Recently, I was reading an article in the Inc. Magazine about Honest Tea. In the beginning of February, company sold 40% to the Coca-Cola Corporation, with a clause that allows Coca-Cola to buy out the rest of the company in the next three years. This generated much heated debates about the Future of Honest Tea and weather it is staying true to its ideals. Some people were very upset by this news and stated that they will not remain Honest Tea’s customers. Seth Goldman, founder of Honest Tea feels very positive about this deal and in his blog states the reasons why this deal with Coca-Cola is good for the company and for the customers.

                You do not have to read whole Goldman’s blog to understand the bases behind both arguments. Coca-Cola is often perceived as an evil empire, and its priorities are to expand the business and make revenues for the shareholders. Most of their products are not necessarily good for the person, and their practices in other countries have been questioned by the natural food activists. It seems almost natural to think that Honest Tea sold out, that it went after profits and market domination. But is it fair to say this? Just because the company is interested in expanding, and bringing its product to mass-market, does it mean it “sold its soul?”

                This statement of mission is taken from the Honest Beverages site:  “A commitment to social responsibility is central to Honest Tea’s identity and purpose. The company strives for authenticity, integrity and purity, in our products and in the way we do business. In addition to creating a healthy alternative beverage with a lot less sugar than most bottled drinks, Honest Tea seeks to create honest relationships with our employees, suppliers, customers and with the communities in which we do business.” The question is how do you expand while stay true to these values. Social responsibly is not a cheap task for a company. The question is whether customers are willing to pay for it. At the end, if the company stays in business, it is because customers are willing to consume the product. What if the product’s cost becomes much higher than an alternative, will a consumer spend more just to help Honest Tea uphold its values. Additionally, if Honest Tea did not agree to form a deal with Coca-Cola it would not be able to reach the market effectively. The company does not have a very good distribution system, and to create one will require a lot of resources, and at the end consumer will have to pay for it. The company can easily go bankrupt doing so. What good is a powerful mission statement if the company went bankrupt upholding it?

                Naturally, another alternative is to only grow organically:  grow only when you have the resources to do so. Business wise this alternative may also become lethal. The competition does not stay still. Conducting my own informal research, every week I visit near-by Whole Foods store; before it used to be Natural Foods store. Over the past year I have noticed that the selection of organic teas has grown quite a bit. It means that the competition is becoming stiff and a good, powerful mission statement is not enough. At the end, it comes down to business effectiveness and offering the best deal to the consumer. This means that if one of those brands gets access to a well developed distribution model, as well as other resources that a brand like Coca-Cola offers, it will get an upper hand in fighting competition.

                It is hard to see the work that needs to be done in order for a bottle of tea to appear on the shelf in a store at a reasonable price. But this whole process is what needs to be considered before judging what Honest Tea did. At the end of the day, I am willing to bet, if the price of the bottle of their tea will be 20 cents higher than of a similar organic tea produced by another responsible company, they will lose the market. The majority of the consumers will not care that this increase in price happened because Honest Tea paid more to the farmers in China that their competition.

                So how does all of this come together?  I am in no liberty to judge Seth Goldman’s decision to sell 40% of his company to Coca-Cola. But perhaps, in order to deliver this great tea (I did try it on more than one occasion) to the wider audience at a reasonable cost it was a no-brainer. Time will show whether Honest Tea will get “corrupt” and will go after profits or will use Coca-Cola’s power to deliver healthy, tasty teas to consumers, while staying true to their believes.