How To Behave When A Big Company Sinks Your Partnership

Seth Goldman created an entrepreneur’s dream in the success of his Honest Tea startup beginning in 1998, then built upon that dream by selling his brand for a mint to Coca-Cola in 2011, then further embellished his accomplishment by staying on with the beverage titan to help run Honest Tea—and even give his new bosses advice on how to work with new ventures and emerging brands.

That’s why it was “a real gut punch” a few weeks ago, Goldman told Chief Executive,  when Coca-Cola unceremoniously announced that it was dumping the Honest Tea organic and fair-trade line, whose sales had declined while those of its other tea brands, Gold Peak and Peace Tea, had risen significantly. Coca-Cola said it would retain the better-selling Honest Tea Kids sub-brand and the rights to the Honest marque.

“I saw that they were never investing in the Honest brand the way they were in the other tea brands,” said Goldman, who also started a new better-for-you food venture, Eat the Change, and is chairman of Beyond Meat. “I heard and saw that there were some supply-chain challenges. When I would go into a Whole Foods store that normally had 10 varieties [of Honest Tea], I would see only two. But ultimately, it came down to a choice, and they chose to lean into the other brands and cut Honest Tea.”

Other entrepreneurs just might be inspired by and learn from Goldman’s reaction, his mettle, and the way he’s going about his latest venture.

Rather than simply harp on Coca-Cola’s decision, for example, Goldman decided to do what any scrappy serial entrepreneur would do: He fought back. The first step was to assemble the old team of Honest Tea suppliers and staff people and launch his own new brand—appropriately named with the double entendre Just Ice Tea—to show Coca-Cola executives the error of their ways.

“Just Ice Tea will be on shelves by early October,” Goldman said. “I care a lot about what Honest Tea did and what it stands for and what it meant to all the people who consumed it, and all the work that went into it. There’s disappointment that Coca-Cola is walking away from it, but that doesn’t mean there isn’t consumer demand for our kind of product.”

Based in Bethesda, Maryland, Goldman built Honest Tea into America’s best-selling organic-tea brand. In 2008, he sold 40% of the company to Coca-Cola, which was looking for new growth categories, and the company bought the rest of Honest Tea in 2011. Goldman stayed on to oversee Honest Tea’s continued robust growth with vast new resources at his disposal, holding on to some equity in the brand until 2017 and serving as an effective ambassador for the brand to higher-ups at Coca-Cola, and vice versa. Goldman quit Honest Tea in 2019.

Here are four lessons for other CEOs from the unraveling of Honest Tea from Coca-Cola:

1. Understand the big guys. Just as Honest Tea benefited from the attention, resources and reach of Coca-Cola, lately the brand has experienced the flip side of being controlled by a huge company. Coca-Cola CEO James Quincey has been on a brand-culling rampage since 2020, when he said that Coke would cut its product line in half, reducing it to 200 products by ditching poorly performing brands.

“Toward the end of the pandemic a few months ago, they were doing their [brand and product] review, and I knew about their decision to do fewer, bigger bets and not have as many brands. That decision gets [made] based on sales and margins, and Honest Tea wasn’t looking as good as the others.” Goldman also believed that Coca-Cola was capable of pushing through supply-chain snarls that limited inventories of Honest Tea in some markets if there was a corporate will to do so.

Further, Goldman pointed out that Honest Tea was “the top-selling tea brand in the natural channel. You’re going to walk away from that? It was hard to believe.” In an era when the origins of products and their sustainability narratives have become increasingly important to American consumers, he noted, “It’s the only brand they had that is fair-trade certified and with a less-sweet taste profile, not zero-calorie. But they were willing to walk away. They didn’t have to justify it to me.”

2. Respond to stakeholders. While Honest Tea’s owner no longer appreciated the brand, other stakeholders certainly did, and Goldman found that out immediately upon Coke’s announcement in May. Honest Tea suppliers reached out to him, and consumers rallied.

“I posted something on LinkedIn and got a huge response,” Goldman recalled. “My blog post got more than a million views, thousands of likes and hundreds of comments. I also heard from suppliers who said that they didn’t want this to be looked at like a failed experiment. Several retailers already are committed to” his new brand.

“It’s a great lesson in karma: All the relationships we had with different people over time are coming back, and the way we treated them is paying off. They want to work with us. If we’d treated them unfairly or squeezed them, they might not” be positive about Just Ice Tea, Goldman said.

3. Value your team. Goldman has continued to work with many staff members and outsiders from his Honest Tea startup days, and it is paying off in his pivot to Just Ice Tea. Purpose-based companies like his tend to retain purpose-driven relationships.

“Companies I was friendly with wanted to go after this space and wanted me to be associated with it,” he said. “But I figured if anyone should go after it, it should be” the old Honest Team.

So the first individuals Goldman contacted about Just Ice Tea were Barry Nalebuff, co-founder of Honest Tea, and Spike Mendelsohn, a celebrity chef who’s been helping with Eat the Change, a producer of plant-based snacks. They’re onboard.

4. Leverage your legacy. Goldman believes that if he hadn’t built Honest Tea on the proposition he did, and in the principled way that he did, the opportunity for Just Ice Tea wouldn’t be here today. The brand’s past accomplishments also will pay off for his new brand in areas such as retailer interest and supplier pricing.

“Was it a failure?” he said of Honest Tea. “It wasn’t. The goal was always to democratize organic, and Honest Kids is still doing that. But also, as I think about launching the new brand, if Honest Tea hadn’t done what we did—making organic bottled tea available to millions around the country—we wouldn’t be able to do what we’re doing now.

“There’s no downside to working on something you believe in. I’ve always believed that but never had the chance to find out if it was truly accurate. Now I get to enjoy the upside.”