Honest Tea co-founder tells shareholders Coca-Cola intends to buy the company

By Danielle Douglas
Monday, February 21, 2011

Seth Goldman, co-founder of Honest Tea in Bethesda, informed shareholders last week that Coca-Cola, which owns a 40 percent stake, intends to exercise its option to buy the remainder of the organic beverage company. An agreement has yet to be inked, but this move takes the boutique brand one step closer to completing the transaction.

Goldman shared with investors that Coke is offering him the right to retain a stake in Honest Tea, which, he also noted, will remain in Bethesda. He could not divulge the full terms of the ownership agreement, but said he will be keeping the majority of his equity in the company.

Analysts following the deal have said Goldman's continued role in Honest Tea would be crucial to maintaining the brand's identity. He has been the face of the company, as it built a reputation for using healthy ingredients and engaging in socially responsible practices, like organizing tea garden cooperatives in developing nations.

"It's a formed, but impressionable brand," said Goldman, who founded the company with Barry Nalebuff, his business professor from Yale, in 1998. "To the extent we can keep building it with the same kind of passion and direction that we've brought to it in the first 13 years is a good thing."

Coke's intentions became clear last month, when the Federal Trade Commission granted the company antitrust approval to buy Honest Tea. The behemoth corporation has been, and continues to be, silent about the acquisition. Coke did not respond to a request for comment at press time.

Honest Tea has substantially grown in the three years since Coke made its $43 million investment in the company. The beverage, with flavors such as Pomegranate White Tea and Black Forest Berry, can now be found in 70,000 outlets across the country, compared to 15,000 prior to the investment. What's more, gross sales last year penciled in at $71 million, more than triple the revenue the company cleared in 2007.

"It's important to be able to build the organization," said Goldman. "We are still in investment mode here."

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