Q&A Seth Goldman, Honest Tea (Executive Perspective: Seth Goldman)

INSIDER takes you behind closed doors to meet with a top executive. Get to know the industry’s power players on a personal level, and discover their long-term strategies and vision for the industry’s future. This month we introduce you to Seth Goldman, co-founder, president and "TeaEO" of Honest Tea. Along with business partner Barry Nalebuff, Goldman started Honest Tea a decade ago, with five varieties of fresh-brewed, barely sweetened tea. Today, Honest sells dozens of teas and related beverages, to the tune of $23 million in revenues, and recently scored a 40-percent investment from Coca-Cola.

INSIDER: How did you enter the natural products industry?
Seth Goldman: I was in charge of the marketing and sales for Calvert Group’s socially responsible mutual funds and found I was most excited about Calvert’s private equity investments in early stage, mission-driven companies. So I decided it was time for me to give it a try.

INSIDER: Did you have a mentor?
Seth Goldman: Tons of them. At Calvert, it was co-founder Wayne Silby. With Honest Tea, the two most active mentors have been board members, Gary Hirshberg of Stonyfield Farm and Jeff Swartz of Timberland. And, of course, my co-founder Barry Nalebuff.

INSIDER: Have you served as a mentor?
Seth Goldman: Quite a bit. I advise the co-founders of Happy Baby and Peeled Snacks, among others.

INSIDER: What would you consider to be your greatest achievement?
Seth Goldman: My family.

INSIDER: What are some of the most valuable lessons you’ve learned over the years?
Seth Goldman: There is a big difference between the business plan and the business. Distribution is almost everything in the beverage business. Excel spreadsheets don’t know how to model growth, because they don’t have to actually go out and sell!

INSIDER: What advice would you pass on to newcomers to the natural products industry?
Seth Goldman: All the fancy investors will say you need lots of money, but you really need to work harder and be more creative. Make sure you know what business you’re in. For the first seven years, we thought we were a tea company; but, gradually we came to realize that the word “Honest” was the most important part of our name. Soon we were selling “Honest Ade” and “Honest Kids”, which are all organic, lower-calorie and authentic. Finally, make sure there’s balance in your life. We could all work 24 hours a day, but you need balance to reinvigorate your energy and your perspective.

INSIDER: What is your company’s point of differentiation compared to yourcompetitors?
Seth Goldman: Organic, lower-calorie, Fair Trade and authenticity.

INSIDER: What are the three top challenges facing your company’s growth, and how are you addressing them?
Seth Goldman: 1) Communicating to our consumers that we are still the authentic enterprise we have been since we started; 2) Maintaining our supply chain as we accelerate our growth; and 3) Continuing to find ways to make authentic connections with new consumers as our distribution expands beyond the natural foods channel.

INSIDER: What type of operations do you have on a global scale? What percentage of your business is in the United States? What are the major export markets or import countries you work with?
Seth Goldman: We purchase tea from all around the world, but we only sell it domestically. Of course tea is the world’s second most popular drink (behind water), so there’s great international opportunity for our brand, but we need to cover this country first.

INSIDER:What steps have you taken to ensure the quality of your imported ingredients?
Seth Goldman: Organic, kosher and Fair Trade certification, as well as more frequent visits to the tea gardens.

INSIDER: What has been the response, from retailers and customers, about Coke buying a 40-percent share in Honest Tea? Has the reaction been different within the natural products community vs. the mainstream community?
Seth Goldman: I think in general it’s been wait-and-see. No one to my knowledge has thrown us out—except for a café in Ohio, but they are watching to see whether we change our product or our behavior. And that’s all we could ask for; it’s up to us to prove that we’re still who we say we are, and I welcome that challenge because we’re actually going to be taking our mission up a few notches in the years to come, in terms of sustainable packaging and ingredients.

INSIDER: How do you detail the benefits behind such an investment from a mainstream beverage company?
Seth Goldman: The opportunity to partner with the world’s largest beverage company gives us the chance to expand our distribution reach to consumers who have never tried organics before. It also gives us the chance to leverage our purchasing so that we can increase the recycled content in our packaging.

INSIDER: How did you come to choose the types and levels of energy-imbuing ingredients included in its energy teas? Did you perform or consult research to determine ideal energy-blend ingredient levels regarding efficacy?
Seth Goldman: Our green energy teas have those names primarily because we are paying offsets to a wind farm in Iowa, based on the carbon footprint of the drinks from tea garden to warehouse floor. Of course, they are both green teas, one with yerba mate, which are invigorating ingredients.

INSIDER: How is the economy affecting business, especially the price of goods worldwide and the value of the dollar vs. currencies in the countries where you source tea ingredients?Seth Goldman: We have seen the costs of our packaging increase as the price of fuel rises, but this is one area where we look forward to benefiting from the relationship with Coca-Cola. Otherwise, the prices of tea have been quite manageable as more gardens convert to organic.

INSIDER: Is tea, especially Honest Tea, mostly an adult beverage, or are there opportunities to reach children with such healthy beverages?
Seth Goldman: Tea is still mostly an adult beverage in the United States. That’s one of the reasons we created Honest Kids.

INSIDER: What are the primary challenges facing the greater natural and organic products industry?
Seth Goldman: Price and supply will be an ongoing challenge, though less so for tea. I am extremely bullish on organics—I can’t foresee any scenario in which consumers will want to know less about the integrity of their food source.

After An Honest Day’s Work

Even though it wreaks havoc on my schedule, I coach my 10-year old son’s travel baseball team. It’s a wonderful balance to all that’s going on in the beverage world. Honest Tea may be in the middle of a record $5 million month, and no one on the [baseball] diamond cares; or the team may win a nail-biter in extra innings, and no one in the office cares. It helps keep it all in perspective. I went to the Organic Trade Association (OTA) show this year, but I got there late, because our team played in the finals of a tournament at Cal Ripken’s park in Aberdeen, Md. We ended up winning in the bottom of the last inning and my son ran into my arms and squeezed me as hard as he could – I wouldn’t have missed that for all the tea in China.