Blooming Founders Meets Seth Goldman, Co-Founder of Honest Tea

Blooming Founders meets Seth Goldman

Lunch with Seth Goldman – Co-Founder of Honest Tea

This summer, HONEST,  a new organic bottled herbal tea brand launches in the UK. We had the rare opportunity to meet its co-founder, Seth Goldman, and learn for the kitchen table entrepreneur first-hand how he build the brand so successfully that it got acquired by Coca Cola.

How it all started…

The brand was founded in 1998 by Seth alongside Barry Nalebuff, his professor at the Yale School of Management, who shared his passion for finding an low calorie, flavourful drink that would quench a thirst, but without the sugar load.

Barry provided most of the $500,000 in seed funding and came up with the name of “HONEST tea”, which plays with the word “honesty”. Seth built an office in the guest bedroom of his home, which he shared with his wife and three small children at the time.

They began brewing batches of tea in Seth’s kitchen, and just five weeks later a buyer from Fresh Fields (now Whole Foods Market) ordered 15,000 bottles. That was validation for Seth and Barry that there is a big enough business opportunity.

From the beginning, there were two key values behind the company: to bring beverages to market that were organic and ‘just a tad sweet’, and to conduct the business using fair trade principles.

How the food industry is changing

Seth told us that there is currently an appeal for foods that are simpler, authentic, local and natural. At the same time, people want to see science used to make food healthier, while keeping it tasty.

He explained how people are on their own personal path to health and prefer to buy organic produce. However, taste is still the driving factor for purchase. Seth said: “You can get people to try your product because it’s healthy, but you have to keep them with the taste.”

By 2007, HONEST was the best-selling tea in the US and was stocked in 15,000 stores, but Seth realised that they were selling healthy teas to people who were already living a healthy lifestyle. He wanted to democratise the concept of HONEST and bring it to the general population, who tends to consume too much sugar.

In 2008, the Coca-Cola Company purchased a 40% stake of the company at $43 million and bought the remaining stakes in 2011. Today, HONEST is now in 100,000 stores and all teas and sugar are now of fair trade certification.

The affiliation HONEST has with Coca Cola is a great example of how entrepreneurs can impact large companies. The innovation entrepreneurs bring can be very disruptive in the food industry, as entrepreneurs are able to stay much closer to the consumer than a big corporation and know their needs much better. This gives them a competitive advantage, because ultimately, all innovation in food and beverage is driven by the consumer.

Seth Goldmans’s top tips for budding entrepreneurs

  • “Don’t let the perfect be the enemy of the good.”
    The first batches of tea had residues of tea leaves on the bottom and were far from perfect, but they were good enough for Seth to take them to a store and pitch them.
  • “Taste comes before mission. No one can make you eat or drink something you don’t want.”
    It is all about making something consumers want. Having a social driven mission is good, but at the end of the day, nobody will become a repeat customer, if they don’t like your product.
  • “Focus on your core business and outsource the rest.”
    One of Seth’s biggest regrets in growing Honest Tea was the decision to purchase a bottling plant. Having ownership over it meant that he had to deal with all the complications of running a plant as well as continue to build the Honest Tea brand. When he realised that things were not going to work out, he sold the plant and worked with a bottling company, whose core business is to bottle beverages.
  • “The best thing you can do is follow your passions and find your own venting solutions to help you get through the dark days”
    Having three children provided a good outlet for Seth to distract himself the business when the going got tough. For others, it might be exercise or talking with friends. Whatever it is, entrepreneurship is a bumpy road and having some form of distraction is crucial to keep the motivation.

 

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