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Issue Date: Vol. 51, No. 3, March 2011, Posted On: 3/8/2011

Coca-Cola Acquires Honest Tea

Emily Jed
The Coca-Cola Co., Coke, Coca-Cola, Venturing and Emerging Brands, Honest Tea, soft drink, organic beverage, vending business, vending machine business, Seth Goldman

ATLANTA -- Coca-Cola Co. has acquired Honest Tea, a leading maker of organic bottled tea. The move completes a transaction that began three years ago when Coca-Cola, through its Venturing and Emerging Brands (VEB) unit, purchased a minority stake in the company. Financial terms of the transaction were not disclosed.

Honest Tea, which has sustained an annual compound growth rate of more than 60% since it was founded in 1998, will continue to be based out of Bethesda, MD. It will operate as a stand-alone business under current chief executive Seth Goldman, his management team and current Honest Tea employees. The operating model is structured to allow Honest Tea autonomy to continue to run its day-to-day operations while benefiting from Coca-Cola's scale in manufacturing and distribution. As part of the VEB team, Honest Tea will also begin to sell current brands to the natural channel.

Under an arrangement with Coca-Cola Co., Goldman has reportedly chosen to reinvest most of his proceeds from the sale back into Honest Tea. Goldman's cofounder, Barry Nalebuff and Gary Hirshberg, chief executive of Stonyfield Farm, will continue to provide informal guidance to Honest Tea as part of its advisory council.

Since receiving an investment from Coca-Cola, Honest Tea has expanded distribution from approximately 15,000 outlets in 2008 to more than 75,000 today. It has also transitioned to a plastic bottle said to use 22% less material and doubled its number of product offerings. Additionally, Honest Tea has committed to transitioning its entire tea line of teas to be Fair Trade Certified by the end of March.

Coca-Cola has made some major accommodations to support the addition of Honest Tea, including obtaining organic certification at three of its facilities and establishing a state-of-the-art tea brewing and filtration system at one of its bottling plants.

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