all the players and all the contacts."

Starting in January, that market expansion will be the responsibility of Chuck Muth, who will be vice president of bottler relations. Muth, a 30-year veteran of the bottling industry, has most recently worked as senior vice president of sales and marketing for the Philadelphia Coca-Cola Bottling Co.

"This is about expanding the footprint of Honest Tea nationally," said Muth, who pointed to states such as Florida and Georgia as places where he'd like to see Honest Tea products on retail shelves. "We want to reach consumers where an organic, high-end tea makes sense."

Honest Tea has built its brand on a line of organic drinks, with names such as Heavenly Honey Green tea and Pomegranate Blue fruit juice. Goldman, who started the company 11 years ago with one of his former business school professors, said Honest Tea is on track to make $50 million in sales this year, up from $38 million the year before.

Under the terms of the deal with Coke, the company has an option to buy the bottled-tea maker in February 2011.

"Honest is one of the real, recent success stories in American beverages, though they are still very small," said John Sicher, editor and publisher of Beverage Digest, a publication that covers the non-alcoholic beverage industry.

Last year, Honest Tea, which is distributed mostly in the Northeast and on the West Coast, sold 4.5 million cases. By comparison, Sicher said, Coke sold about 5.3 billion cases, while Pepsi sold 4.6 billion.

If Coca-Cola ends up owning Honest Tea, it's tough to forecast the future of the Honest Tea brand. In years past, Sicher said, giant beverage companies like Coca-Cola bought up smaller brands without knowing how to manage them properly. But in recent years, he said, Coca-Cola has shown that it better understands how to cultivate products that fit into smaller niches.

It has even started to look for its own smaller niches, with a recent announcement that it plans to introduce small, 7.5 ounce cans of Coke -- with 90 calories -- for customers who want fewer calories.

Honest Tea has already started extending distribution. The company recently made a deal with retailer Target to carry Honest Kids, a juice product that the company advertises as having half the sugar and calories as other drinks marketed to children. Honest Tea also recently landed a deal that will get its tea and lemonade products on the shelves of 7-Eleven convenience stores in the Northeast.