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We spoke to co-founder and CEO Seth Goldman about that decision, and how the company has managed to keep its values and culture intact as part of a much larger organization.
The company's mission is this:
"Honest Tea seeks to create and promote great-tasting, truly healthy, organic beverages. We strive to grow our business with the same honesty and integrity we use to craft our products, with sustainability and great taste for all."
"I started with (the mission) so I am certainly no less committed, Goldman told us. "I continue to stay very close to the consumers who are consuming our product. I'd say the two main beneficiaries of what we do are the people who drink the tea and the people who make the tea. Staying close to both of those groups has helped me continue to be excited and inspired and passionate about what we're doing."
The mission hasn't changed. The scale certainly has. The growth of the brand really has been incredible. According to Goldman, when Coke first invested in 2008, they were in around 15,000 stores. Now they're in more than 100,000. In 2007, the company bought 800,000 pounds of organic ingredients. Last year, they bought over five million.
It wasn't a difficult choice for Goldman to join with Coca Cola. The company, a decade old, had reached a point where it needed more resources to reach the next level of growth. "We needed access to distribution — that was critical. We needed additional financial resources too," Goldman said. "When we decided to take in investment from people who were not our immediate family, or you know, people who wouldn't mind if we lost their money ... we put ourselves on a course where at some point we were obligated to get that money back to those investors, ideally with a return on it."
From the start, Coke knew that maintaining its core values and mission was a priority for the company. In fact, Goldman believes that those very beliefs helped draw the investment in the first place.
"They invested in us because they saw value in our approach and in the trust we had engendered with our consumers," Goldman said.
And to make sure that the companies would be a good fit, the deal was structured so that Coke started out as a minority investor, with an option to buy the brand in its entirety after three years.
"Sometimes you see large companies invest in small companies and they don't grow well together because each has a different way of thinking about things," Goldman said.
Over the three years until Coca Cola bought the rest of the company, Goldman and Honest Tea proved that that wasn't the case this time. And that mutual trust meant that when
"When they bought the company in 2011 they certainly had the option to say: 'Okay now we own it and we're going to cut costs and were going to shut down the office in Bethesda and we'll run Honest Tea out of Atlanta.' That was absolutely an option that they had," Goldman said. "But because we'd been working together for three years, and working, I'd say, well together, we were each able to appreciate that there was still a lot more growth ahead for the brand and for the organization so we mutually agreed, let's keep doing what we're doing with pretty much the same structure."
The lesson to take away is that businesses need to find the right partner, and make sure they understand the business and its values. Secondly, rather than jumping wholesale into a partnership, it's essential to test it out first. Sometimes ideas that are great on paper don't work in reality.
That's why Honest Tea hasn't changed as much as people might think. "Our enterprise is much larger but the day-to-day business really hasn't changed that much, I don't think about the business that differently than I did before Coke invested." Goldman said.
"It is a different business in terms of its scale but in terms of its mission, it's still very much the same business," he added.
Many things change when you become much larger very rapidly. The change from being a small, entrepreneurial company to being part of a global giant takes a lot of adjustment. It "takes different behavior, and a different leadership style," Goldman says.
Small companies have it tough, Goldman says. "When you are a small upstart company you have to scrape for everything and you have to shout for everything. I don't mean that in a bad way but nobody is going to give you what you want just because you want it badly. We got to be pretty good at nagging and the squeaky wheel does get the grease."
The company had to fight for time on bottling lines. "I don't want to use the word 'harass' the co-packer but, you know,we would marshal all of our persuasive powers," he said.
In the beginning, distributors just weren't interested in a more expensive, less sweet product. But they eventually got into stores because they were vocal and incredibly persistent.
Coca-Cola opened up a whole new world of opportunity, but Goldman and his team had to adapt to the corporate world.
"When we started to work with Coca-Cola, those qualities or those behaviors were not necessarily the most effective way to make things happen. We were actually getting the audiences with the right people so that then we didn't have to yell to get to them. But the way to persuade them wasn't just to 'harass' it was, you know, data."
That's a big change from having to scrape for every distributor, or for time in a factory.
We had to have data and compelling factual information. You can't just make a 'from-the-gut decision' when you're a much larger corporation," Goldman said. "It does take data and it does take a little more rigor and our team evolved to understand that; to speak that language more effectively.We didn't have to change the brand, we just had to change the way that we communicated with stakeholders."
Goldman and his team have learned to speak a different language, but they speak the same one to their customers. The mission and the brand are the same. They just have a much bigger stage to work on.
And the tea itself? Billion-dollar plants help. "I was going to say it's as good as it was before," Goldman revealed, "but it's actually better than it was because the clarity is better, the taste and consistency is better and it's, of course, still brewed with real tea leaves."