Honest Tea Founder on the Future of Coke

"Let’s try to evolve" -- "TeaEO" Seth Goldman explains his view of Honest Tea’s role within a major corporation such as Coca-Cola.

Mar 20, 2014 at 9:00AM

Seth Goldman and Barry Nalebuff founded Honest Tea in 1998. In the recently released Mission in a Bottle, the co-founders tell -- in comic book form -- the story of building a successful mission-driven business. Goldman, now president and "TeaEO" of Honest Tea, joins Motley Fool CEO Tom Gardner to discuss sustainability, entrepreneurship, and what it means for a socially responsible, health-oriented business to be bought by Coca-Cola (NYSE:KO) .

Some people have told Goldman that he shouldn't work with major corporations like Coca-Cola and Wal-Mart. In this video segment he argues that huge corporations aren't going anywhere -- and won't be the ones to initiate change -- but mission-driven businesses like Honest Tea can help show the way.

A full transcript follows the video.

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Seth Goldman: The question was asked, where is Coca-Cola 20 years from now?

Tom Gardner: How is "Honest Coke" doing, 20 years from now?

Goldman: I think that Coca-Cola is still an icon. It is, as a brand, the world's most powerful brand. I think it's still an icon. It's probably a little more of an indulgence beverage, as opposed to an everyday occasion. I do think the usage of it will change. I'm sure the company will still be there.

I think another thing that's important to recognize -- because we had some people say, "You should never work with big companies. You should never work with Wal-Mart."

I said, "These companies aren't going away." They are the ones who establish the infrastructure. Coca-Cola has more trucks than UPS and FedEx combined. Someone asked the other day -- just to give you a sense of scale -- how many servings of Coca-Cola products are sold every day, if you were to make a guess? It's 1.7 billion a day. That's a lot. We sold, just by scale, about 200 million servings of Honest Tea last year.

Gardner: That's still awesome, though.

Goldman: So, we've got a long way to go, but these companies are there. You can curse the darkness or light a candle. Let's try to evolve.

The other thing I believe is that these big companies -- I talk about the change that needs to happen in our society -- big companies are not going to initiate the change. But entrepreneurs can initiate it and, if they succeed, big companies will invest in them and then buy into a different future.

Gardner: What's the one reason you think that Honest Tea succeeded in the category where big companies dominate so much? What are the factors?

Goldman: We were meaningfully different. We were not a "me, too" brand. There's always the pressure to make it sweeter, make it cheaper -- but because we stuck to that, we stood for something that was different. It wasn't something they could copy. It wasn't just the ingredients; it was the connection to the consumer. It was the reputation in the marketplace. It was the authenticity we had built and stuck to.

Tom Gardner has no position in any stocks mentioned. The Motley Fool recommends Coca-Cola, FedEx, and United Parcel Service. The Motley Fool owns shares of Coca-Cola and has the following options: long January 2016 $37 calls on Coca-Cola and short January 2016 $37 puts on Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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