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Coca Cola and Honest Tea — The Plot Thickens!

Since Coca Cola acquired a minority interest in Honest Tea back in February of this year, the organic beverage company has utilized the benefits of the partnership to come a long way, and according to CEO Seth Goldman, managed to stay true to its mission.

Since Coca Cola acquired a minority interest in Honest Tea back in February of this year, the organic beverage company has utilized the benefits of the partnership to come a long way, and according to CEO Seth Goldman, managed to stay true to its mission.

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As of late September, Honest Tea will be available in far more locations – both geographically and across more channels – than ever before. The company has entered into an agreement with Coca Cola Enterprises (NYSE: CCE), by which all 9 flavors of the tea will be distributed in select markets in the Western US (initially in Northern California, Arizona, Las Vegas, Washington, and Oregon) and across all channels.

This gives Honest Tea the chance to really break into the mainstream, moving far beyond just natural foods — a progression that most natural beverage brands strongly covet.

“We’re being presented with great growth opportunities. CCE is the largest single beverage distributor in the world,” enthuses Goldman. “This enables us to get our brand to so many more people and channels. With this account, our products will go wherever Coca Cola is sold. Now we’ll get to convenience stores that don’t specialize in natural foods. Consumers will come across our product as the first organic beverage there.”

Honest Tea has simultaneously expanded its use of Fair Trade Certified tea leaves, and claims to be the only bottled Fair Trade Certified tea in the world. Two of its newest varieties, Lemon Black Tea and Peach White Tea, will contain Fair Trade Certified tea leaves.

Turning to Fair Trade is not the most directly lucrative venture – although obviously the right thing to do, it lowers the company’s margins, which is why Goldman hasn’t taken the whole line in that direction all at once. He says it will happen, but gradually. However, a burgeoning awareness about environmentally friendly products and an increasing conscientiousness about fair labor practices mean that, in the long-term, Honest Tea’s Fair Trade certified status will hold the company in good stead.

In the meantime, it’s unlikely that Honest Tea will have to struggle — Goldman points out that the company aims to gain in other places, like buying bottles in bulk now that it can buy alongside Coca Cola.

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By converting more of its teas to Fair Trade Certified, at the same time as he is creating a partnership with CCE, Goldman hopes to dispel any notions that his brand has been diluted.

“In fact, it’s the opposite of diluting our brand,” says Goldman. “Partnering with Coca Cola has accelerated our conversion to Fair Trade. We’re running things like we always have. I’ve only gone to Atlanta once since Coca Cola invested in us, and that was to make the sale to CCE. We aren’t reporting in every day or anything.”

However, some consumer’s perceptions have soured after Honest Tea chose to link itself to Coca Cola. In response to a blog post I wrote a few months ago on this, one member wrote: “I was disappointed to hear they were joining forces with Coca Cola, will they be able to keep their honesty?” Shawn Graham, a Fast Company expert blogger, commented: “(This is) similar to Tazo Tea who is a competitor to Honest Tea and was ultimately acquired by Starbucks. As companies continue to jockey for position to be seen as ‘green’ by consumers, we’ll continue to see socially responsible, environmentally friendly business being gobbled up.”

Goldman himself acknowledges that consumers’ perceptions after the change have been hard to deal with. The company lost its account an Oberlin College, after the student body protested its dealings with Coca Cola, citing the beverage giant’s questionable labor practices in South America. Oberlin is well known for having an extremely liberal, eco-conscious student body and all Coca Cola products have reportedly been banned from its campus for some years now.

“I’m not a spokesperson for Coca Cola,” says Goldman. “I come from an activist background so I don’t just brush this stuff off. If you are concerned about labor conditions regarding the product you are buying, there’s no greater protection than Fair Trade. Sometimes people like to just make a point without being serious about making change. You’ve got to want the largest beverage company in world to move towards making positive change rather than punishing them for their attempts to get serious.”

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