Honest Tea proving the real thing for Coke
Beverage giant nears deal to buy rest of Bethesda firm
The Coca-Cola Co. has decided to exercise its option to acquire the rest of Honest Tea, but it probably will be a few weeks before executives are sure the deal has closed, Seth Goldman, co-founder and CEO of the Bethesda beverage company, said Thursday.
Coca-Cola is one step closer to closing the deal, "but there are always risks with a publicly traded company," Goldman said.
Executives with the Atlanta beverage giant could not be reached for comment.
Coca-Cola bought about 40 percent of Honest Tea in 2008 for a reported $43 million. Sales of Honest Tea tripled to $71 million last year from 2007, Goldman said, and he expects revenues to rise even more with the broader national marketing footprint supplied by Coke.
Honest Tea shareholders were formally told Tuesday of Coca-Cola's plan to purchase the remaining shares. Goldman said he expects company headquarters to remain in Bethesda.
Goldman also said he will be able to repurchase most of his personal equity in Honest Tea, which he called an unexpected and positive development.
"There were no guarantees in the deal with Coke back in 2008 that I would have the right to keep any stock," he said in his blog. "So why would Coke allow me to maintain a stake in the company, even though it might cost them more in the future? Because ownership matters to entrepreneurs ... Once the founder loses ownership, his or her motivation to keep building, inspiring and sacrificing diminishes, and as a result, the rest of the team transforms into managers instead of entrepreneurs."
Because Goldman is expected to be the only Honest Tea employee to retain a piece of ownership, a challenge will be to find ways to continue to instill in workers a sense of ownership, he said.
The names of Goldman and co-founder Barry Nalebuff will remain on bottles, Goldman said. Nalebuff, now Honest Tea's chairman and a professor at the Yale School of Management, is expected to continue as an adviser.
Honest Tea started as a kitchen operation in Goldman's house in 1998. The business sold some 360,000 bottles in its first year and reached the 100 million mark last year.
Coca-Cola's revenues last year rose by 13 percent compared to 2009 to $35.1 billion. Its profit jumped by 73 percent to $11.8 billion.